Editor´s note: This is a guest post by Susan Krautbauer, director of business development for Flash Global, which designs and implements service supply chain strategies for rapidly expanding companies. 

Counterfeit products are everywhere and very difficult to identify. Scam artists fake everything: packaging, serial numbers, and manufacturers’ websites. Counterfeit goods account for as much as 5% of all goods imported into the EU. The problem is growing and becoming more pervasive. While a counterfeit purse with a broken strap is an annoyance, a counterfeit part that fails in a warehouse computer can halt shipping from ecommerce orders, leaving you with lost revenue and angry customers. Learn more about the dangers of counterfeit products, how to spot them, and how to protect your business.

Counterfeit Products: Dangerous & Defective

Everybody wants a deal, but the underlying caution for the online marketplace is “buyer beware.” Don’t be so eager to cut a deal that you fail to do due diligence on the products. There’s a real danger that counterfeit products will cost you far more money than you save on the initial purchase.

A lot can go wrong:

  • Cost: Imagine the chaos in your facility if counterfeit hard drives or servers fail. The cost to replace them with a certified product is small compared to the critical data or sales you might lose.
  • Security: Counterfeit storage devices – hard drives, servers, and portable storage, for example – often come with malware already installed. The fraudster profits twice: once with the initial sale and again when he starts stealing your data.
  • Reputation:  If your products or services are unreliable, your reputation is at stake. Once you lose customers to competitors, it’s hard to get them back.
  • Profitability:  Tangible direct costs associated with counterfeit items include sending a service technician to the site as well as the cost of the parts. Intangible costs may be higher, too, when disappointed customers go elsewhere the next time.
  • Warranty: You may inadvertently void your original equipment manufacturer (OEM) warranty if you install products or parts that aren’t genuine OEM-certified.

In addition to client data security, physical safety and liability are also serious concerns with counterfeit batteries representing a particularly significant danger. OEMs have experienced numerous product recalls due to defective batteries that were part of the original product. Remember 2016, when Samsung Galaxy Note 7 phones were banned by airlines around the world due to battery issues?

And yet, there is a huge demand for “after-market” batteries sold at “too good to be true” prices on sites like eBay, Amazon and Alibaba. A counterfeit battery with “thermal runaway” could start a fire in your office or even burn down a warehouse. The risk that sub-par, unregulated electronic components pose to your company just isn’t worth the cheap price.

Be Careful Where You Shop

Third-party seller sites like eBay, Amazon, and Alibaba are full of counterfeit products. No matter how diligently the sites try to police unscrupulous purveyors of replacement parts, their very structure makes it easy for fraudulent merchants to simply set up a new account and keep selling.

Note that there’s an important, but subtle, difference between a fake and a counterfeit product. For example, if someone offers you a new Kapten & Son watch for 15 Euros, then it’s an obvious fake. You know you’re getting the shine, but not the substance. But suppose someone offered a lot of 100 new watches on eBay for 58 Euros each? “Wow,” you think: “That’s a good discount, and what nice client gifts they’d make.” They do, at least until they fell apart. A counterfeit item is one that’s sold to someone who thinks it’s a legitimate product.

The stakes are higher when the counterfeit products are used for important business-critical functions. Consider the people scammed by counterfeit microSDHC cards on eBay. They held just a fraction of the data promised. Even worse, when the cards were full, the new data just overwrote the existing data.

Look For Counterfeit Warning Signs

Many counterfeiters run large, profitable operations, emulate the OEM specifications on their counterfeit product, and are really good at what they do. Even careful buyers can be deceived. To protect yourself, your first step in the purchase process is to answer “yes” to both of these questions:

  1. Am I buying from the manufacturer or an authorized reseller?
  2. Does the price seem reasonable?

Unfortunately, even if you answer yes both times, there may be hidden pitfalls. Criminals have a number of tricks that fool even careful buyers:

  • Identical Packaging: They use shipping boxes and OEM packaging that’s identical to the real thing, even down to security and inspection stickers that match the real ones used at the original factory.
  • Serial Numbers: Counterfeiters often place serial numbers on their products. It could be an actual serial number used by the manufacturer, but look carefully. If you have 10 disk drives all with the same serial number, that’s a huge red flag.
  • Spoof Websites: Check the spelling and make sure you’re really buying from the correct website. Scammers will set up a site using a common misspelling of the manufacturer’s name or a different suffix on the domain, such as .biz instead of .com. The site may look identical to the real one, but the products offered are not.

Even more insidious is the practice of installing counterfeit parts into a larger assembly or whole unit and then selling it as genuine. For instance, up to 10% of car parts sold in Europe may be counterfeit. The “genuine” replacement steering column for your BMW could include counterfeit parts that will fail at the worst possible time – like when you’re navigating a narrow road in the Swiss Alps. You lose twice because the premium price for a “genuine” BMW-certified steering column actually gave you a substandard part, and now you don’t have the manufacturer warranty to fall back on.

Ideally, OEMs will develop a system that tracks real serial numbers to the sub-assembly level in the future. In the meantime, however, understand that a serial number doesn’t confer legitimacy any more than fancy packaging does.

What If Counterfeit Products Fail?

In most cases, you have little or no recourse. Most buyers don’t realize a product is counterfeit until it fails. Sometimes a technician on a service call is the one who catches the problem and delivers the bad news: “Your parts aren’t legitimate and installing them voided your warranty for the entire system.”

The only way to avoid these problems is to stay inside authorized distribution channels. Once you leave them, you have no OEM warranty protection and no recourse. Counterfeiters are happy to take the money and run, but your business will be left holding the bag and dealing with disappointed customers.

Author´s Bio: Susan Krautbauer is director of business development for Flash Global, which designs and implements service supply chain strategies for rapidly expanding companies.

Guest Blogger

This is a guest post written by one of our contributors.