September 16, 2010, 10:17 AM

Criminals lure consumers seeking luxury goods to illegitimate sites

A new report suggests criminals use the same online marketing techniques as honest retailers.

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Criminals peddling suspected counterfeit goods attract roughly 120 million visitors annually, MarkMonitor, a provider of online brand protection technology and services, says in its latest Brandjacking Index report.

In a study of data related to five global luxury brands, MarkMonitor found fraudsters intercept significant amounts of traffic from consumers searching for luxury brands by subverting legitimate search engine marketing techniques.

“Fraudsters are savvy online marketers and are extremely effective in generating high volumes of traffic,” says Frederick Felman, MarkMonitor chief marketing officer. “These scammers dismiss the rules of professional conduct and have created a highly visible online ecosystem specializing in criminal behavior and fraud.”

Among the most common forms of abuse is cybersquatting, according to the report. Criminals use company trademarks in their Internet domain names, such as creating a site called LouisVuitton4sale.com to persuade consumers they are actually dealing with Louis Vuitton. MarkMonitor identified 1,251 web sites that contain one of the five luxury brands examined in the study and none of the sites had any rights to the brands.

Another common method, which MarkMonitor found 56 different advertisers partaking in, was criminals placing search ads using branded keywords to drive traffic to sites offering counterfeit or pirated goods. While doing so is against the rules of Google, Yahoo and Bing, the search engines do not prevent or monitor the behavior, according to MarkMonitor. Instead, each brand must initiate action with the search engines to remove the offending ads.

The retail sector isn’t the target of criminals—they’re also conducting business throughout the wholesale supply chain. The report found 3,989 sellers of suspicious goods with a combined 11,598 listings for the five brand names on 12 business-to-business exchange sites. The average selling price on those sites was $118, 80% below the retail prices for the genuine goods.

Moreover, MarkMonitor found 1,432 sellers of suspicious goods with a combined 3,590 listings for the five brand names on 10 business-to-consumer exchanges, including auction sites and classified ad sites. Those sellers are global—with 55% located in North America, 29% in Asia-Pacific and 16% in Europe. The average selling price for the goods was $324, 45% below retail price.

“While it’s debatable that the person who purchases a $100 fake handbag is an actual customer for the real item, the fact that suspicious sites promoting these five luxury brands generate more than 120 million visits annually indicates that actual prospects are being siphoned away from the real deal by suspected counterfeiters,” says the report. “As the luxury segment—and luxury buyers—continue to embrace the Internet, it’s vital that the industry takes aim at online counterfeiters, paid search scams and other forms of online brand abuse in order to reap the fullest return from their precious brands and carefully cultivated images.”

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