Back Four Brand Protection

Back Four


Recently, while stumbling through the social media jungle I came across a seller of counterfeit football shirts who described herself as a “mumpreneur”. Despite it being a new concept to me it immediately set my mind spinning about the nature of entrepreneurship in our digital age.

If your idea of entrepreneurship is the one which I think most people have grown accustomed to, that of hard work, talent and dedication to the nurturing of a product or brand that you then take to market, you’re going to be a little disappointed by what I saw on this lady’s page. If your idea centres more on the Del Boy Trotter school of “pile it high, sell it cheap and don’t ask where it came from”, then maybe shoot me an email and I’ll give you her details. I should make it clear here that I’m not picking on mums in particular, the same would all hold true for dadpreneurs, childfreepreneurs or any other kind of individual you care to mention. Social media is nothing if not an equaliser of opportunity to broadcast yourself.

So what do we mean in 2018 when we think of an entrepreneur? Even the Oxford English Dictionary only gives the somewhat parsimonious definition as “A person who sets up a business or businesses, taking on financial risks in the hope of profit.” But do these new social media sellers even have the right to call themselves entrepreneurs according to the slim dictionary definition, and what does this say about counterfeiting and brand protection in the twenty-first century?

If we take the dictionary as a starting point then it seems to me there are three key things here which are worth unpicking:

1. A person who sets up a business or businesses.
2. A person who takes on financial risk.
3. A person who has a hope of making a profit.

Let’s take them each in turn:

1. A person who sets up a business or businesses.

When we speak generally about globalisation and its effects upon specific commercial and industrial concepts like Just In Time (JIT) production or Lean/Agile manufacturing we tend to have an image in mind of the kind of “big” work/production flow which takes place across factories, shipping containers and international boundaries. Our new hypothetical models of global businesses have become defined by how we see them operating transnationally and responsively.

This may be in contrast to older nation-state type models where everything was localised and where trading only needed to adhere to one specific set of laws and business regulations. Arkwright’s corner shop in Open All Hours didn’t need to be too concerned about shipping routes from Guangdong or the impact of the One Belt One Road Initiative, but it did need to pay tax and to make sure that all goods sold corresponded to relevant trade laws on weights and measures and so on.

This kind of operation was, in the common mind, “A Business”. The trickle-down effect of technological globalisation however has meant that most businesses in every country now at least have the potential to be almost unrecognisably altered. The advancements in computing and production methods and their impact on commerce has allowed private individuals in their own homes to become importers, wholesalers and distributers in their own right. Formerly these things would have been off limits to such people because they may not have the personal connections, the commercial know-how or the legal status to be able to source a manufacturer of thousands of items who could then move these across the world within a reasonable space of time. But that picture no longer holds true. People can log on to DHGate, pick a supplier in China and receive a shipment of goods in a matter of weeks or even days.

While much of this is a positive development because it allows people to work flexibly and in an entrepreneurial manner, with the breakdown in these particular barriers there has also been a significant drain on both knowledge and responsibility in terms of how businesses are supposed to operate within legal frameworks. Frequently when you buy counterfeit items, for example, you are asked to pay via Paypal using the Friends and Family transfer method so that the seller can avoid paying fees. This is in itself revealing because it shows a willingness to acknowledge that a business transaction is being done but an unwillingness to pay for it. You would have to surmise from this that not only are funds being withheld from online providers such as Paypal, but elements of taxation which international businesses normally generate are also being misplaced or not paid at all.

More seriously, what has also gone missing as part of this shift is a loss of legal transparency. Shops cannot trade in this opaque way without, ultimately, being made accountable for the selling of illegitimate goods because they have a legal status and a fixed place of registered business. In the process of establishing a business they are also funnelled into a system where they are made aware that it is their responsibility to know what they can and cannot do, what they can and cannot sell, including counterfeit goods. Social media traders aren’t necessarily schooled in this way and although many of them are fully aware of the laws they are breaking in selling fake items, there will also be many who are probably more ignorant than malicious.

So in the twenty-first century the idea of what a business looks like has changed. Many questions arise as a result of these changes; What laws and jurisdictions does a modern business have to adhere to? Where does responsibility lie for enforcement? How are they now “set up”? In my opinion it is this sense of global flux which has allowed more and more people to take on a slightly “Wild West” perspective wherein they don’t see themselves as strictly operating in one country so they also don’t necessarily think they should abide by those rules.

