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Counterfeit Goods a Hot Cottage Industry

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The sale of counterfeit goods has mushroomed and become more prevalent in recent years. So much so, it’s now become a cottage industry for entrepreneurs and even gone mainstream — sort of.

One way counterfeit goods are sold is through home parties in American suburbia, similar to stodgy Tupperware parties. Loss Prevention Magazine, in an article in its January-February 2004 edition (available in print only) written by two Tiffany & Co. employees, gives the following account:

    “[W]e received a call from an informant indicating she had information on counterfeit Tiffany & Co. merchandise sold at “home parties” in a suburb of a major city in Ohio. The caller claimed that one woman organized the parties and made a large amount of money in this business. ***

    With “buy” money and a company-provided camera concealed in her purse, the undercover officer, along with the informant, went to the party and purchased various Tiffany & Co. merchandise, which was later examined and determined to be counterfeit. During the buy, we also learned that another party was scheduled later that week in the party organizer’s home.”

In addition to home parties, another growing trend is the sale of counterfeit goods on the Internet, especially via auction venues such as eBay. Entrepreneurs are popping up all over the Internet selling low cost “brand name” goods. The Internet makes it easier to find buyers and distribute fakes all over the world.

Counterfeiting is a major concern to manufacturers and retailers of brand name goods. Counterfeit merchandise now accounts for $350 Billion (USD) in sales, or 7% of world trade, according to the International AntiCounterfeiting Coalition. Some estimates indicate it will rise to 18% of world trade by 2006.

Counterfeit goods hurt legitimate businesses both large and small. The brand owner whose merchandise is faked is obviously hurt. But smaller legitimate retailers are hurt, too. It’s tough for legitimate retailers to compete when just around the corner or online there are fake goods being passed off for originals at under-market prices. Not to mention that there is a strong connection between counterfeit goods and organized crime gangs and terrorist organizations — it’s one way they finance their organizations.

Adapted from a post appearing on Small Business Trends, the author’s weblog.

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