The cosmetics industry is under attack daily from counterfeiters selling fake products in lookalike containers. Unfortunately, the contents of these imitation products can be far from the original. And the dangers are real, from the loss of brand investment to the risk of the counterfeit product that could cause harm to the consumer. The cosmetics industry worldwide was about $380.2 billion dollars in 2019 and is expected to grow to $463.5 billion by 2024.  In the US, the industry reached about $90 billion dollars in 2020 and is expected to grow about 7%  a year for the next five years. The counterfeit market in the US for fake cosmetics is about $75 million dollars, or roughly about 8% of total sales. Counterfeits’ Financial Impact What does this mean? Counterfeit products cause a direct loss of revenue for cosmetics companies. As a result, jobs are lost across the industry, and there is less capital available to reinvest in new products for the future. If any legal action is necessary, additional financial investment is required. Dangerous Ingredients in Knock-off Cosmetics Analysis by the Federal Bureau of Investigation (FBI) found bacteria, animal waste, human waste, as well as very dangerous chemicals in these products—testing positive for lead, mercury, arsenic, E. coli, and more. According to research from Clarkston Consulting, if these hazardous chemicals aren’t enough to scare away deal-hungry consumers, the conditions in which most of these products are manufactured are alarming. It is difficult to believe an informed consumer would voluntarily put these “ingredients” on their body. Numerous accounts detail coveted cosmetic products (that are later found to be counterfeit) have sealed shut consumers’ eyes, caused chemical burns and, at times, caused permanent damage. Knock-off cosmetics can be so harmful that the FDA has a website specifically for reporting a “cosmetic related complaint.” This website includes everything from tattoos and shaving products to makeup and perfumes. In an FDA report, it is noted that over 12,000 complaints were filed from January 2018 to March 2020. The complaints range from minor burns to permanent scarring. Social Media Influencers Changed the Market  With the increase in e-commerce sales, the opportunities for counterfeiting have increased proportionally. According to recent data from Statista information, e-commerce sales will account for 8.6% of all cosmetics sales by 2024. Social media plays a massive role in cosmetic sales. Influencers flood Instagram, TikTok, and YouTube with makeup advice and tutorials. With all this beauty knowledge easily available online, consumers find it unnecessary to visit brick and mortar stores for the personal advice they may have relied on in the past. When everyone shopped in stores, any negative impressions could be easily handled in face-to-face discussions. Unfortunately, social media also has a dark side for brands. Since “news” travels faster than it ever did, bad product reviews are readily available for consumers to read on the web. So, how do you protect your brand? Protecting the Beauty Brand The world is changing rapidly. As a brand owner, getting in front of, and staying ahead of, positive and negative brand reviews is essential. This is especially pertinent with the rise of counterfeit cosmetics. Therefore, smart labeling technology is now more critical than ever. The least expensive and most effective way to help prevent counterfeiting is labeling. A serialized bar code following GS1 standards can be assigned to a specific product, which can be traced throughout the supply chain. Since all products are labeled, adding an intelligent labeling solution to the existing label can prevent counterfeiting. However, the most effective labeling technologies are multi-faceted and are exceedingly difficult to replicate. Smart labeling combines overt/covert technology into the package decoration. Overt technology may be a hologram or a basic tamper-evident label that is often used as a box seal. Covert technology may be a hologram with a hidden message, micro-text in the label, or an RFID chip.  These methods require a task force and additional equipment to read and understand the messaging. Consumers make up the most powerful enforcement team. With today’s mobile technology, an App on the phone will enable the consumer and the brand owner to be more proactive and help police counterfeit products. Next-generation labeling combines overt and covert technology into the label in such a way that the label is nearly impossible to counterfeit. With intelligent next-generation labeling, consumers can use their mobile device to scan the label’s unique serialized barcode, which reveals hidden information that is analyzed and validated to determine the product’s authenticity. Within an instant, a consumer will know whether the product is fake. By using smart labeling technology, cosmetic brand owners can react quickly and proactively identify counterfeit products and gain market information for future sales when combined with a dashboard. When a beauty product is scanned, its location is identified and stored in the cloud. Brand managers can leverage this data to build loyalty programs to boost sales potential and ensure products are in the appropriate place to reduce the threat of counterfeiting. The rise of e-commerce has forever transformed the beauty industry. With that, more criminals have moved online to sell knock-off products. Accordingly, cosmetic companies must take proactive steps to protect their brands.

Ron Ducharme