You've got to hand it to any operation that can fake, not just a product, but an entire store. Five facilities in China purporting to be Apple Stores have been targeted by authorities as counterfeit. As it turns out, the stores weren't selling bogus products -- the stores themselves were fake. They weren’t operating under any kind of license from Apple Inc.
Chinese authorities have moved to shut down the stores for not having the right business permits. While this sounds a bit like arresting Al Capone for tax evasion, it's the best they can do for the moment. Nobody's really clear on whether a store's "look and feel" can be copyrighted or patented in China. It's an interesting dilemma.
This idea of licensing is one of the key issues driving the counterfeiting debate in the supply chain. In the retail or restaurant business, franchises (or licenses) are granted to private owners that agree to resell the products associated with the brand, while maintaining the brand's standards. In electronics distribution, franchises are granted by suppliers to distributors and manufacturers' reps. Franchises allow distributors to resell components, pass on the manufacturer's warranty, and provide certain other rights such as returns or discounts. They are in many ways worth their weight in gold: In the days when certain suppliers wouldn't be sold alongside others, franchises could make or break a distribution company. Nowadays they are being used in an equally high-stakes battle: authorized versus non-authorized distribution.
The US Department of Defense has recently enacted a policy that its subcontractors cannot source from non-authorized distributors. This is understandable: Aside from the manufacturer, authorized distribution is the only way to guarantee you are buying factory-made product. But this is a tough situation for distributors that resell legitimate products but may not be franchised by suppliers. EBN will tackle that subject in a Live Chat Thursday, July 28, at noon with SolTec CEO Dawn Gluskin. Log in here to join us.
Authorized distribution has worked hard to distinguish itself from "brokers," which in my mind differ from many non-authorized distributors. Brokers are opportunistic buyers and sellers that purchase inventory from anyone who is selling it. It doesn't take much to set up a broker firm: A little money upfront and a phone, fax, and URL, and you're pretty much in business. This kind of company deluged the electronics industry before the tech bubble burst in 2000/2001 and a lot of buyers got burned. Brokers sold product for less than market price; sold hard-to-find products at a massive profit; and then many disappeared off the face of the Earth. They deservedly earned the reputation for being less than reliable sources of product (and selling less than reliable products).
Authorized distributors can safely say they are the only source of supplier-guaranteed products. Like the Apple Stores, they are licensed by the brand owners to resell their wares. This doesn't necessarily mean other stores don't sell legitimate products -- there is a lot of factory-made inventory floating around in the open market. As long as the product is authentic, does is matter which store you buy it from? I can't answer that question, but I'd like to hear from readers: What is that "franchised" label worth to you?
Apple has to come up new ideas to prevent this operation to save their market standards. It will not only reduces the market share there is also a chance to defame their name.
As long as the product is authentic, does is matter which store you buy it from?
Barbara,
The only advantage of buying a product from authorized stores is the product by default is authentic. But if by some means other vendors also guarantee that the products they are selling are authentic then it shouldn't matter where you buy that product from.
I've seen this story a couple of times now and one thing that isn't clear is whether the products are genuine Apple products or knock-offs. If they are really Apple products, it is interesting that there is a shortage for some Apple products through legitamate sources; are these some of those products? If they are, there must be a leak in the Apple supply chain to allow these stores to get their inventory. In any acse Apple needs to look closely at their partners to see if they are on the up and up.
The counterfeit store sounds crazy but this isn't an easy thing. How they were able to procure apple products to sell. Do they have fake licenses and apple also couldn't find it out before supplying any products to them?
I've seen many products from china which looks exactly like the apple ones. This is next standard they are into by setting up the stores. Apple should come up with new plans in eradicating these smuggles.
"As long as the product is authentic, does is matter which store you buy it from? I can't answer that question, but I'd like to hear from readers: What is that "franchised" label worth to you?"
Franchisers have different scope from the authorized company or factory and the total goal for them even if the follow the strict regulations is to have profits as much, they can.
From the other hand, I have seen companies that they implement franchise policy to grow up their network, but they are asking demanding requirements from the Franchisers making their business life very difficult.
This is actually not a new phenomenon. In 2006, the NYTimes ran a story about the same exact thing happening to NEC. My bet is that this is a lot more common in one degree or another than many realize.
As stated in a few previous posts, there needs to be some sort of tracking and registration to help curb counterfeits and ensure buyers are getting legitimate products. Everybody needs to be involved in this process in order to help curb counterfeiting. As for Apple stores in China, seeing how Apple products are some of the most sought after and counterfeited products, Apple and the Chinese government need to come up with a plan to stop these fake stores and prevent more from popping up.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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