Global Counterfeiting

From Tokyo, Japan and Auckland, New Zealand, this is Down to Business English, with your hosts Git Montreau and Samantha Vega.

Good to be back with you, Samantha Vega.

Well, it's great to be back with you two, Skip. I hope you've been doing well. You kinda disappeared on me for a while.

Yes, I do apologize and I'm sorry to you and to all of our listeners, especially our D to B members. I got a little sidetracked with some business English training courses here in Tokyo.

Well it is good to be bad.

And how have you been?

I've been doing well. I was actually at the rainbow run today.

The rainbow run.

Yeah, it's g it's a color run. It's a five K color run to go down the beach. It's also raise money for charity. It's uh kind of coincides. It was reminding me of the Indian festival for spring equinox, the holy bagwa festival like that. They throw up color in everybody who who was wearing white. gets uh covered in color and it's uh it's a lot of fun.

Huh. So they ripped off the idea from an Indian festival.

Well, y they they borrowed the idea. Maybe not ripped it on. Sounds a bit harsh. They borrowed the idea, but it was all raisin. for charity.

Just joking. I'm just trying to get a little bit of a tie-in into today's stories.

Ah, and what are we talking about today?

Well, in our last episode together, we talked about Ali Baba and Jack Ma. And in that episode, the topic of counterfeit products came up. And since then I've looked into that topic a little bit and today I thought we could talk about it.

Sounds good. So let's do it. Let's get down to business with the growing problem of counterfeiting.

What is the definition of a counterfeit product?

Counterfeit product is any product that imitates another product but is made with lower quality and sold at a lower price. Now, generally speaking, counterfeit manufacturers are capitalizing on the popularity of the original brand, producing a product that is very similar and selling it to customers at a greatly reduced cost.

And this of course cuts into the original brand's market share, and it becomes very difficult for them to be profitable or even recoup the investment that they've made on R and D, or research and development and marketing and design and the whole kit cat and caboodle.

Huh, precisely.

So a real world example would be Nike. They've invested millions of dollars designing cutting edge shoes, paying for world class marketing campaigns, and they have to compete with counterfeit Nikes that sell at a fraction of the cost of a real pair.

Nike is a very good example. They have been battling counterfeiters for decades.

There are many terms used to talk about counterfeit products. Of course there is the term counterfeit, but I've also heard of knockoffs and pirated goods. Do they all mean the same kind of thing?

Actually, there are a few legal differences in the terminology, but yeah, pretty much the words are interchangeable. I guess a pirated good refers to copied music or software, and counterfeits and knockoffs try to pass themselves off as the original brand.

And how big of a problem is counterfeiting?

It is huge. A report released last year by the OECD, the Organization for Economic Cooperation and Development. estimated that the global market in fake goods was almost half a trillion dollars, two point five percent of the global economy.

I always imagined it was a large industry, but that is amazing.

And counterfeiting is growing. It used to be limited to just a handful of industries, but now has spread to the point where it is having a major impact in almost every kind of market.

The apparel and accessory industry, uh software, pharmaceuticals, those are some of the industries off the top of my head that have a problem with controlling fake and pirated products.

Add to that list cosmetics, home electronics, and food and wine.

Counterfeit wine. Hey, I like my wine, but I don't know about counterfeit wine. That can't be very good.

I don't know about that. I read recently that almost seventy percent of top end wine available in Hong Kong restaurants is actually knockoff wine. And the profit margins for fake wine are huge. Something like five hundred percent per bottle is not uncommon.

Oh wow, no wonder the counterfeit market is growing. That type of potential profit is very appealing. I remember taking trips to the market in Bangkok and there would be literally row after row after row of stalls and everything was knockoff products. But that is quite a limited way to sell goods in local markets. For this industry to be growing, there must be other ways than this to distribute these products.

That's absolutely correct. It used to be that if you wanted to get into the business of selling counterfeit products, you needed to have the contacts in the manufacturing industry, arrange the shipping, deal with all of the logistics of making the product available to paying customers. But with the growth of the internet and distribution channels like Amazon and Alibaba, it has become much easier for people to get into counterfeit trading.

Yes, online. I forget that the internet has only been around for thirty years. I suspect that most counterfeit products are made in China, is that right?

Yes, that is right. Eighty-six percent of all counterfeit goods originate from either mainland China or Hong Kong. Other leading countries are Ukraine, Russia, India, Thailand, Indonesia, and Vietnam.

But the contribution from those areas is really dwarfed by China and Hong Kong. eighty six percent of knockoffs come from China, that is hard to believe.

Yes, it is a little hard to believe, but the numbers are 72% from mainland China and 14% from Hong Kong.

And what, if anything, is the Chinese government doing about this?

In the past, they have turned a bit of a blind eye to the issue, but in recent years they have become more and more proactive in combating counterfeiting. They are really caught in a tight spot, though.

Why is that?

Well, on one hand, they are under pressure from the US and the World Trade Organization to clamp down on counterfeiting. But on the other hand, counterfeiting is a large part of the economy. If they put an end to it, a lot of people will be out of work.

Well, I can kind of understand their point. After living in Thailand for so many years, I've seen entire families make a living off selling knockoffs and without counterfeit goods that have a hard time feeding their families. Uh and online organizations like Alibaba and Amazon are great tools for these families to thrive.

