>>strategy to combat the illicit market…Colin Peacock, global customer development director at Gillette
Organised retail crime impacts every aspect of the industry and consumers can be caught in the crossfire. Take bargain-hunters who buy from traders at car boot sales. Many car boot sales are harmless and good-natured local affairs, but at others the public may buy counterfeit goods and have no rights against the seller.
The impact stretches beyond retail with nations losing billions in tax revenue as criminals avoid paying duty. Perhaps most sinister of all, there is clear evidence that many of those involved in illicit trading are members of crime syndicates and that their operations help fund terrorism.
The economic impact of the illicit market is significant. In the UK alone, the estimated loss from fakes and counterfeits has doubled over the past five years. In 2004, it cost more than 4,000 jobs and nearly £11bn, on which the VAT alone would fund several new schools and hospitals. But this is just part of the problem. Theft of fast-moving consumer goods from the lawful supply chain is now costing $56bn worldwide.
But what is the impact on sales? Clearly a product sold in the illicit market will be a lost sale to the legitimate market, but it gets worse. All too often in our efforts to restrict theft, products will be taken off open sale and placed behind counters or the customer service desk.
It follows that sales are not going to be optimised when the ability of the consumer to browse and conveniently purchase the products is restricted.
Interviews with offenders suggest all are opportunistic and skilful. They explore and steal from vulnerable points in the supply chain, from factory through to shelf. Once stolen, goods will often pass through many hands (other thieves, fences, consolidators, wholesalers and illicit retailers) before they reach an end-user, who is either the consumer or the commercial buyer.
Stolen goods may be mixed with counterfeit, illegally imported product and genuine lawful products, such as imports, end of lines, returns or slightly imperfect products, providing criminals with the perfect opportunity to launder illicit goods.
Thieves look for items that can be most quickly converted to cash or commodities such as drugs. So-called ‘hot’ products are therefore more likely to be branded cosmetics, the latest DVDs and popular fashion brands than ‘cold’ products such as
own-label cosmetics or old movies. A recent and disturbing global trend, however, is the increase in fake everyday goods traded in bulk, such as instant coffee, razor blades, condoms and even washing powder.
Gillette has resourced a cross-functional team to direct its efforts against the illicit market. We’re at the forefront of technologies such as the electronic product code (EPC), which will help authenticate shipments and clearly identify rogue product. While the EPC is still in its infancy, the trials and adoption programme undertaken by retailers such as Metro, Tesco and Wal-Mart indicate that its introduction is a very real prospect.
It is obvious, though, that we cannot solve this alone. Industry needs to work together to support changes to legislation and enforcement, develop best practices in loss prevention and share intelligence.
Retailers can make life more difficult for criminals by developing and adopting selling and buying policies, procedures and guidelines to protect our supply chains.
There is evidence of product stolen from stores, transport assets and warehouses, as well as counterfeited and illegally imported goods ending up in licit supply chains and stores. If a deal looks too good to be true, it should send off a signal that extra care needs to be taken before confirming the order, particularly when the pursuit of a short-term gain could jeopardise a long and trusted relationship with consumers.
We’ll be working with retail associations to help drive this initiative forward. But once we have guidelines in place, it’s vital we put them to use. Too much good work ends with a paper or report being released. If we are serious about this, we must bring it to life.
n For a copy of the Illicit Market Report email colin_peacock@gillette.com
Organised retail crime impacts every aspect of the industry and consumers can be caught in the crossfire. Take bargain-hunters who buy from traders at car boot sales. Many car boot sales are harmless and good-natured local affairs, but at others the public may buy counterfeit goods and have no rights against the seller.
The impact stretches beyond retail with nations losing billions in tax revenue as criminals avoid paying duty. Perhaps most sinister of all, there is clear evidence that many of those involved in illicit trading are members of crime syndicates and that their operations help fund terrorism.
The economic impact of the illicit market is significant. In the UK alone, the estimated loss from fakes and counterfeits has doubled over the past five years. In 2004, it cost more than 4,000 jobs and nearly £11bn, on which the VAT alone would fund several new schools and hospitals. But this is just part of the problem. Theft of fast-moving consumer goods from the lawful supply chain is now costing $56bn worldwide.
But what is the impact on sales? Clearly a product sold in the illicit market will be a lost sale to the legitimate market, but it gets worse. All too often in our efforts to restrict theft, products will be taken off open sale and placed behind counters or the customer service desk.
It follows that sales are not going to be optimised when the ability of the consumer to browse and conveniently purchase the products is restricted.
Interviews with offenders suggest all are opportunistic and skilful. They explore and steal from vulnerable points in the supply chain, from factory through to shelf. Once stolen, goods will often pass through many hands (other thieves, fences, consolidators, wholesalers and illicit retailers) before they reach an end-user, who is either the consumer or the commercial buyer.
Stolen goods may be mixed with counterfeit, illegally imported product and genuine lawful products, such as imports, end of lines, returns or slightly imperfect products, providing criminals with the perfect opportunity to launder illicit goods.
Thieves look for items that can be most quickly converted to cash or commodities such as drugs. So-called ‘hot’ products are therefore more likely to be branded cosmetics, the latest DVDs and popular fashion brands than ‘cold’ products such as
own-label cosmetics or old movies. A recent and disturbing global trend, however, is the increase in fake everyday goods traded in bulk, such as instant coffee, razor blades, condoms and even washing powder.
Gillette has resourced a cross-functional team to direct its efforts against the illicit market. We’re at the forefront of technologies such as the electronic product code (EPC), which will help authenticate shipments and clearly identify rogue product. While the EPC is still in its infancy, the trials and adoption programme undertaken by retailers such as Metro, Tesco and Wal-Mart indicate that its introduction is a very real prospect.
It is obvious, though, that we cannot solve this alone. Industry needs to work together to support changes to legislation and enforcement, develop best practices in loss prevention and share intelligence.
Retailers can make life more difficult for criminals by developing and adopting selling and buying policies, procedures and guidelines to protect our supply chains.
There is evidence of product stolen from stores, transport assets and warehouses, as well as counterfeited and illegally imported goods ending up in licit supply chains and stores. If a deal looks too good to be true, it should send off a signal that extra care needs to be taken before confirming the order, particularly when the pursuit of a short-term gain could jeopardise a long and trusted relationship with consumers.
We’ll be working with retail associations to help drive this initiative forward. But once we have guidelines in place, it’s vital we put them to use. Too much good work ends with a paper or report being released. If we are serious about this, we must bring it to life.
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