David Patterson Discusses Counterfeit Cosmetics in E-Commerce
Clarkston’s David Patterson was interviewed on the rise of counterfeit cosmetics, particularly in light of the increase in e-commerce sales. An excerpt of David’s interview and a link to the full article are below.
Bloomberg | July 17, 2018
Wish got its start in 2011 as an e-commerce shop for everything from ultra-discounted makeup, to clothing, to home supplies. The San Francisco-based company—co-founded by a pair of Google and Yahoo veterans—quietly generated more than $1 billion in revenue last year and currently lists more than 200 million items, largely from sellers in Asia.
The ascendance of Wish into the global shopping ecosystem was swift. It has been among the 100 most-downloaded mobile apps in the U.S. almost every day since 2015, according to research firm App Annie, and was the 17th most-downloaded iPhone app last year, just ahead of Twitter. It’s backed by more than $1 billion in venture capital.
With a million sellers, Wish is about half the size of Amazon’s marketplace and has a mostly young, middle-class customer base. People who shop there love the sheer variety and low price of its goods. Need a corn sheller? It’s $2 on Wish. How about a human-sized Pikachu plush? For $7 and the tap of a smartphone screen, that can be yours, too. The platform’s web interface looks like the lovechild of Pinterest and a swap meet. A search for “makeup” conjures up rows of colorful mascara, eyeliner and eyeshadow, alongside more exotic glittery and metallic polishes. Most are under $10.
But with great scale, comes greater room for error. The site is among the top 10 global platforms with the most counterfeits, said Joan Porta, of Barcelona-based brand protection company Red Points. That places Wish alongside EBay Inc., Amazon.com Inc., Facebook Inc. and Instagram. “We find hundreds to thousands of counterfeit listings every week,” Porta said.
Khue Nong, a bookkeeper from Maryland, bought some eye makeup from Wish early last year. The 25-year-old looked to the app as an affordable way to experiment beyond her usual brown-eyeliner-only routine. “Because I’m not too good with makeup, I didn’t want to spend $50,” she said. She’d been buying discount clothing on Wish for the past couple years and decided to take the plunge into cosmetics, picking up an eyeliner pencil and a black-and-gold cheetah print tube of mascara. “The mascara was really goopy and slimy,” Nong said. “It made strings, like when you pull cheese off of a pizza.”
Nong’s symptoms began shortly after applying the eyeliner. Her eyes swelled, and the skin around them turned bright red. “The next morning, it wasn’t any better,” she said. When the swelling didn’t subside, she finally went to the doctor and received her diagnosis: pink eye.
Concerns surrounding the sale of counterfeit cosmetics are well-documented: In April, the Los Angeles Police Department confiscated $700,000 worth of counterfeit makeup in the city’s Fashion District. The products tested positive for bacteria and animal waste. Fake name-brand makeup seized in Houston that same month had high levels of lead, aluminum and arsenic. Dr. Jessica Weiser, of the New York Dermatology Group, said her practice routinely sees patients with skincare-related reactions to counterfeit cosmetics.
The rise in e-commerce spending has exacerbated the spread of counterfeit goods in the U.S. Consumer demand has been met by manufacturers in China and Hong Kong, which are “able to produce knockoffs very cheaply,” said David Patterson, health and beauty industry lead at Clarkston Consulting. Sites like Wish, where anyone can sell directly to shoppers, are particularly vulnerable. “I don’t think any platform is specifically safe from this,” Patterson said.
Typically, responsibility for policing false merchandise falls to the platforms themselves, said Kimberly Gianopoulos, director of international affairs and trade for the GAO. Companies like Amazon and EBay have built-in mechanisms to try to root out potentially counterfeit products. But enforcement on hundreds of thousands of sellers at once has proven a challenge.
To view the full article, visit Bloomberg’s original article here.