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Better Than the Original

7/5/2016 | Jeff Jacobs, The Brand Protector

I wish it was a conversation that hadn’t happened, but it did. As an end-user client at a Global 500 company, I had more than one unscrupulous distributor tell me they had easy access to manufacturers willing to knock off proprietary products. Today, that willingness has actually become a deterrent to getting other information critical to the documentation necessary for safety in a transparent supply chain. It is also a fundamental flaw that is constantly hounding suppliers in the promotional products business who are careless when outsourcing manufacturing—intellectual property ends up in the parts of the supply chain where they can exert little control.

This issue ramped up this month when Alibaba CEO Jack Ma suggested that some of the fakes were actually better than the originals from brand names. Mr. Ma, speaking at Alibaba’s investor gathering said, “they are exactly the same factories, exactly the same raw materials but they do not use the names.” Alibaba, no stranger to claims that they do little to prevent counterfeit products from being sold online, was suspended after initially being admitted as a member of the International Anti-Counterfeiting Commission. This was after U.S. fashion brand Michael Kors and Gucci America, Inc. withdrew in protest, according to the Wall Street Journal. In fact, in a letter to the coalition, Michael Kors called Alibaba “our most dangerous and damaging adversary.”

While Mr. Ma downplayed the temptation to create knock-offs as just “human instinct,” this situation is not new news in our industry. Chinese factories have been doing brand names by day, and knock-offs by night, for a very long time. But the fuel to the counterfeiters’ fire was the internet—the ability to do direct sales online, with access to literally millions of new customers. Critics of Alibaba maintain that fuel is still being fed to the fire even today, with knockoffs easy to spot on the Taobao site.

There is no doubt that our industry is headed for more upheaval, not unlike what Amazon did with the book industry, or online sites have done in the travel industry. The traditional supplier creating proprietary products, then selling through distributors to a captive end-user client is simply on its way out as a business model.

Mitch Mounger, president of Sunrise Identity, says, “I believe the traditional factory, supplier, and distributor model that our industry is built on is due for disruption. Our clients are focusing on compressing the supply chain in order to improve delivery times and pricing.” Mounger added, “Of course there is the continuing issue of product safety and social responsibility. These are real issues that the industry must address head on. The additional costs and resources required to comply in these areas will force smaller distributors and suppliers out of the market.”

While there are positive indicators in our industry, there are still enough reasons for concern to keep you up at night. What is your biggest worry? Is it increased governmental regulations, or is the bigger concern for you this breakdown of the traditional supply chain? How about the migration of ad spend from promotional products to other platforms, like digital? Have you given any thought to the significant effect Millennials will have in purchasing habits as they become larger forces in the U.S. work force? With this many changes to consider, we’d love to hear what you’re thinking for the rest of 2016, and beyond. Drop me a note at Jacobs.jeffreyp@gmail.com, and we’ll feature some of your thoughts in future posts.

UPDATE- You may have seen a post here a few months back, “A Recall That Isn’t A Recall”, about IKEA furniture that posed a significant tip-over risk. At that time, we found it interesting that the deal between the Consumer Product Safety Commission and the Swedish furniture giant was actually a “repair program’, instead of a full-out recall of dangerous chests and dressers. That all changed last Tuesday as IKEA announced that it will recall 29 million MALM and other chests and dressers. The chairman of the CPSC, Elliott Kaye, said, “If you have, or think you have, one of these products, act immediately. It is just too dangerous to have the recalled furniture in your home un-anchored, especially if you have young children”. At least six deaths of children three years old or younger were attributed to the IKEA furniture, and 36 more were injured. A child dies, on average, once every two weeks from accidents involving toppling bulky furniture or television sets. 38,000 visit emergency rooms every year from tip-over injuries, and most of them are children under five years old. You can learn more about the specifics of the recall on the CPSC release.

Jeff Jacobs has been an expert in building brands and brand stewardship for more than 35 years. He’s a staunch advocate of consumer product safety and has a deep passion and belief regarding the issues surrounding compliance and corporate social responsibility. He recently retired as executive director of Quality Certification Alliance, the only non-profit dedicated to helping suppliers provide safe and compliant promotional products. Before that, he was director of brand merchandise for Michelin. As a recovering end-user client, he can’t help but continue to consult Fortune 500 consumer brands on promo product safety when asked. You can also find him working as a volunteer Guardian ad Litem, traveling the world with his lovely wife, or enjoying a cigar at his favorite local cigar shop. Follow Jeff on Twitter, or reach out to him at jacobs.jeffreyp@gmail.com.

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