Guankai (GK)
Director, Business Development, Nabcore Pte Ltd

The legendary grandfather of modern marketing, Peter Drucker, once shared that the purpose of business is to create a customer. All business enterprises have two basic functions: marketing and innovation. For him, marketing and innovation produce results; all the rest are costs. Both functions are critical for a company to grow. Regardless of the business size, companies need to expand into new markets for growth.  

According to the World Economic Forum—based on the purchasing power parity (PPP) terms—Asian economies will become larger than the rest of the world combined for the first time since the 19th century. Asia is set to become the next economic driving force. China, India, and countries in the Association of Southeast Asian Nations (ASEAN) all play significant roles. No company can ignore Asia when it comes to manufacturing or selling their products. However, this region is also a hotbed for counterfeiting and grey market activities. 

When venturing into new markets, SMEs often overlook intellectual property (IP) and brand protection compared to their multinational corporations (MNC) counterparts primarily because of the following views: 

Counterfeiting only affects bigger brands and companies and it is unlikely that my products will be targeted.

Brand protection solutions and strategies are only applicable for big companies and hard to adopt. 

It is an additional operational cost and not going to add to our top-line.

It requires large manpower and resources to implement.

In the past, the above may have been true. However, in the 21st century, counterfeiting activities have changed due to globalization and internet accessibility. Sales and marketing of fake goods have since become easier. Luxury brands used to be the only ones to attract counterfeiters. Now, any product with a logo could potentially be a target for counterfeiting. Given resources are always tight and limited for SMEs, how can SMEs play a smarter game when expanding to new markets in Asia? To begin, let’s first understand the landscape of the Asian market.  

The Consumers 

Consumers in Asia region tend to have the following behaviors:     

  • Higher perceived value and quality of foreign imported goods compared to local products.
  • Growing demand by younger consumers to acquire unique niche brands instead of mass-market or traditional luxury brands. 
  • Generally, price sensitive with the following characteristics:
  • The Unwilling – They purchase counterfeits knowingly because they are not keen to pay for the real products. Usually for products that are used externally such as footwear and apparel.
  • The Bargain Hunters – They want to buy genuine products (e.g. Toys, consumer electronics.) This group often thinks that the products are on sale and are happy that they are getting a good bargain. 
  • The Undiscerning – They are unable to differentiate between real and counterfeit products. Eager to get genuine products, especially for products that are consumed internally or topically like food, medicine, drinks, and cosmetics.

The Playing Field

Counterfeiting is prevalent. Foreign brands, be it well-known or boutique, are subjected to more attacks in Asia compared to local brands (due to higher pricing). 

Enforcement and regulation may not be as comprehensive compared to other markets. 

Largest Free Trade Zone with porous borders. 

Countries such as China, India and Vietnam are highly aware of counterfeit products. Local distributors may expect brand owners to provide support to prevent counterfeiting of the products that they would be distributing.  

So how can SMEs utilize brand protection to their advantage? 

Brand protection can help to protect revenues and drive new business growth for SMEs. The key strategy is to understand and deploy the aspects below: 

Branding Aspect – Provide Trust and Assurance  

Asia is a highly competitive market. For a brand to stand out, a trust factor needs to be established. Consumers are concerned about getting fake products and want to verify their purchase. This is especially true for a country like China where counterfeit goods are rampant. Therefore, verification of products is a common practice prior to purchase. 

Product assurance through authentication helps brand owners to showcase to the public their effort and concern for their customers in getting the real products paid for. The approach enhances positive image and increase brand value. 

Cost Aspect – IP Registration and Smart Brand Protection 

Some SMEs may still think that the only way to protect their brand in every region is through trademark/copyright registration. However, a trademark is territorial and must be filed in each country where protection is sought. The approach can be useful for MNCs with deep pockets, but unlikely to be practical for SMEs to implement across Asia. Moreover, brand owners can only enforce their rights if there is a violation thus often reactive. Additional costs (e.g., conduct raids, litigation) would also need to be incurred. For jurisdiction where the IP laws and regulations are weak, the rights would even be harder to enforce. 

Given that SMEs have limited budget, it is important for them to pick their battles. Companies can choose to file only in countries where their main product parts are manufactured and/or their biggest sales market. Once that’s done, SMEs need to implement a holistic brand protection program for their products to cover the market. The objective is to allow consumer’s ability to authenticate genuine products, support the SME in tracking distribution channels and offer marketing engagement (Figure 1). 

Figure 1

The combination of IP registration in select countries and brand protection solutions would provide comprehensive coverage. SMEs can reap benefits without high administrative cost. 

Marketing Aspect – Consumer Engagement

To be a forward-looking business strategy, brand protection needs to be able to support revenue generation. 

Traditionally, companies often consider protecting their products as an operational cost. This is because security solutions in the past often depended on trained eyes or proprietary devices for verifications. However, with the presence of smartphones and technology progression, newer brand protection solutions support easy authentication and meaningful marketing engagement. Loyalty programs and lucky draws can be implemented to incentivize and build long term repeat customers. 

Digital technologies such as unique QR codes, Near Field Communication (NFC) and Augmented Reality labelling allow consumers to get information and verify genuine products using smartphones at physical retail stores. 

In Asia, it is very common to use mobile phones to scan QR codes for information, payment and verification. The approach lies in engaging consumers through smart product packaging. Digital technologies enable each product to have a unique identity that is trackable. Brand owners can track their products across their distribution channels to prevent illicit grey market and trace rogue distributors. For online shopping, upon receiving the products, consumers can also authenticate them before using. 

Counterfeiting has no borders. It affects everyone, be it a big or small company. 

With less resources, SMEs need to be even more proactive to protect their brand and products. The counterfeiting landscape in Asia requires a different approach. SMEs cannot be solely dependent on regulators in the different countries to tackle the issues. A smart brand protection program empowers consumers to easily identify genuine products, help organizations to track supply chains and build brand loyalty. The values created go beyond counterfeit protection—it drives business growth. 

The holistic approach of IP registration, integrated physical and digital brand protection solutions, consumer engagement and enforcement are needed for companies to tackle counterfeit issues effectively in Asia. 

Brand protection is often overlooked by smaller companies. The rewards will come for those who take the effort, flexibility and mindset to get them.