Dive Brief:
- A federal judge ruled earlier this week for Costco to pay Tiffany & Co. $19.4 million in damages for illegally selling 2,500 counterfeit engagement rings attributed to Tiffany, PYMNTS.com reported Tuesday.
- Costco contended it did not sell imitation Tiffany rings, but sold its own rings and used the word "Tiffany" to describe the ring settings. Costco said it will appeal the ruling.
- As a wholesaler, Costco sells many different brands — including its own — often at discounted prices when bought in bulk from its large warehouses that double as grocery centers. The Tiffany fiasco implies an attempt for Costco to push its own products while keeping prices down.
Dive Insight:
The Costco Tiffany case brings to light supply chain turmoil that at its best creates undue confusion and pressure, and at its worst leads to counterfeit goods and fraudulent suppliers. While counterfeit goods certainly predate the internet — just look at the bootleg CDs, faux handbags and fake watches sold forever on many a NYC street corner — the pressure to meet cost reduction targets may make some in the supply chain to not only cut corners on materials but fall victim to counterfeit goods from all corners of the world.
These cost pressures are especially prevalent in retail. A family member, purchasing a well know brand on a popular online marketplace, received a fleece jacket that seemed on the surface to be the exact model she was looking for, from the color to the style to the labels. But, a closer review showed the zipper installed backwards…a clear indicator of a counterfeit product. While the marketplace made good on the purchase, and acknowledged the problem of counterfeit goods, the vendor’s storefront seemingly disappeared overnight. The price was indeed to good to be true.
Manufacturing cannot be left out of the counterfeiting equation. The lack of visibility in the extended supply chain may also provide cover for companies to trade in counterfeit goods. And these goods don’t need to be high profile. Counterfeit goods can be found in such mundane commodities such as fasteners, fittings, and other types of hardware and electrical components. These lower level and seemingly low value items on a bill of material are often overlooked, especially when considered ‘just commodities’. But the performance if these inferior goods can have a devastating impact downstream, creating safety or compliance nightmares. Counterfeiters can make a lot of money in low cost items.
The pressures on cost reduction at all costs amplify throughout the supply chain, causing some to ignore obvious red flags. Some use of counterfeit goods may be unintentional or as a result of a misunderstanding. Others push the envelope with small print and creative advertising. Yet, there may enough bad actors lurking in the shadows of the extended supply chain waiting to take advantage of an unsophisticated or distracted buyer.
