Preventing counterfeit during explosive e-commerce growth during pandemic

Counterfeit and fake goods are a rising threat as e-commerce spending takes off

As COVID-19 has kept consumers around the world at home, mitigated travel and forced out social distancing measures, nearly everything from groceries to beauty care and technology supplies is now purchased online. Thu Lan, an office staff of a local conglomerate, still goes to work every day during the pandemic, however, she has given up habits like going shopping every evening, going to the supermarket every weekend, and going to cafés and restaurants. She now uses e-commerce platforms and delivery apps to order everything.

“Instead of shopping, I order clothes, home appliances, and electronics for all my family on e-commerce platforms, as well as order all fresh food through the app or hotline of supermarkets and grocery stores, and receive food and coffee through delivery apps,” she said, adding that she has not gone out much, except commuting between her home and work to avoid the pandemic. “My purchase frequency on e-commerce platforms has increased 5-10-fold since the health crisis.”

Thu Lan is one among millions of people in Vietnam and over the world who are adopting new habits due to the pandemic. According to Mastercard’s latest Recovery Insights report, this amounted to an additional $900 billion being spent on retail online around the world in 2020. Put another way: in 2020, e-commerce made up roughly $1 out of every $5 spent on retail, up from about $1 out of every $7 spent in 2019.

“Even in times of worldwide shutdowns, globalisation has shown its resilience, fuelled by digitalisation and the power of global trade," says John Pearson, CEO of DHL Express. “These trends have led to an ever-growing number of consumers shifting their shopping activities online. The pandemic has accelerated this development like never before, with a sharp rise in businesses selling their goods in the global marketplace. E-commerce and global logistics thus provided the key to unlock local shutdowns, keep economies running, and mitigate the impact of COVID-19 for many of our customers.”

According to Mastercard’s latest Recovery Insights report, international e-commerce got a boost both in sales volume and the number of different countries where shoppers placed orders. With infinitely more choices at their fingertips, consumer spending on international e-commerce grew around 25-30 per cent on-year from March 2020 through February 2021. Consumers are increasing their e-commerce footprints, buying from up to 30 per cent more online retailers.

E-commerce is also predicted to see strong growth in the B2B (business to business) segment in the coming years. In the opinion of an expert from DHL Express, one of the leading global firms in the logistics industry, by 2025, 80 per cent of all B2B sales interactions between suppliers and professional buyers will take place in digital channels.

In 2019, before the pandemic, global sales on B2B e-commerce sites and marketplaces had already increased by 18.2 per cent to reach $12.2 trillion, outpacing the market size of the B2C sector. Through COVID-19 and the resulting acceleration of digitalisation, this global B2B e-commerce volume is estimated to reach $20.9 trillion by 2027.

In addition to the convenience it offers, e-commerce also carries risks for customers. Last week, Tuyet Mai, an accountant at BRG Retail ordered a lipstick from a world-famous brand for VND590,000 ($25.65) on Shopee. A few days later, she received the item, but it was not authentic. “It looks rough, not shiny, and came without a full box, labels, or a barcode. For this price, I was expecting an authentic lipstick,” said Mai.

In fact, fake goods have been a serious issue for e-commerce for a long time. In February, the 2020 Review of Notorious Markets for Counterfeiting and Piracy report of the United States Trade Representative Office (USTR) highlighted that Shopee is "tolerating counterfeiting",with right holders reporting very high levels of counterfeits being sold on all of Shopee’s platforms.

Shopee reportedly has no procedures for vetting third-party sellers and preventing infringers from re-registering on the platforms, and sellers of counterfeit goods seem to have their accounts frozen only after multiple escalating actions.

The General Department of Market Surveillance (GDMS) predicts the annual growth rate of Vietnam’s e-commerce in 2015-2025 at 43 per cent. Particularly in 2020, the revenue of the e-commerce segment was estimated to surpass $13 billion with an escalating number of violations.

Last year, the department checked more than 5,000 cases, settled about 4,500 violations, distributing fines of VND30 billion ($1.3 million) in total. The value of counterfeit goods and goods without a certificate of origin, violating intellectual property rights discovered in the first seven months of 2020 by the GDMS was VND40 billion ($1.74 million).

Tran Huu Linh, director general of the GDMS confirmed that the authority has been building a legal framework to address these issues, proposing more adequate penalties to replace Decree No.52/2013/ND-CP on e-commerce.

“The legal document will set up a new management method for e-commerce purchases. The growth of e-commerce is fast enough, especially during the pandemic, to receive the same treatment as traditional retail. The new decree will put e-commerce and traditional retail on the same footing,” said Linh. “Additionally, the responsibilities of e-commerce developers and businesses will also be tightened to mitigate issues as much as possible to ensure customers’ rights.”