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Cosmetic brands worldwide have been under attack from counterfeiters. The problem escalated over the past year as more consumers shopped online due to the global pandemic. Vast amounts of revenue are being lost to counterfeiters, and brands have had their reputations threatened when a toxic counterfeit is mistaken for a legitimate product. And it is not just companies that are affected ā€“ fake beauty products can pose serious risks to consumersā€™ health and safety.

A Disrupted Market

The pandemic has wreaked havoc on the cosmetic industry. Sales have plummeted with social distancing and so many people working from home. Even the Lipstick Index, where women still splurge on a high-priced luxury lipstick during recessions and other downtimes, has been upended. Who buys lipstick when you have to wear a mask when you go anywhere?

In a market that was on a trajectory for growth, things are in flux. Brick and motor stores initially shut down when the Covid-19 virus hit. Ā While many stores have reopened, traffic is still down, as countless consumers who were purchasing shifted to an online buying mode. During the pandemic, online beauty product sales have grown 20% to 30%. Unfortunately, e-commerce is a ripe market for counterfeiters.Ā  Counterfeiters were responsible for an estimated $5.5 billion in cosmetic and personal care organizations lost sales in 2020.

In a market facing challenges because of lifestyle changes and people spending more time in their homes, brand protection from counterfeiters is paramount.

What Are You Putting On Your Skin?

More consumers today are looking for organic, safe products to put on their skin. The ingredients in counterfeit beauty products could not be any further from that. Ā For example, in 2018, a Los Angeles Police Department task force seized aboutĀ $700,000 in counterfeit cosmeticsĀ that contained high levels of bacteria, human waste, and animal feces.

According to the United States Federal Bureau of Investigation, fraudulent cosmetics may contain arsenic, beryllium, and cadmiumā€”all known carcinogensā€”along with high levels of aluminum and dangerous levels of bacteria from sources such as urine.Ā  Some of these products have caused conditions like acne, psoriasis, rashes, eye infections, and in extreme cases, much worse.Ā  Counterfeit fragrances have been found to contain something called Diethylhexyl Phthalate (DEHP), classified by the Environmental Protection Agency as a probable human carcinogen that can affect the kidneys.Ā  Other counterfeit beauty products have contained lead, mercury, and E. coli.

How Do Cosmetic Companies Defend Counterfeit Products?

Governments and corporations are taking action to address the counterfeit situation. While strictly prohibiting counterfeit products on its site, Amazon has been dealing with a rise in counterfeit products. They have even taken counterfeiters to court. Beauty market leaders Lā€™OrĆ©al and EstĆ©e Lauder have invested significantly in the fight against fake products. They have teams of legal and security resources working to protect their brands.Ā  However, smaller brands with less funding are unable to mount such expensive brand protection measures.

In an FDA report there were nearly 12,000 reported cases of adverse effects to counterfeit cosmetics between January 2018 and March 2020.Ā Ā  Unfortunately, the process for handling these complaints only starts after a complaint is filed.

Regrettably, there is no easy answer to prevent counterfeit cosmetics from crossing borders. The US government has teamed up with the US border patrol to inspect products coming into the United States, though not every shipment is inspected.

In a proactive approach, the FDA issues Import Alerts on products and ingredients that may be considered high-risk.Ā  All imported cosmetics must comply with the same laws and regulations as those produced domestically.

According to a Securing Industry article, a Europol campaign against counterfeiting seized nearly $3m in fake products. In terms of volumes of seized products, perfume bottles accounted for the largest category, at almost 70,000 items, followed closely by cosmetics at more than 22,600 items. To get the word out about this rising threat, Europolā€™s Intellectual Property Crime Coordinated Coalition IPC3 has developed theĀ Donā€™t F***(ake) UpĀ prevention campaign.

How Do You Know If The Product Is Counterfeit?

Probably the most asked question from consumers is:Ā  How do I know the cosmetic I purchased is real or fake? One action a consumer can do is to inspect the container closely. Counterfeiters have become very sophisticated in creating knockoffs.Ā  Without close examination of the containers or packaging, you may not see subtle changes in color, wording, or labeling of the fake product.

All major cosmetic companies will have a serial number and/or a batch number on the product.Ā  Compare these numbers to the previous lot you purchased. If there is no consistency in the numbers, think twice about buying.

Check the product. You should be able to ask to test a sample to compare the productā€™s color, feel and smell. Quality cosmetics will have a smooth consistency and texture and not be separated into layers. Upon application to the skin, it should appear smooth and not clump and fall off.

Genuine cosmetics also are paired with quality applicators- brushes and sponges. Check these for size, color consistency of the applicator area, and the ā€œhairā€ in the brush.Ā Ā  These should not be irregular or vary in size.

And if the price seems too good to believe, then it more than likely is a fake.

Intelligent Next-Generation Labeling

As a brand owner, you have spent countless hours and energy developing the brand, the image, and the messaging. And your packaging and labels are critical components of your brand.

The least expensive and most effective way to help prevent counterfeiting is labeling.Ā  A serialized bar code following GS1 standards can be assigned to a specific product, which can be traced throughout the supply chain. Impactful labeling technologies are multi-faceted and, therefore, exceedingly difficult to replicate. Smart labeling systems combine overt/covert technology into the package decoration label in such a way that the label is nearly impossible to counterfeit.

The most powerful enforcement team is the consumer themselves. Todayā€™s mobile technology combined with a phone App allows the consumer and the brand owner to be more proactive and help police counterfeit products. With intelligent next-generation labeling, consumers can use their mobile device to scan the labelā€™s unique serialized barcode, which reveals hidden information that is analyzed and validated to determine the productā€™s authenticity. Within an instant, a consumer will know whether the product is fake.

By using a smart labeling technology, cosmetic brand owners can react quicker and proactively identify counterfeit products, and gain market information for future sales when combined with a dashboard.Ā  Each time a product is scanned, its location, and potentially the consumerā€™s whereabouts, are identified and stored in the cloud. With this information, brand managers can build and enforce a loyalty program, and ensure products are in the required locations to maximize sales potential while minimizing the risk of counterfeiting.

Covid-19 has considerably altered the beauty market, some of the changes will persist, and others may fall to the wayside.Ā  But regrettably, bad actors who are looking to profit off the beauty market are here to stay. Consequently, beauty companies need proactive approaches to protect the brands they have worked so hard to establish.

About the author: Ron Ducharme serves as Vice President of Business Development at Covectra, a leader in track and trace solutions. Ducharme can be reached at rducharme@covectra.com.

by Richard McKeon