Interviews, insight & analysis on Ecommerce

The rise in social ecommerce and the potential counterfeit pitfalls

By Benjamin Li, Consultant, Rouse and James Godefroy, Senior Consultant, Rouse

Over the last few years, social media platforms have continued to morph into online stores. For consumers, the option brings new flexibility, allowing them to browse and purchase a variety of products from different brands with ease. Brands, meanwhile, have been quick to jump on the trend to reach larger audiences and boost sales. 

Now, with the likes of TikTok and Instagram continuing to invest more heavily in social ecommerce, offering new shopping features for brands and influencers, its influence is set to grow even further. However, despite the potential of social ecommerce, monitoring on these platforms is a challenge, and this can create the perfect environment for counterfeiters. 

This is already becoming a significant issue in China – the world’s largest ecommerce market – and the Southeast Asia (SEA) region. With brands worldwide increasingly planning to rely on social ecommerce, there is much to be learned from the region. 

The rise in social ecommerce 

The rapid rise of social ecommerce can largely be attributed to its successful disruption of the traditional consumer purchase journey. A typical consumer journey from advert to purchase involves many steps. In contrast, brands selling directly on social media platforms reduce the process, increasing the chance of a successful sale.

The pandemic has accelerated the shift to this new model, especially when shops were closed during lockdowns. A recent study by iKala, looking at the performance of the social e-commerce sector in SEA during the first half of 2021, found that 42% of shoppers now use social media to make purchases 1-2 times per month, and 35% use it to shop more than 3 times a month.  

But, while consumers and brands have been enjoying the benefits of social ecommerce, counterfeiters have also been taking advantage of the buzz.

Counterfeiters see an opportunity 

Counterfeiters have a unique entry point in SEA due to the lack of monitoring and regulating of illicit activities on social media platforms. Social media platforms in the region are generally held to a less high standard than e-commerce platforms and do not require identify verifications, meaning counterfeiters can easily hide behind fake or anonymous accounts. This opens the door for them to set up private networks for sales and distribution through Facebook groups or Instagram accounts, and impersonate brands effectively. 

A common tactic is for counterfeiters to funnel transactions by creating networks of accounts across multiple platforms and attempting to direct consumers to external sites. Alongside this, counterfeiters enhance their credentials by paying for positive reviews using bots and embellishing sales volumes through fake purchases.

Finding solutions 

With counterfeiting on the rise, greater action needs to be taken. 

Ideally, there would be greater collaboration and accountability between brands and social media companies, as both parties have a responsibility to consumers. We are seeing more instances of brands and social media companies joining forces. For instance, Facebook and Gucci teamed up earlier this year to sue an individual accused of setting up an online business to sell luxury counterfeit goods on Facebook and Instagram. However, platforms typically lack the incentive to collaborate on investigations and lawsuits, and only well-known international brands usually get this privilege.  

For legal action to be successful, platforms also need to convert online targets (accounts) into offline targets (counterfeiters) to facilitate further investigation and legal action. This requires more thorough identification processes, as introduced in China, where social media requires real-name identification. 

However, primarily, businesses still need to be responsible for protecting their own brand, and there are various steps they can take to do this. Firstly, brands should apply to have official verified accounts on all social media platforms. This allows them to identify and report IP infringements quickly and effectively.

Brands can also map and monitor platforms using keyword searching to find key infringers while keeping a tab on the general health of the platform. Brands should focus on capturing information regarding users and their locations, reviews, sales volumes, and discount rates. This monitoring can be complex, especially due to new shopping features like live shopping and auctions, as by the time brands become aware of illegal live streams, the damage has already been done. Multiple platforms also prohibit automated data mining through scraping bots, meaning that often manual data capture is required to supplement online monitoring tools. 

Lastly, brands should ensure that they are familiar with the tools already at their disposal for online enforcement. Most platforms have processes in place for brand owners to report and enforce IP infringements, and these are vital for those brands wishing to quickly take some action to remove offending content – but at the risk of also pushing the problems deeper underground. In addition, investigative steps taken to connect the online and offline world are key in pursuing more deterrent enforcement actions.  

Moving forward

As social media continues to compete with e-commerce platforms, we will likely see many of these challenges elsewhere around the world. Brands and social platforms can do much to tackle counterfeiters – especially when working together. However, wider conversations need to take place involving regulators as well to ensure we are closing the window of opportunity for counterfeiters. 

To date, global developments in data protection regulation and privacy law have made it more difficult for brands to pursue social e-commerce infringers. In China, a new draft regulation proposes to hold social e-commerce to a much higher standard. It is a promising legislative change that, if successful, could serve as an example for other countries in SEA and around the world.  

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