Counterfeit warning: Fake products may hamper growth prospects of Europe’s hair care market

The new data was released in a report by global technology research and advisory firm TechNavio.

It states Germany is expected to represent 36% of the aforementioned growth, which would see the market accelerate at a 4.87% CAGR during the forecast period. This is hardly surprising, as the country has the largest number of spas in Europe and is home to luxury fashion and beauty product brands such as Beiersdorf AG and Henkel AG & Co. KGaA.

The German market is further driven by factors like the rise in product innovations and endorsements, which in turn drive demand for beauty and personal care products. 

However, the report also warns that counterfeiting poses a significant threat to the sector's growth prospects.

Last year an Intellectual Property Crime Threat Assessment​ — produced jointly by Europol and the European Union Intellectual Property Office (EUIPO) — came to the same conclusion.

Failed by fakes

The report purports that counterfeit goods distribution has been particularly active since the COVID-19 pandemic, which offered fresh opportunities for trade in such products.

The latest data from the OECD (Organisation for Economic Co-operation and Development) and EUIPO show that imports of counterfeit goods reached €119 billion (US$131 billion) in 2019, accounting for 5.8% of all goods entering the EU.

The rise of the e-commerce industry has exacerbated this problem, allowing for greater penetration of counterfeit products made with harmful, low-quality ingredients. Distribution has shifted almost fully from brick-and-mortar to online stores, raising public health concerns as convincing counterfeits make it difficult for consumers to tell the difference between fake and genuine hairstyling products when shopping online.

Moreover, the growing availability of counterfeits affect the sales and profit margins of genuine product vendors, thereby reducing the European market’s growth potential and negatively impacting the European economy.

Criminal operation trends

Luxury goods, including luxury cosmetic products, are among the most commonly counterfeited items and are sold both online and in physical marketplaces. According to the report, they are among the top categories of around 66 million counterfeit items seized by EU authorities in 2020 alone. Other often counterfeited products include perfumes, cosmetics and even everyday goods such as shampoo and toothpaste.

These items are typically sold via livestreaming, social media advertisements and instant messaging apps and services, with sellers often targeting customers with misleading claims and discounts and unusually low prices for branded products.

These products mostly come from outside the EU, largely from China and other parts of Asia. Still, the report speculates that some may also be “produced in illegal laboratories within the EU, which are difficult to detect and can be set up with relatively few resources”. This assumption is based on increased importation of counterfeit packaging materials and semi-finished products into the EU.

Europol’s executive director Catherine De Bolle said: “The COVID-19 pandemic has presented new business opportunities for criminals to distribute counterfeit and substandard goods. At best, these products will not perform as well as authentic ones. At worst, they can fail catastrophically.

“Law enforcement seizures indicate that the production of these goods is increasingly taking place within the EU, while the COVID-19 pandemic has further entrenched the criminals’ reliance on the digital domain to source and distribute their illegal goods.”