Singles' Day 2018: The rising risk of counterfeiting

Singles' Day is the world's largest ecommerce festival, but counterfeits pose risk to brands

Singles' Day is the Chinese ecommerce phenomenon that has exploded in popularity over the last five years. Although the holiday has been around since 1993, it is only since Alibaba became heavily involved that we have seen the dramatic growth in sales. From US$3billion of sales in 2013, last year shattered ecommerce sales records by registering over US$25billion, and 2018 is set to top this. To provide a frame of reference around the scale of Singles' Day, Black Friday and Cyber Monday (the closest western equivalents) achieved half as many sales combined in 2017, whilst ecommerce giant Amazon only reached $2.4bn in sales during its ‘Prime Day’.

This two-part series examines the history of Singles' Day, the emerging counterfeiting threats and what can be done to combat online infringement. Part one explores Alibaba’s online, and now, offline dominance and investigates signs of an increase in counterfeiting in China and Southeast Asia. Part two will delve into how Chinese marketplaces and the Chinese Government are combating counterfeiting, and how brands themselves can better protect their IP online.

What is Singles' Day?

Singles' Day was first coined in 1993 by Chinese students who wanted to create an ‘anti-Valentine’s Day’ celebration and give each other gifts. Taking place on 11^th November every year, the holiday rose to prominence in 2009 when Chinese ecommerce giant Alibaba began to encourage vendors using its platforms to offer large discounts for a 24-hour period. Alibaba cemented its hold on the holiday by trademarking the term 'shuangshiyi' (double-eleven) in 2012 to represent the date 11/11.

It expanded further last year when Alibaba ventured offline for the first time. Timed to coincide with Singles' Day, the company set up 60 pop-up stores across China and collaborated with retailers to launch 100,000 smart shops that allowed customers to scan physical products which they could then order on Tmall (Alibaba's 'high-end' marketplace). This April, Alibaba took things a step further and opened a shopping mall in Hangzhou, China, in response to concerns that the Chinese ecommerce market is becoming saturated.

Founded in 1999, today over 550 million consumers shop with Alibaba, with a third of the Chinese population purchasing items during Singles' Day alone. Last year, top products included mobiles, tablets, clothing, footwear and other electronic devices, with international brands such as Uniqlo, Vero Moda, Nike, Adidas and Skechers performing well. Local goods also made great sales headway and challenged international brands for the top 10 slots.

This year will see the sale of flagship products such as a red variation of the Nike Air Jordan 4, Adidas’ Pharrell Williams Nmd shoes and Apple’s iPhone XS. Alibaba is also planning extensive international expansion of the event with Lazada, its ecommerce platform in Singapore, hosting Singles' Day sales for the first time.

Rise in Counterfeiting

China is the largest counterfeiting hotspot in the world and their online platforms have been plagued by IP infringement.

Bharat Dube, chief executive of Strategic IP Information estimates that 50% of goods sold on Alibaba’s Taobao marketplace are counterfeit or infringing on IP.

America’s trade war is also likely to increase the size of the counterfeit market in China by making genuine products more expensive to Chinese consumers.

As Singles' Day expands into other countries in Southeast Asia, the threat of counterfeiting to Western brands hoping to capitalise on the ecommerce festival is increasing. International brands accounted for 40% of total purchases last Singles' Day, demonstrating their appeal to the Chinese market. A recent report found that 69% of consumers consider price the biggest indicator of whether a product is legitimate or not, but as more global brands discount their genuine goods on these large ecommerce holidays, even this is becoming less useful as an indicator.

Alibaba’s competition providing more counterfeiting opportunities

With the huge amount of sales Alibaba has generated on Singles' Day, it is only natural that other platforms are trying to get a piece of the action. Pinduoduo, a 'group buying' platform where consumers joint-purchase products directly from the manufacturer in exchange for lower unit prices, is set to make large gains this year. Used alongside immensely popular WeChat (China’s answer to WhatsApp) for social shopping, Pinduoduo now boasts over 340 million users, many of whom from the poorer rural regions of China where cost is still very much key to purchase decisions.

Many of the platform’s core customers are those living in tier 3 and 4 cities who have been put off Alibaba and JD.com by the higher prices. This Singles' Day, they are looking to take on incumbent platforms and appeal to less affluent members of China’s population with low base prices through the holiday and beyond. The platform has seen a flood of counterfeiters attempting to entice bargain hunters, and there are fewer intermediaries within the supply chain to scrutinise product authenticity. As a result, Pinduoduo has received numerous complaints of very low product quality.

Combating Counterfeiting

The ever-growing threat of counterfeiting in China and Southeast Asia poses­­ a clear challenge to brands, marketplaces and legislators alike. At Corsearch we work with our clients to create their online brand protection strategies, leveraging our industry expertise and insights. If you believe your brand is being infringed, or are curious to see the scale of your issue, talk to one of our experts.