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27 September 2018

Secondary Markets Are Dripping With Counterfeits. Here’s Why

Online shopping is the new normal for mobile-first consumers and so is browsing for treasures on reseller sites and secondary market platforms like eBay and Grailed. It’s exhilarating to find an elusive last-season item or sell a piece you no longer wear, but without a simple and reliable method to guarantee that products are authentic, these markets are also a playground for counterfeiters preying on loyal brand fans to pass off fake goods as real.

In most cases the risk is baked into the model. Anybody can list photos and descriptions on sites for consumer-to-consumer sales, meaning the secondary market is wildly unregulated. Scammers caught on quickly when brand lovers searching rare and limited-edition items migrated to marketplace platforms like eBay, Taobao, Grailed, Depop, and Poshmark — sometimes selling items at many multiples of the original retail price. Private buy-sell-trade groups on Facebook and Instagram are another popular fishing ground for fakers selling counterfeits as real.   

Another reason counterfeits can flourish in secondary markets is that most countries don't hold resale sites legally responsible for hosting listings for fakes, making the temptation exponentially more attractive to those looking to make money by selling imitation products as real. Demand for limited-edition pieces and streetwear capsule collections, in particular, fuels the trade in fakes with a potent combination of high demand and high mark-ups. Add this to the fact that modern counterfeiters are disturbingly adept at camouflaging replica goods and it’s no wonder that today nearly 3 in 4 fakes are bought by consumers who earnestly believed they were buying an authentic item.

Third-party sellers, where many fakes come from, often use secondary markets to clear inventory. Scammers will even go through the work of establishing fake reviews to build trust with unsuspecting buyers who land on a site after using search engines to track down deals. China hopes to quell scamming issues with new legislation to hold e-commerce platforms responsible for allowing third-parties to list counterfeit goods on their sites from January 2019. The legislation is an important step forward for consumer and brand protection but a long way from a global solution.

A growing number of luxury resellers such as Vestiaire Collective,  The RealReal, and Tradesy are responding to consumer concerns with a digital update of the classic consignment model —  screening pre-owned goods and charging a premium for "guaranteed authenticity". Not wanting to miss out, eBay offers handbag and watch resellers an optional security check using its eBay Authenticate service in return for 10% - 20% of the sale price. Buyers concerned about authenticity can also hire an assessment from any number of paid authentication services willing to review pictures and issue an "expert" opinion for a fee and a wait time of 24 hours to 1 week. The cost and quality of expertise varies dramatically and can fall out of date quickly as brands change up their designs, suppliers, and security features from season to season. Even the seasoned experts at Vestiaire Collective occasionally send items to Chanel, Hermès, or Vuitton for verification.

To date, the only way to give consumers 100% security is by enhancing new or vintage products with a digital authentication service that detects when a product scanned by a consumer is authentic or fake. By making authenticity an integral component of new products, for example, brands like Emporio Armani, Armani Exchange, Versace, Diesel and Stone Island are ensuring that consumers can shop their brands with complete confidence in whatever channel they choose — from the flagship store to the unregulated wilds of the secondary market.

Are secondary markets part of your plan to grow brand value? Watch our 30-minute webinar to learn how Italian streetwear icon Stone Island uses product authentication to protect brand fans buying and selling in secondary markets.  

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