Combating Counterfeit Production in Beauty & Cosmetics | Client Story
Updated: a day ago
How Amore Pacific -- the world’s 7th largest cosmetics company -- used tooling digitalization to tackle counterfeiting
Counterfeiting in the Cosmetics Industry
Counterfeit production issue continues to plague the global manufacturing industry, with the market size expected to grow to as large as $2.8 trillion by 2022. Numerous corporate measures were implemented to combat this phenomenon, including big-budget counterfeit prevention programs and smart packaging developments, but yielded unsatisfactory results in terms of addressing the root causes. Meanwhile, global manufacturers are bearing all the costs regarding loss of revenue and brand image.
“Between 2013 and 2016, the share of trade in counterfeit and pirated goods in global trade grew very significantly. Moreover, this growth was reported during a period of a relative slowdown in overall world trade” - OECD/EUIPO, 2019, Trends in Trade in Counterfeit and Pirated Goods
The most obvious loss from the counterfeit problem is the direct loss of sales revenue, and this is a growing concern due to how easy it has become to distribute and purchase counterfeit products with the advent of e-commerce. With counterfeit products becoming increasingly indiscernible from the original products, more consumers are willing to turn to this illegitimate channel. As Alibaba founder Jack Ma pointed out, counterfeit production now happens in the exact manufacturing sites of the OEM suppliers with identical designs and raw materials.
On top of this, the problem of counterfeit production runs deeper for cosmetics and beauty product manufacturers in certain aspects. Packages and components for cosmetics and beauty products are much easier to imitate and harder to differentiate compared to other industries, meaning there are that many more counterfeit products out there. This, coupled with the fact that there are significantly higher health risks relating to counterfeit cosmetics and beauty products drives the industry leaders to seek answers.
Research from Incorpo reveals that 32% of those who have purchased counterfeit products suffered from health complications as a result. With no regulations to supervise their activities, counterfeit manufacturers use cheap materials under unhygienic production environments to cut costs, and the hazardous products are delivered to unsuspecting consumers. Once these potentially harmful fake products are out there in the market, there is no good way of tracking and confiscating them, which should be alarming for all stakeholders.
This potential health risk, along with issues regarding product quality and longevity, triggers the erosion of consumer confidence for brands riddled with counterfeit problems. In fact, being even indirectly associated with counterfeiting issues can be detrimental to the brand image. Incorpo’s research mentioned above presents a shocking rate of 76% of respondents saying that they are less likely to purchase from brands associated with counterfeit production. For cosmetics and beauty product brands that heavily rely on consumer trust and brand reputation, the damage to brand image and profitability is immeasurable.
Naturally, world-renowned cosmetic brands have been pouring billions of dollars on anti-counterfeiting measures over the years. The actual impact of these anti-counterfeit projects on improving the situation, however, has been underwhelming. This is because, as previously mentioned, it has become nearly impossible for an average consumer to identify counterfeit products just by looking at the packaging. Moreover, consumers often have to actually use cosmetic products to detect quality defects.
The most reliable approach in countering this rampant global counterfeiting is to address the source of the problem directly. Digitally monitoring supplier plant production to prevent identical packages and components from being circulated is a good starting point. That is why leading companies in the cosmetics and beauty industry like Amore Pacific are taking a digital approach to combat the counterfeit problem.
Amore Pacific’s Digital Approach to Anti-Counterfeiting
For South Korean companies, the monetary damage from counterfeiting can reach up to $7.2 billion a year. Amore Pacific, after years of struggling with these same issues, decided to take action in the form of tooling digitalization.
Amore Pacific was surprised by the fact that many of the fake products flooding the market were in fact created by their own molds. After an internal investigation, it was revealed that contract manufacturers of Amore Pacific have been relocating Amore Pacific's molds to overseas Chinese subcontractors. Amore Pacific had no visibility over those subcontractors' production practices, which created a blind spot for production malpractice and outright extra-contract production.
Amore Pacific's frustration stemmed from the inability to track its own tooling assets moving around the intricate global supply chain. Monitoring data regarding the actual production pattern was also unreliable due to the nature of manual and unstructured data transfer practice. This motivated Amore Pacific executives to look for solutions that could provide real-time access to crucial data on their tooling assets. The solution needed to hold all the answers to this complicated issue.
In 2017, Amore Pacific found the answers in eMoldino's tooling digitalization solution:
Easily attachable and truly wireless IoT sensors logged real-time tooling locations, effectively preventing suppliers from relocating tooling assets without notice.
The sensors tracked crucial process parameters including shot counts and total activity uptime. Combined, the compiled data allowed Amore Pacific to be alerted of any abnormal production patterns or process anomalies signifying counterfeit production.
All data was automatically transmitted in real-time to a customized software platform, where Amore Pacific personnel could access all the relevant data and analytical reports.
On top of these features appropriately addressing the counterfeit production issue, eMoldino's solution opened up new opportunities for the client to improve its business practices. Reports of crucial KPIs on asset management, risk mitigation, and strategic sourcing enabled Amore Pacific to establish best practices and make strategically aligned data-driven decisions.
The Name of the Game: Tooling Digitalization
Amore Pacific is not the only global manufacturer out there struggling with the consequences of having a low visibility tooling management system. Discussions with our extensive list of OEM clients revealed issues of late part delivery, quality failure, excessive CAPEX, dysfunctional OEM-supplier relationships, and more across the board. The core problem shared by all was the lack of visibility and control over the tooling assets across their extended supply chain. This is the status quo — not even the largest OEMs are equipped with accurate tooling data or the digital capacity to start collecting them.
That is why they reach out to eMoldino and our tooling digitalization solution — a comprehensive solution that provides full visibility over all data tooling-related. After the implementation of the eMoldino solution, clients have been experiencing continued success in acquiring clear data and insight over asset management, risk mitigation, strategic sourcing, and ultimately, driving costs down. Detailed success stories of our clients in various industries, including global giants like Samsung Electronics and HP, are available on eMoldino's website.
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