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Security Director News
June, 2006
SECURITY, ALONG WITH INTERNAL ALLIES, ADDRESS COUNTERFEITING ISSUE
The message regarding mitigating counterfeit merchandise is clear-- develop a proactive plan and stick with it.
For many companies, that plan overlaps with the duties of the security director or loss prevention executive, who can count brand protection among his or her responsibilities.
Joseph LaRocca, vice president of loss prevention for the National Retail Federation, said in most companies, dealing with counterfeiting "is a very cooperative effort."
As companies try to attack the issue from many angles, various departments get involved, he said, ranging from marketing to legal to security.
FOLLOW THE LEADER
Who takes the lead on developing a plan, said Michael Kessler, founder of Kessler International and its BrandProtect Worldwide division, depends on the corporation. But most often, he said, he sees teams from finance, security, legal and sales working together on the issue.
"Sales is a good one to get involved," he said, "because they can see the decrease in revenue (from the influx of counterfeit goods)." Sales also receives the complaints, he said, such as when products don't scan correctly because they aren't using the legitimate bar codes.
Dean Brocious, director of brand protection for Limited Brands, which encompasses 4,000 retail stores for The Limited, Express, Bath & Body Works, The White Barn Candle Co., Henri Bendel and Victoria's Secret along with catalog and Internet retailing, said he reports to the company's vice president of loss prevention, but also works closely with the legal department. Issues related to brand protection are also passed up to other senior level executives at the board level, he noted.
JOINING FORCES
Some companies have separate intellectual property departments or turn over the business of going after counterfeiters to trademark attorneys, both inside and outside of the company, added Kessler.
Security and legal both play an important role, said LaRocca, as they try to shut down counterfeiters for copyright infringement, tax evasion and the like.
Security and loss prevention fit into the equation, explained Michael Kelly, executive vice president for GIS Corporate Security Services, because they often have a relationship with law enforcement or have come from a law enforcement background.
"I think it makes sense for the security director to handle it," said Kris Buckner, president of Investigative Consultants, because they already deal in theft and similar activities.
Kelly said security also has the responsibility to work with finance to show how anti-counterfeiting measures can improve the company's bottom line and provide a return on the investment made in them.
Even customers and retail employees can have a role, said LaRocca, by bringing the issue to the security director's attention when they see questionable merchandise. "Any incident can be a indicator of counterfeiting," he said.
Brocious noted that competitors have brought counterfeiting to his attention because they want to protect their own market share. He said Limited Brands closed eight counterfeit stores in China on a tip from a competitor, as well as ones in Mexico and Greece. In China, he said, the fake stores used images of Victoria's Secret models as well as sewing counterfeit labels into the merchandise.
BRAND PROTECTION
Having once established who within the corporation will address the issue, experts said the most important step is creating measures to protect the brand.
Kelly, whose background includes serving as director of corporate security for Fendi, a division of LVMH Fashion Group, and director of loss prevention for Versace, said Louis Vuitton had an anti-counterfeiting program in place that worked closely with law enforcement to identify fake products and get them off the street.
"You have to train them on what makes the brand unique," he said. He said this includes customs and federal enforcement agencies as well as major police organizations in port cities where many counterfeit items first appear.
Kelly said GIS has the ability to provide that role for security directors, helping them develop identity programs and then training law enforcement on what to look for.
Companies are putting together training manuals and courses, said Kessler, especially those who are aware that they have a counterfeiting problem.
Training is important, said Kessler, who recommends that security directors take the lead in training, while allowing investigators to be "their feet on the street."
Limited Brands' Brocious said they are in the process of developing a law enforcement training program. The documents used to identify products will be made available internationally, he said.
"The No. 1 thing a company needs to start with is the ability to tell what is real and what is not," said Buckner. That requires documentation of manufacturing, including keeping samples, tracking timelines for manufacture and deliver of goods, he said.
Buckner agreed with the idea that law enforcement also needs to know what constitutes real and fake products. "We train 150 cops a month," he said. "You can open their eyes. We want them to know who to call and what red flags are raised."
LaRocca said the NRF's suggested approach is for companies to look within their organization first, and vet their manufacturing partners who may be in the best position to produce counterfeit goods.
CONTROL ISSUES
It is a matter of keeping controls on inventory, said LaRocca, both labor and brands. For example, said LaRocca, companies require accurate accounting for the labels they send manufacturing partners so they know their legitimate label isn't being used on knockoff merchandise.
Then the security team should address where counterfeit goods are being sold and manufactured, followed by a plan of attack for investigating and shutting down the root cause, he said.
Addressing counterfeiting, said LaRocca, means following the path from retail through the supply chain. "Those are the real people you want to go after," he said.
Kessler concurred that the target should be "the top of the food chain. The heart is the manufacturing facility," he said.
GLOBAL LOOK
He noted that counterfeit goods come from all parts of the world, but especially from China, other Asian countries and the Middle East.
While China is certainly an area to watch because of its major role in garment manufacturing, Brocious said there isn't one part of the world on which companies can focus their resources or attention these days.
"The Internet has made the world smaller," he said. "I would caution anyone from saying that this one country or geographic area is where we need to focus."
With the elimination of trade barriers, he said, counterfeit goods can come from anywhere.
Many of those interviewed cited the need for involvement at the customs level, but some noted that it's not easy to find counterfeit merchandise that way.
Offshore manufacturers that produce counterfeits often make legitimate goods as well, said LaRocca. And some counterfeits ship pieces, instead of finished items, said Kelly, such as the shell of a handbag, which is separate from the hardware and the logo. "That is what stops it at the port level from being identified," he said.
Even when an item is considered questionable, said Kessler, it may still make it through the system. He noted a case where sugar sweetener, imported from Bogota, Colombia, was in packages that said it was made in the United States. While that caused customs to put a hold on the shipment, he said, it eventually was released and made its way into the marketplace as counterfeit product.
Because counterfeit goods show up not only at flea markets and through street vendors, but also on the Internet, Kelly said security directors can partner with data mining companies to identify counterfeit items sold on line.
ONLINE FRAUD
LaRocca said e-fencing sites "need to be held accountable." The web site operators, he said, have taken the stance that all they are doing is bringing together buyers and sellers, but he likened it to being the getaway driver in a robbery--you may not have committed the act, but you are a party to it nonetheless.
Under the new Stop Counterfeiting in Manufactured Goods Act, LaRocca said manufacturers and retailers have recourse to go after root entities of counterfeiting, seizing their equipment and interrupting the illegal supply chain.
But Buckner cautioned that any legislation is only as good as the enforcement and prosecution tied to it.
He said even with the billions lost each year to counterfeiting, there are still companies that don't view it as a serious issue.
"As a brand gets more popular," said Kelly, "you find more and more knockoffs. Then there is the recognition that people have to treat it as a serious problem," he said.
Brocious concurred that brands in demand are targets for counterfeiting. "It goes with the territory," he said. "The more of a market leader you are, the more they want to use your name."
Author - Joanne Friedrick
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