There is a new phenomenon in brand and product piracy: the deliberate replacement of originals. In order to compensate for the loss of sales and income caused by Covid-19, companies and consumers are intentionally replacing expensive originals with cheap Chinese copies. By replacing original branded products, they can significantly reduce their purchasing costs in the ongoing difficult economic situation – often without any significant loss of quality or damage to their reputation. This is increasingly eroding the business of original manufacturers.
In the current fiscal year, this exchange will temporarily increase the existing loss of sales for brand owners in the short term, which results from the failure to combat product and brand piracy and which has now reached considerable levels in many industries. For example, German mechanical engineering companies are losing an average of 3 – 5% of their annual sales to counterfeiters, and one world market leader is even expecting a 10% loss of sales. In addition, the many copies put further pressure on the market prices of the original products. In China, German manufacturers of textile machinery have already had to cut their prices by up to 25% due to cheap imitations.
The replacement caused by Covid-19 will lead to a loss of market share for the affected manufacturers in the medium term – in many cases permanently, because the customers lost to counterfeiters during the pandemic will not return. The low-cost markets are growing and consolidating. If the original manufacturers discount their cash flows lost over the years, in the long term this often results in a present value of the cumulative loss that is above the EUR billion mark. They can only stop this downward spiral if they fight brand and product piracy consistently, systematically and sustainably with all available means.