The impact of the internet on productivity and growth in the Chinese marketplace has been nothing short of transformational and the revenue potential that this emerging eCommerce market offers makes China a very tempting digital business proposition.
According to a report from the McKinsey Global Institute, the projections are that new internet apps could fuel seven to 22% of China’s incremental GDP growth through to 2025, depending on the rate of adoption.
For businesses around the globe, China’s digital transformation may make financial sense on paper. But alongside the tremendous online opportunities, there are also well documented challenges brought by counterfeiting and the issue of brand protection for businesses operating in that region.
The production and sale of counterfeit goods is a global, multi-billion dollar problem and one that has serious economic ramifications for businesses and consumers.
Counterfeit sales represent more than 8% of all global trade and it is no secret that a large proportion of these goods originate in China. For brand owners, the most effective brand protection strategy becomes even more critical, and one of the biggest challenges is around enforcement and how local policies impact on brands’ enforcement rights.
According to Statista.com, the number of shoppers online in China reached 361.42 million for 2014 – which may rise significantly during the next two years.
Don’t be discouraged
Businesses should not be discouraged by the challenges. When brand owners are looking to engage with this market, it is important to remember the rapid growth in purchasing power and that China is a workshop for legitimate goods as well as counterfeits.
The key to tackling the challenges and complexities of brand protection in China is to seek expertise from those who fully understand the policies and practices in the region.
In this highly specialised marketplace, it makes sense to acquire a partner who can help an organisation navigate the landscape and leverage best practices for local enforcement.
Logical steps, such as using native speakers who can enforce with boots on the ground, can make action against counterfeiters far more effective than doing it from abroad. There are several other areas that brand owners should look at to ensure best practices are followed when protecting their brand.
Building a strong IP portfolio
The foundation of success in any market is building a strong IP portfolio. Even when brand owners think that they have taken the necessary steps to build a strong IP portfolio by securing Chinese trademarks, they find it isn’t enough.
One of the most significant challenges is the unique classification system in China, which differs from that used by the World Intellectual Property Office.
There are also very specific procedural details that must be met such as trademark registrations only being accepted in colour and affixed with the official government as evidence.
Brands should engage with local partners to regularly assess the strength of their IP portfolio. They can also advise on account variations in local use of a brand name, in both Simplified Chinese and Traditional Chinese translations.
When launching new products or services it is best practice in Asia to consult local legal counsel to verify the strength of the company’s trademark rights and help navigate local requirements. In addition, trademarks should be registered well in advance of the launch in each region.
Brands have to understand the volume of cases of infringement as well as the number of marketplaces and sites on which cases are found. Successful enforcement will depend on an accurate assessment of the scope of brand infringement, clear priorities for action and scrupulously-prepared documentation.
Brand owners need to make it difficult for buyers to find sites infringing their brand online. This requires focusing efforts on identifying and engaging high-value targets.
Counterfeiters follow traffic, so it is logical that the greatest number of enforcements occur on the most popular marketplaces. However, going after the biggest players requires investigative resources, an adaptive strategy, and partnering with local resources.
The most successful brands have worked hard with regional marketplaces to build trust, and this shared level of trust results in higher compliance rates for enforcement efforts.
Paying special attention to each marketplace’s enforcement guidelines and procedures, enabling brand owners to build a track record for accuracy and a sense of partnership.
If brands are too aggressive with delisting requests, such as submitting without proper justification, they could face additional scrutiny and removal time for all delisting requests.
Leveraging a recognised partner in brand protection will help build that vital element of trust with marketplaces and improve compliance rates.
A partner can also help organisations to understand wider local enforcement complexities and address unique problems that require a customised approach.
Weak affiliate agreements and guidelines could result in distribution channels quickly growing out of control.
The result is that while original distributors might only sell authentic products, at the bottom of the chain there will be authentic products mixed with counterfeit goods. This can be avoided by brand owners focusing on strengthening agreements, and being tough on those who break them.
Brand owners operating in today’s digital world may recognise the huge growth opportunities in China’s online market, however there are many challenges to overcome before reaping the revenue potential.
Having an effective brand protection strategy that incorporates local expertise will help businesses to yield valuable insight and enable them to optimise marketing, pricing and product strategies across the region.
Counterfeiting may be a global problem and brands have to be protected, but with the right strategy and effective enforcement, businesses can take full advantage in these emerging and lucrative marketplaces.