But that is an unintended consequence. And just this month, Jack Ma of Alibaba was pushing the Chinese government to take on counterfeiting as seriously as they are taking on drunk driving.

Mm it sounds like a war on counterfeiting is going to continue heating up.

Yes, it will. And you and I will have to keep an eye on this topic as it develops. But for now, I think it is time to get D2V down to vocabulary.

Down to business English audio scripts are a great learning tool. Be sure to visit the D2B website and download your free audio script of today's podcast. Down to businessenglish.com. That's www.down to businessenglish dot com.

Our first word today is a verb that I used right at the beginning of the show. And I used it in the passive voice. That verb is to be sidetracked. When a person is sidetracked, someone or something has taken that person off of their course of action.

Yes, right at the top. Skip apologized for D two B's short absence. And explained that it was because he had gotten sidetracked with business English training courses.

In other words, those training courses took me off course and distracted me from producing D2B. And again, I really am sorry about that. Samantha, can you give us an example of sidetracked in a business context?

Well, anyone who has ever attended any sort of project meeting has probably experienced being sidetracked. All it takes is just one person to start talking about issues that are not on the agenda and the whole meeting is sidetracked.

I have attended my fair share of those kinds of meetings in my day. Not fun at all.

No, they aren't. Next, let's talk about the verb recoup. To recoup your investment simply means to get back the money that you have put in. In the story I remarked that it is difficult for brands to recoup their RD and marketing investments because counterfeit products cut so much into their sales.

In other words, companies who lose sales to counterfeit products have a hard time getting the money back.

Precisely.

Another example from the business world is how a company will intentionally develop a product that they know will lose money, but do so knowing that they will recoup those losses. From their more profitable products.

Like how Google invests money on developing new platforms at a loss, knowing they can recoup their investment from advertising revenue from their search platform.

Oh, that is a very good example. Moving on. Our next phrase today is the very odd-sounding expression kit and caboodle, which Samantha used just after she was talking about recouping investments.

I don't think it is very odd. It's kind of fun to say actually. Kit and caboodle.

Actually, in the story, you used a variation. I think it is a Canadian variation of Kit and Caboodle.

Oh really? What did I say?

You said kit cat and caboodle.

Heh really? I must have mixed in a chocolate bar there.

I say it like that sometimes too, but according to the dictionaries I check, the expression is kit and caboodle. Anyway, kit and caboodle is a noun phrase and it communicates the whole entirety of something. Or everything.

Hmm. That might be a little abstract for our listeners.

Well, in the story, Samantha said it was difficult for companies to recoup their investment on RD, advertising, design, and the whole kit and caboodle. In other words, it was difficult to recoup their investment on everything they spent money on, bringing their product to market.

Can you give us another example?

Sure. At this time of year in Japan, many new employees start their jobs at their company. In most cases, they spend the first several weeks at their new job receiving on-the-job training. They learn Japanese business etiquette, about the history of their company, how to dress properly for work. How to speak to a senior staff member. They learn the whole kit and caboodle.

So they learn everything?

That's right. Do you have our next word?

I do. Next we have another idiom. I think this idiom is used in conversations a bit more often than the phrase kit, cat, and caboodle.

You mean Kit and Caboodle.

Ah yes, kit and caboodle. Anyway, the next phrase is to turn a blind eye to something. I think it is easy enough to understand the meaning from the words, but second language English speakers might find this to be a unique way to express themselves. When you turn a blind eye to something, you are ignoring it.

I use this phrase a lot.

And in the story, you used it to report that in the past, the Chinese government had turned a bit of a blind eye to the counterfeiting issue. In other words, the government somewhat ignored the problem caused by the counterfeiting market.

A few years back, I was involved in a project that had about ten members working on the team. It was a textbook project and we had very strict deadlines to stick to. Unfortunately, many of us had a tendency to turn a blind eye towards those deadlines, and although the textbook was finally finished. It missed an entire sales season because we had missed the printing deadline.

Writers are famous for turning a blind eye to deadlines.

Aren't we all? Finally today, we have the two-part verb to clamp down on something. When you clamp down on something, you limit or restrict it. In the story, I remarked that the US and the WTO put pressure on the Chinese government to clamp down on counterfeiting. In other words, they pressured China to restrict or limit the amount of counterfeit manufacturing happening in that country.

In today's tight economy, many companies are trying to clamp down on business travel to save costs. Instead of spending money on airline travel for their salespeople, they are encouraging more teleconferencing and Skype style meetings.

I'm trying to clamp down on staying up late. Recently, I have been only getting four or five hours of sleep every night because, well, honestly, I've just been overloaded with work.

In addition to clamping down on your late nights, I think you should also look into eating better, regular exercise, the whole kit and caboodle. It will add years to your life.

One step at a time, Samantha. One step at a time.

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Thanks for speaking with me today, Samantha. As usual, it was very nice talking with you.

My pleasure skip. I enjoyed the report on the issue of global counterfeiting. The next time I see a pair of Nikes at a super low price, I'll think twice about where it comes from and the harm it causes.

Me too. I will keep that in mind when I see pirated software available online.

It you would never use pirated software, would you?

Of course not. Thanks for listening, everyone. Once again, I am sorry about the short hiatus we recently took. But have no fear, Down to Business English is back, and we will see you next time with an all-new episode.

Good to hear. Take care everyone. See you next time.

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