[Column] Victoria Epelle: The retail value chain and its ongoing counterfeit battle
Counterfeit products have a presence across major industries in Nigeria. The impact of having these counterfeit products for manufacturers range from dwindling sales and failed customer loyalty schemes. Presently, trade of counterfeit goods is projected to be worth $991B in 2021 by the OECD. This value has continually been on a high growth trajectory. When compared to the figure of $461B in 2013, it has increased by 114%. Major industries impacted by counterfeit products include that of Health and Food & Beverages. According to UNDP, the fast-moving consumer goods packaging remains the worst affected industry due to counterfeiting and accounting for over 30% of transactions according to UNDP.
In Nigeria, reports from the National Bureau of Statistics (2019) state household consumption expenditure of products in Health and Food & Beverages section were distributed at 6.1% and 56.5% respectfully. These two areas account for over 60% of the entire household consumption expenditure. There are anti-counterfeiting laws that exist to protect manufacturers and consumers. However the laws do not presently cover all types of food and all forms of counterfeiting. Leaving certain areas vulnerable.
Manufacturers aren’t the only parties within the value chain impacted by the presence of counterfeit products. Other parties that are impacted include that of the retailer and the consumers. A study was recently carried out by Market Forward on Counterfeit Products within the retail industry within Nigeria. The research looked to understand preventive tactics of exposure to counterfeit products and what industries are impacted.
The survey carried involved interviewing the key participants within the value chain. It included major fast moving consumer goods manufacturers, SMEs, consumers within Nigeria. From the consumer perspective, the Survey result showed that over 70% of customers interviewed have experienced purchasing a fake product. The top three industries that they had experienced these products were that of who Cosmetics Pharmaceuticals and Food items.
From the retailers surveyed, over 63% of retailers avoid exposure to counterfeit products by ensuring they purchase directly from the distributors, less than 5% verifying barcodes and others utilizing other means of verification.
The survey result from the manufacturers showed that almost 50% of manufacturers ensure the sale of original products across the value chain by entrusting the Key distributors with this responsibility. The results also indicated a strong reliance on brand identity as a measure of protection with a small percentage utilizing special/ focused internal team dedicated to fighting counterfeit products. This further highlights the need for visibility across the value chain in retail market that is still largely traditional.
One of the areas where manufacturers are impacted by the presence of counterfeit products is that of brand identity. Here the consumer purchases the counterfeit item which has either imitated the branding and packaging of producers. The customer then experiences a poorer/altered quality of the product than anticipated which leads to the producers brand reputation being negatively impacted.
Sales and Marketing are also not left unscathed. From reduction of sales to increasing investing in marketing/loyalty schemes in certain jurisdictions when consumer purchasing patterns have decreased due to lack of full visibility. The manufacturer is unaware these situations have potentially occurred from their customers' interaction with a counterfeit product.
A lot of grey areas still occur within the ongoing battle of counterfeit products. However, manufacturers could adopt engage in adoption of new technology driven tracking systems that are being developed, and creation of clear channels for reporting such incidents for both consumers and retailers. The government can also reduce such occurrences with anti-counterfeit laws being continually reviewed and updated.
Victoria Epelle is founder of Management Consulting and Research firm, Market Forward.
