Counterfeits in the small business and discount retail channel

Counterfeits in the small business and discount retail channel

Recently, the Washington DC ABC affiliate reported on the presence of counterfeit electrical products in a suburban Maryland retail store.   This was clearly a small business.  The report included an interview with the store owner who said he had pulled some of the counterfeit electrical products off of his shelves but he had not pulled all of them down.  Montgomery County, Maryland officials had already visited him and requested that he remove the product. One consumer actually witnessed a counterfeit extension cord that he bought from this retailer catch fire.  Now, the Washington Post reports, the counterfeit products have finally come off the store shelves.  But the story highlights a dilemma that can be faced by distributors and retailers who buy counterfeit products even unwittingly.  They can choose to swallow the loss of their mistake, or they can try to seek indemnification from their supplier, which may be problematic because the supplier is not financially viable, cannot be located, or they can only be a found in a jurisdiction too costly to pursue. If they can pursue indemnification from their supplier for the loss of inventory they should do so, but they should also report their supplier to authorities.  Tracking down the original source of the counterfeit product, somewhere across the Pacific Ocean, is unfathomable for this retailer, but pushing back up the supply chain so that those who brought the product into the country feel the pain is important.  The retailer's option of leaving the counterfeit goods on the shelf should never fit into the calculus, because they risk facing product liability lawsuits that will bankrupt the retailer.  This loss is clearly greater than the loss of the value of inventory.

 The evidence clearly shows that the deep discount retail channel, small retailers, street vendors, and unauthorized distributors are the most vulnerable locations for counterfeit electrical distribution.  Two factors are at play here.  First, the lure of the incredible bargain price.  Second, the lack of due diligence by the wholesaler or retailer in checking on the provenance or source of the product (or alternatively, their willingness to simply look the other way) and the remote or unknown manufacturer's quality control and testing protocols (or lack thereof).  Both are probably in play at the same time time when it comes to counterfeit electrical products.  Yes, we may pay more for safer, quality genuine brand electrical products, but the calculus of that purchase is warranted by the fact that there is supplier who will stand behind their product and its warranty and the risk of defect is lower.

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