This article was published in the September 2016 issue of STORES Magazine.
UGG combats rising levels of counterfeit
Serving an eviction notice is a routine task for law enforcement officers, but when police arrived at a Long Island property in late June, failure to pay rent was the least of the transgressions going on.
Law enforcement officials discovered an established counterfeit operation, uncovering nearly 4,000 pairs of counterfeit UGG boots worth more than $700,000, among other fraudulent goods. The counterfeiters assembled and shipped counterfeit goods of multiple premium brands across the country — bringing the estimated total value to more than $1 million.
The size and scope of the takedown was just a drop in the bucket for coveted brands like UGG. Since 2009, the division of Goleta, Calif.-based Deckers Brands has seized over 2.2 million counterfeit products before the goods entered the market, taken legal action against more than 60,000 websites selling counterfeit products and removed over 590,000 counterfeit listings on websites such as Taobao and eBay.
“As the popularity of the UGG brand increased, the counterfeiters obviously saw an opportunity,” says Lisa Bereda, assistant general counsel at UGG. “We’re constantly battling counterfeiters on multiple fronts.”
The Long Island operation shows how the problem continues to morph: Despite exhaustive efforts with customs and border patrol, counterfeiters are shipping parts of products into the United States and assembling them here in an attempt to evade customs.
“We’re continuing to expand our anti-counterfeit efforts to address both the supply side and the demand side of the problem,” Bereda says. “We have both overt and covert security measures in place, and the processes are core to what the brand stands for.”
Supply side strategies
On the supply side the countereffort is global, with investigations and raids taking place all over the world. In the last 10 years counterfeiters migrated online to e-commerce websites; more recently, they’ve taken to social media.
“We employ a variety of different tactics and we have people around the world … . In Asia our brand protection team is intimately involved with our factories and our supply chain team, conducting factory audits. Those teams are also trained to identify product security issues,” Bereda says.
Asia presents an acute challenge for brands like UGG: The majority of counterfeit websites operate in China, where offenders are protected from prosecution.
Graham Thatcher, brand protection associate at Deckers, conducts regular training with U.S. law enforcement and border patrol to educate them about the brand and teach them to identify and authenticate counterfeit products.
REAL: The toe area is flexible and sculpted and the upper shaft is form-fitting.
FAKE: The materials are synthetic and the outsole is extremely stiff.
Some aspects are easier to flag, he says: On counterfeit items the outsole is usually more stiff and much less comfortable than a genuine UGG. “Often you can just pick up the counterfeit product and tell something is not quite right because you can’t bend the sole. Also, counterfeiters use synthetic cheap materials that smell like paint thinner,” Thatcher says. “We use twin-face sheepskin.”
Shoppers in physical stores can inspect the product; given that some 40 million Americans own the iconic boot and have some frame of reference, it’s far easier to tell if the item is authentic. Online purchasing is entirely different.
“Counterfeiters don’t display photos of their poor quality product. They usually steal our marketing and product images in an attempt to fool customers,” Thatcher says. “Consumers see the UGG boot they covet at a [much lower] price … and they think they’ve found some incredible deal. They don’t realize that the item is not a true UGG until it lands on their doorstep.”
Since counterfeit products have surfaced on phony websites, social media and on some marketplaces, UGG’s counterefforts are equally diverse. In some instances, the brand uses sophisticated web-crawling algorithms to identify counterfeit UGG websites, Bereda says; other times, basic social media searches are done.
“We’ll use takedowns specifically with the search engines or with the marketplaces. All the marketplaces have their own takedown programs — with the websites we use website litigation to take down counterfeit websites,” Thatcher says.
“It’s challenging because they could be using servers that are outside of the United States and registrars that may or may not comply. It really just depends on each unique circumstance.”
Demand side doctrine
UGG’s demand side efforts include extensive educational outreach on the brand’s website and ongoing customer interaction using social media. “One of the best ways to fight counterfeiters is to fight the demand for their goods,” Bereda says.
“One of the best ways to fight counterfeiters is to fight the demand for their goods.”
UGG’s website features a series of pages explaining issues around counterfeiting, including a list of authorized retailers and a gallery of images illustrating key product features.
Website consumer outreach has been in place for about two years; the team recently created a dedicated UGG anti-counterfeit Facebook page and a Twitter account.
“With social we’re able to update information a lot more frequently. We can engage directly with consumers,” Thatcher says. “Shoppers will ask us, ‘Is this website fake?’ or ‘Is it okay to shop here?’ We can answer those questions in real time and other customers can see our responses and learn from them.”
Customers are also talking to each other via social media. “Using social media we’ve been able to prevent counterfeit purchases, or if the shopper didn’t realize an item was counterfeit until they received it, we can provide instructions about how to dispute the charge with their bank or credit card,” he says.
“We do what we can to help them get their money back, and to turn negative sentiment into positive. In many cases these interactions convert shoppers into advocates and they begin assisting other consumers.”
‘Duped and disappointed’
Counterfeit goods such as drugs or infant formula can be downright dangerous for deceived consumers. While purchasing counterfeit UGGs is not likely to cause physical harm, Bereda stresses that that prospect of an unsuspecting shopper opening a box and encountering boots that reek of paint thinner is disturbing.
“Consumers tend to be passive about counterfeiting until they become a victim.”
“Consumers tend to be passive about counterfeiting until they become a victim — until they open the box and realize the great deal they thought they snagged is nothing but a cheap knock-off,” Thatcher says. “To protect our brand mark globally and ensure our customers maintain the highest level of trust, we take counterfeiting very seriously.”
Then there are the sad stories they hear all too often from shoppers that have been duped by counterfeiters. “UGG is a huge gift-giving brand and often the person looking to buy the boots for a loved one isn’t really familiar with the product,” Bereda says.
“I’ve heard of several instances where a grandmother wanted to buy a Christmas present for her granddaughter, but didn’t really know what to look for. Then there are the teenage girls who save up for months to their first pair, only to be duped and disappointed by counterfeiters,” she says. “It’s heartbreaking to hear these stories, and it’s a big part of the reason why we’ve worked so hard to engage with consumers.”