Despite ongoing attempts by many big brands to thwart the creation and sale of counterfeit watches, the market for them continues to grow. Not only that, but the makers of these goods seem to be getting better at faking it.
Sales of illicit watches are wreaking havoc on the world’s watch industry. Counterfeiting costs upward of $500 billion a year globally in lost business, according to the Fondation de la Haute Horlogerie (FHH) in Switzerland. A recent report by the Organization for Economic Cooperation and Development (OECD) pointed to an increase of more than 154% in counterfeit goods this century — from $200 billion in 2005 to $509 billion in 2016. Meanwhile, seizures of knock-off goods at US borders have increased tenfold: There were 33,810 confiscations in 2018, compared with 3,244 in 2000, according to the US Department of Homeland Security.
The rise of these replicas is due in part to their widespread availability on the internet, and in part to consumers’ desire for luxury goods at a price they can afford.
What harm does it do?
Sales of counterfeit watches eat into not just brand profits, but also sales by authorized retailers — and the problem extends beyond the financial bottom line. Brand reputations and long-term goodwill relationships often suffer as well. Clients who unknowingly purchase a fake or receive one as a gift lose faith in the brand as the timepiece begins to deteriorate.
“Over time, counterfeits impact the brand image, not only because the product is being sold for less, but also because the product is inferior in quality,” explains Mitchell Sussis, senior vice president and general counsel for watchmaker Movado Group. “It may not be immediately apparent, but the watch won’t keep time as well, it will tarnish or scratch more easily, or it won’t be as water resistant,
for instance.”
Another concern is that counterfeiters don’t comply with the same regulations that legitimate brands are required to follow, particularly in regard to toxic substances.
“We obviously comply with those standards, as do other legitimate watch brands, but we have every reason to think that the people making the counterfeits are not complying,” says Sussis. “They’re not looking at lead levels or cadmium levels or other substances.”
The dangers don’t end there. In an article titled “Evils of Counterfeit Watches” on the American Watch Association (AWA) website, number one on the list is that sales of these goods often fund organized crime and terrorism. Other risks the AWA cites include potential use of child labor, minuscule compensation for workers, and unorthodox supply chains.
A look at the targets
Which brands are counterfeiters targeting? The most common copies are of luxury labels such as Audemars Piguet, Cartier, Chanel, Hublot and Rolex, though the lower-priced fashion brands are an easy target as well.
“The majority of the business is in [high-end] brands where people want the look but don’t want to pay the price for the real thing, especially for designer lines like Michael Kors, Gucci or Chanel,” says Danny Govberg, chairman of Govberg Jewelers. In 90% of cases, counterfeit watches go for $700 and under, adds Govberg, who is also cofounder and chairman of WatchBox, an online platform for selling and trading pre-owned watches.
There are two types of customers for fake timepieces: those who deliberately buy them because they want the luxury look for less, and those who get fooled into thinking they’ve bought something real. Most experts agree that the former will never be converted to buying the genuine article. “The guy who is happy paying $400 for the look of a more expensive watch is okay with wearing a fake,” says Govberg. “But there is the guy who is looking for a deal and thinks he got one and is just being suckered. Either that, or he got a fake as a gift from someone and has no clue it’s not genuine.”
From a retailer’s standpoint, Govberg is not terribly concerned about the latter type of consumer. It doesn’t really affect his business, he says, because nine times out of 10, if someone wants the real thing, they go into the store to ensure it is authentic.
The online threat
While many watch companies are investing tens of thousands of dollars in finding, confiscating and destroying imitation watches, most are reluctant to discuss their efforts. And after speaking off the record with at least half a dozen big brands, this reporter can understand why: Counterfeiting has become an even messier dilemma than it was in the past.
A couple of decades ago, brands only had to worry about cheap fakes making their way through customs and into different countries illegally. They had to work with investigators to hunt down the brick-and-mortar stores selling these watches (many of them flea markets or street-corner vendors), and with authorities to make arrests and confiscations. Brands have staged elaborate demonstrations of destroying the imitation goods — for instance, by having steamrollers crush sham watches by the thousands on New York’s Fifth Avenue — to get the message across that they won’t tolerate fakes.
Today, though, the situation is more complex. Not only are counterfeiters still producing and selling watches by the millions, there is a plethora of online marketplaces peddling frauds. While some clearly state “replica” goods (still illegal), other e-commerce platforms are selling them as genuine, overtly duping unwitting customers. To combat this problem, many watch companies work with outside firms.
“These brand protection companies are constantly searching the internet for marketplaces that provide counterfeit goods,” says Movado Group’s Sussis. “We confirm that the goods are counterfeit, and the firm works with the marketplace to get the fakes taken down. Sometimes, the marketplace even shuts down the third-party seller altogether.”
Of course, he continues, “that doesn’t stop them from registering with another site and continuing the illegal sales. It is a constant monitoring process, but it is also a bit like [the game] Whack-a-Mole. You can shut one down, but it just pops back up in other places because these sellers can just register elsewhere.”
While Sussis says the anti-fraud efforts have nonetheless made a difference, there are always new challenges. Advancements in machining and 3D printing, for instance, have resulted in the emerging field of “super” counterfeit watches.
“These super watches make it much more difficult for the layman to detect that the watch is fake,” says AWA executive director David Perlman.
Genuine efforts
In addition to the sites that blatantly sell fakes, and the global marketplaces that try to keep knock-offs to a minimum among their third-party sellers, there are a host of online platforms that specialize in selling pre-owned watches. While these last may sometimes unknowingly list a replica, it is a rare occurrence.
“If you are experts in the watch business, you are constantly checking the watches up for sale on your site,” says Govberg, who adds that WatchBox has strict guidelines for identifying counterfeits. It even has sample counterfeit watches on hand for its experts to check against.
“Generally, at the high end, it is pretty easy to spot a fake luxury watch because the legitimate brands make such a superior product from a quality standpoint that the counterfeiters can’t match it,” he says. Signs of a fake include improper-looking logos, or inexact numerals on the dial, he notes. “And the counterfeiters have to get it all right. Few ever do.”
Image: Marcel Christ/Gallery stockArticle from the Rapaport Magazine - April 2020. To subscribe click here.