With this slackening of adherence comes a possible further slide in terms of how they operate and in fact WHAT they sell. In this sense I think that globalisation has allowed the morality of selling counterfeits to become normalised. Crucially, for the question at hand, does a modern entrepreneur “set up a business”? Well, no, not in the sense of being accountable.

2. A person who takes on financial risk.

“The truest saying in this world is that you can’t accumulate if you don’t speculate. But how the deuce are you to start speculating unless you accumulate a few quid to begin with?” P.G. Wodehouse.

The old adage goes that you can’t make money without spending money. Financial investment is risky. Do modern entrepreneurs have to take on the same degree of investment and risk in order to reap the possible rewards that they would have done in the past though? Unsurprisingly perhaps, the answer is that no, they don’t. Traditionally, running a retail business meant that both supply and demand had to be balanced through the canny shopkeeper’s ability to order and then hold enough of the right kind of stock so that not only would the shelves of the shop look full, but so that consumers could get what they wanted while also perhaps being encouraged to make new purchases which the shopkeeper wanted to push for reasons of profit margins etc. There was a skill in spotting the right trends and balancing these against the realities of what suppliers could manage to provide according to cost price, timescale and scarcity.

Modern trading relationships, however, particularly those on social media platforms, function somewhat differently. If we take the example of our mumpreneur on Facebook then there is no investment on her part because the traditional chain of manufacturer-importer-wholesaler-retailer-consumer has been subverted. There seems to be two reasons why. First, as many manufacturers/importers now offer quick shipping methods and small consignments there is an unprecedented ability to buy directly from the source. Couple this with smaller shipment sizes, which Customs officials are less likely to inspect, and you have a substantial reduction of both financial and criminal risk. It’s possible for a social media seller to take orders on the internet and then fulfil those orders directly from China within two weeks. When consumers are getting a massively knocked down price (even for fake items) they rarely complain about waiting a few extra days for shipping.

Secondly, where goods are shipped via a more traditional model of large-scale consignments being held by domestic wholesalers and then becoming available to multiple smaller retailers, this method too has changed. Mobile phones and online ordering systems mean that counterfeiter wholesalers can keep their retailer clients up to date with stock levels and prices instantly, and then retailers then pass this information on to consumers. No one holds stock aside from the wholesalers who are often either so well-hidden or who operate in areas so riddled with counterfeiting issues that they are just one among many other problems to be investigated by enforcement. The lack of a bricks and mortar shop on the part of the retailer means that no stock is held for any longer than it takes to either make a delivery or to put something in the post to a customer. Although there is a digital trail for enforcement to investigate this is a much more time consuming and economically costly process than using powers of entry to seize counterfeit goods from a physical shop. Again, as the number of items which the budding entrepreneur has to purchase diminishes down to that of only what is ordered and paid for in advance then the financial risk involved to them also diminishes down to near zero. So, once again, does this person take on financial risk? No.

3. A person who has a hope of making a profit.

Yes, they most certainly do that. Well, one out of three ain’t bad I suppose.

What, if anything, is to be done about this new breed of entrepreneurial souls? It seems clear that there is a problem with the links between counterfeits and this kind of instant, riskless trading. Social media in particular, with its anonymity and its tentacular community structures, offers a safe haven for the worst offences against brands but also against regular retail businesses, their employees, customers and, ultimately, against the general public because of the slinky avoidance of taxation. There needs to be better regulation of how people can operate as business entities rather than as private individuals if they are going to go to the trouble of selling new goods rather than just carbooting their own used items.

A good first step it seems to be me comes with the social media platforms and payment providers themselves and what they can do to assist with creating a culture of better transparency. Buy and sell groups should be better regulated, traders more stringently monitored, but most of all anyone attempting to offer goods or services to consumers must be able to be held accountable. The only way to do this is to publish (and verify) names, addresses and contact details. Once people are made to publicise exactly who they are then they will either realise that they are doing something they shouldn’t be doing and stop, or they will further recognise that what they are doing is illegal and they will go further underground, thus making it more difficult for consumers to purchase from them, but also leaving law enforcement in no doubt as to the purpose of their actions.

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