Established global brands have an uphill battle in Ukraine when competing against counterfeit goods. Accounting for 35 percent of the retail market, according to the Alliance Against Counterfeiting and Piracy, cheap knockoffs cause an estimated $1.3 billion in losses to brand owners. Regulation is far behind reality and laws are lax when it comes to dealing with fake brands.
One strategy that brands take is fostering customer loyalty. It’s one of the messages that the organizers of the Don’t Take Fake conference in Kyiv on Sept. 5-6 tried getting across. Here more than 50 businesses such as, New Balance, Casio and Oakley gathered to encourage shoppers to avoid buying fake products.
“We work together with companies to promote customer culture,” Oleksandr Sattarov, the movement’s leader said. “There is a huge amount of brands in Ukraine and abroad that you can buy instead of copies of inferior quality.”
A constant problem since the dawn of Ukraine’s independence in 1991, copycat goods like Reobek and Adiidas have expanded from shopping malls and outdoor flea markets into e-commerce.
“As soon as one website selling fake-branded goods is closed down, a dozen new ones appeared almost immediately,” says Oleksandr Pakharenko, head of the Alliance Against Counterfeiting and Piracy.
Compounding the issue is the absence of strong brand protection rules, while agencies that regulate trade are ineffective, said Gabriele Lo Monaco, the European Commission’s trade officer to Ukraine. Ukrainian consumers just don’t understand the real cost of counterfeit goods, which contributes to economic stagnation and unemployment, he added.
The biggest counterfeit bust resulted in a $5 million penalty. A factory in Zolotonosha in Cherkasy Oblast was found making over 40 illegal fragrances in a factory there. This is hardly a deterrent. Fakes keep growing as “they’re even more profitable than human trafficking and the arms trade, while the punishment for these kinds of crimes is not so harsh,” Pakharenko said.
Copying an established brand rarely leads to fines higher than $2,900, he added.
Almost 12 million items branded with the Adidas logo were seized last year worldwide, the company’s communication officer Katya Schreiber told the Kyiv Post. Fake Adidas products, as a result, bring the German sports clothing and accessories maker’s sales figures down. It also damages the company’s reputation and increases expenditures on legal services in order to protect corporate interests in courts. “Consumers duped into buying a counterfeit will be disappointed with the poor quality and this damages our hard-earned reputation,” Schreiber said.
Olga Kovalchuk, marketing manager for New Balance Ukraine, admits that while branded sneakers may be worn for up to five years, their illegal copies won’t survive that long.
Meanwhile, luxury brands Chanel and Louis Vuitton are even more aggressive in their brand-protection policy since they don’t allow anyone to sell their products closer than 1.5 kilometers to the official dealer’s outlet. Apple, a technology behemoth, filed five graphical versions of its trademark with Ukraine’s official brand registry, while the very next day after registration, the customs service in Lviv Oblast, neighboring with Poland, reported the arrest of 45 fake iPhones.
Most of the counterfeit goods that Ukrainians buy are imported, according to the International Chamber of Commerce. A fake iPhone 5 can be bought for some $70 in Kyiv, though its labeling and price tag would usually say that it is a replica. In China, which makes such unlicensed gadgets, they’re usually twice cheaper, which makes them a profitable business.
Electronics and clothing are the most popular among counterfeit makers. Olena Tverdyk, brand manager for Ukrainian sunglasses importer Luxoptyka, says fake brands is not only Ukraine’s problem. She suggests cultivating customer loyalty is a key policy for addressing the issue. Regarding the sunglasses market, consumers usually don’t want to put their eyes or eyesight at risk, so they usually opt for official products.
At the Dreamtown shopping center in Kyiv’s Obolon district, college student Iryna Koval said: “A fake D&G (Dolce & Gabbana) T-shirt is like a Russian automobile; in the beginning it looks okay, but after a couple of months you understand that you’ve wasted your money.”
Kyiv Post staff writer Iana Koretska can be reached at [email protected].
