Sales of counterfeit health, beauty products on e-commerce platforms expanding beyond high-cost products to include everyday personal care items, such as toothpaste, shampoo, nail polish, study finds

BOSTON , September 23, 2011 (press release) – OpSec Security, Inc., the global leader in anti-counterfeiting and brand protection, today released the results of a study that uncovered a substantial number of illicit health and beauty products available on popular online trading platforms. The findings point to a significant rise in health and beauty products that may be counterfeit, substandard, expired, or contain dangerous chemicals, which not only pose a threat to brand reputation, but also present a serious risk to consumer safety.

“In the past, counterfeit health and beauty products were typically focused on high end products, but they have evolved to include everyday personal care items. The anonymity of the Internet fuels an online marketplace where counterfeiters can thrive”

Key findings from the study include:

* Counterfeiting has expanded beyond high cost goods, such as luxury fragrances, into everyday personal care items such as toothpaste, shampoo and nail polish
* Many dubious sellers offer not only customized packaging but also customized products to supply any brand name product in massive quantities
* The Asia-Pacific region, in particular, is notorious for the production and sale of counterfeit health and beauty products
* A Chinese manufacturer on a leading trade board offered a quantity of 10 million units per month of a popular brand name shampoo
* An OEM manufacturer based in China offered a monthly supply of 900,000 bottles of a popular brand name perfume
* A top seller on a popular auction site posted 453 listings with more than 76,000 products available, and had sold more than 23,000 products at a value of $800,000
* Reports of urine and other toxic materials have been found in imitation perfumes

“In the past, counterfeit health and beauty products were typically focused on high end products, but they have evolved to include everyday personal care items. The anonymity of the Internet fuels an online marketplace where counterfeiters can thrive,” said Tom Taylor, president, OpSec Security. “Unwary consumers visit popular auction sites where deceptive dealers sell suspect cosmetics and personal care products. Those dealers often use trade boards to source illicit products. By identifying a set of key Suspicious Behavior Indicators, OpSec provides guidelines to help consumers and companies be aware of dubious sellers and potentially harmful products.”

OpSec used its proprietary Internet monitoring platform to identify listings of health and beauty products on business-to-business (B2B) trade boards and business-to-consumer (B2C) trading platforms within the following categories: mascara, nail polish, shampoo, razors, men’s cologne and women’s perfume. By monitoring the key Suspicious Behavior Indicators characteristic of dubious sellers, OpSec uncovered the following metrics in a snapshot sampling:

* Ability to supply large quantities in a short timeframe: B2B trade boards provide a global e-commerce platform for sellers and buyers to engage in the distribution of bulk products. OpSec found 275,000 health and beauty listings across B2B trade boards, with an average quantity of 250,000 units available per month for each listing. Women’s and men’s perfume were especially popular with 175,000 listings identified on the leading B2B trade boards. In one specific finding, a seller was offering a quantity of 10 million units per month for a popular brand name shampoo. On B2C platforms, more than 46,500 listings for health and beauty products were found with more than 4.85 million units available. Mascara, nail polish, and shampoo each had more than 1 million pieces available for purchase. The top seller on B2C auction sites posted 453 listings with over 76,000 products available, and had sold over 23,000 products at a value of $800,000.
* Product price significantly below standard retail price: Consumers have become more aggressive when price comparison shopping online, creating a large demand for discounted health and beauty products on B2C trading platforms. The ensuing trend creates the perfect catalyst for counterfeiters by triggering the development of cheap products, but also an increased variety of counterfeit products. On B2B trade boards, products are sold in bulk, often at prices below wholesale. On B2C auction sites, health and beauty products are sold at a range of 30-40 percent below retail prices.
* Items located within the Asia-Pacific region, but willing to ship worldwide: As companies have moved manufacturing to countries like China to save on production costs, it has resulted in less control over the supply chain thereby increasing their exposure to counterfeits. Products manufactured without authorization are not subject to the same quality assurance procedures and may include unsafe substances to reduce production costs. OpSec’s study found that 75 percent of B2B listings were from sellers based in China, a known hub for counterfeit health and beauty products. For B2C platforms, the top three countries with the most listings were from Hong Kong, China and Taiwan.
* Questionable packaging photo and/or packaging description: Some sellers examined in the OpSec study claimed to have manufacturing facilities with the ability to produce well-known, original equipment manufacturer (OEM) products. The photographs highlight familiar brand name products. However, upon closer investigation, sellers were offering to manufacture not only customized packaging but also customized products. In these arrangements, buyers could order any name brand product in massive quantities. In one example, an OEM manufacturer offered a monthly supply of 900,000 bottles of a popular brand name perfume.
* Negative buyer feedback on B2C trading platforms: Several top sellers from the OpSec study had questionable negative comments posted from buyers on the auction site, while still maintaining a high feedback rating overall. For example, one of the top sellers based on the value of goods sold had a 99 percent rating, but also had over 130 negative customer comments. Much of the feedback included comments about items purchased that were believed to be fake, due to substandard quality or from verification by authorized sellers.

About OpSec Security

OpSec Security, Inc. is a wholly-owned division of OpSec Security Group plc (London AIM: OSG). OpSec Security is the global leader in providing anti-counterfeiting technologies as well as solutions and services for physical and online brand protection to over 300 companies across industry sectors and over 50 governments worldwide. The Group operates manufacturing facilities and laboratories in the USA and the UK, and has sales operations in the Americas, Europe, and Asia. For more information, please see www.opsecsecurity.com, or contact Terri Mock, +1 617-226-3000, or tmock@opsecsecurity.com.

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