Traders refunds luxury jackets after counterfeit concerns

Industry

Published: 12 Feb. 2024, 17:02

Traders refunds luxury jackets after counterfeit concerns

A Traders Wholesale Club operated by Emart [JOONGANG PHOTO]

Moncler jackets sold at Traders Wholesale Club have undergone a complete refund process due to the retailer's suspicion that they are counterfeits.

Dozens of consumers who purchased the Hermifur jumper found the products to be faulty despite their costly price tag of 3.68 million won ($2,768). People reported that buttons fell off while they were trying the jumpers on.

A total of 28 consumers bought 30 of the jumpers at the six branches of Emart's big box store between October and December.

The retailer collected more than two-thirds of the purchased jumpers and is giving out refunds.

The counterfeit issue of French luxury brand derives from a sourcing method called parallel import.

Parallel import allows a third party who does not have exclusive import rights to bring foreign products into Korea as long as they undergo a proper customs process. Under this scheme, parallel importers can bypass approval from the exclusive import rights holder which is how Moncler's Hermifur jumpers made their way into Emart's wholesaler.

Moncler Korea has exclusive import rights to the product in Korea.

Moncler jumpers are sold at a branch of Traders Wholesale Club. [SCREEN CAPTURE]

The wholesaler said it had not inspected the jumpers before placing them in stalls for sale.

“Traders Wholesale Club checked the sanitized invoice, which is considered to be a receipt and other documents provided by the parallel importer for authenticity verification,” the wholesaler official said. “All the documents were clean and had no issues.”

Foreign products that come to Korea by parallel import usually make four stopovers: brand headquarters, boutiques, the parallel importer, and Korea-based commerce platforms or marketplaces.

Brand headquarters issue sanitized invoices to boutiques, which are their clients. Domestic retailers later use those invoices to verify the authenticity of the traded goods.

“Even when the sanitized invoices and other evidence are legitimate, risk of having illegitimate items always exists because the brands do not specify the jumpers’ serial numbers on those documents,” a parallel importer with 27 years of industry experience told the JoongAng Ilbo.

Other large offline retailers have their own anticounterfeiting measures to prevent such mishaps.

LOTTE TOPS — managed by LOTTE.com and Luxury Gallery, and operated by NC Department Store — seek authentication help from the Trade-related IPR Protection Association. The Korea Customs Service supervises the association.

Though the measures cost extra time and money, those retailers believe reducing risk factors that might damage their reputation should come first.

“The subcontractor and suppliers promised to scrutinize entire sourcing routes and steps to judge the jumpers’ authenticity,” an official from the wholesaler said. “The wholesaler will overhaul and fix the entire parallel import system.”

Despite the rise in the volume of luxury goods sold online and offline, there are no statistics that solely count parallel imports. Custom authorities do not separate parallel imports, but rather manage them with regular imports during processing.

Players in the parallel import market have increased over the years. “In the early 2000s, there were only a few actors. However, by the 2010s — when Koreans’ craze for luxuries started, large retailers started to throw their hats on the ring,” said another parallel importer who has been running their business since 1999. “Today, sole proprietorship businesses are soaring.”

The market’s growth accompanies the concerns about knockoffs.

Intellectual property infringement cases totaled 45,514 in 2022, according to a report from the Korea Customs Service. Some 16.94 million counterfeit pieces were caught the same year. Both figures are the highest recorded since 2018.

Among them, more than 90 percent had infringed on original trademarks.

“I have invested a considerable amount of time and effort flying to Europe [to supply genuine items to my customers.] I am concerned that all parallel imports might lose consumers’ trust because of a recent happening at the large retailer,” the parallel importer said.

“The more intermediaries are involved, the risk of having knockoffs becomes higher,” an official from a large e-commerce platform said.

The official advised people to purchase such goods from specialized vendors under large platforms that inspect items and offer warranty cards. He also recommended that people to check platforms' compensation policies for cases where items turn out to be illegitimate.

Sorting out fake products has been a long-running mission for the luxury goods market.

Last November, the online fashion marketplace Kream allowed individual enterprises to sell luxury items at the platform's discretion.

With such changes in place, Kream experienced a 59 percent surge in the number of registered vendors in December from the previous month. Total sales spiked 740 percent in the same period.

“Though it is experimental, Kream utilizes AI to verify the products,” an official from Kream said.

A QR code printed on the care label of a Nobis jumper [JOONGANG PHOTO]

Luxury brands themselves are developing systems to verify the authenticity of their items. Counterfeits in the market never help the brands they emulate, but they harm their reputation and standing.

The European Union Intellectual Property Office estimated that Europe's fashion industry loses around 12 billion euros (13 billion dollars) yearly due to knockoffs.

LVMH and Prada crafted a blockchain-based authentication system in 2021. Stone Island and Parajumpers have embedded QR codes in their clothing's care labels so that consumers can verify their items with mobile devices.

“The safest way to deter knockoffs' entering the retail market is using technologies that cannot be crafted or manipulated,” an official from a Korea-based blockchain company said.

BY LEE SU-JEONG [lee.soojung1@joongang.co.kr]