The $300 Billion Counterfeit Goods Problem, and How It Hurts Brands
Connect with us

Markets

The $300 Billion Counterfeit Goods Problem, and How It Hurts Brands

Published

on

When you are walking along the boardwalk on vacation, you know it’s a “buyer beware” type of situation when you buy directly from a street vendor.

Those Cuban cigars are probably not Cubans, the Louis Vuitton bag is a cheap replica, and the Versace sunglasses too cheap to be the real thing.

But what if you placed an order for something you thought was truly legitimate, and the fake brand had you fooled? What if this imitation product fell apart in a week, short-circuited, or even caused you direct harm?

Can you Spot a Fake?

Today’s infographic comes to us from Best Choice Reviews, and it highlights facts and figures around counterfeit goods that are passed off as quality brands, and how this type of activity damages consumers, businesses, and the wider economy.

The $300 Billion Counterfeit Goods Problem, and How It Hurts Brands

In 2018, counterfeit goods caused roughly $323 billion of damage to the global economy.

These fake products, which pretend to by genuine by using similar design and packaging elements, are not only damaging to the reputations of real brands – they also lead to massive issues for consumers, including the possibility of injury or death.

A Surprisingly Widespread Issue

While it’s easy to downplay the issue of fake goods, it turns out that the data is pretty clear on the subject – and counterfeit goods are finding their way into consumer hands in all sorts of ways.

More than 25% of consumers have unwillingly purchased non-genuine goods online – and according to a test by the U.S. Government Accountability Office, it was found that two of every five brand name products they bought online (through 3rd party retailers) were counterfeits.

Some of the most common knockoff goods were as follows:

  • Makeup – 32%
  • Skincare – 25%
  • Supplements – 22%
  • Medication – 16%
    • Aside from the direct impact on consumers and brands themselves, why does this matter?

      The Importance of Spotting Fakes

      Outside of the obvious implications, counterfeit activity can open up the door to bigger challenges as well.

    • Economic Impact
      On a macro scale, the sale of counterfeit goods can snowball into other issues. For example, U.S. accusations of Chinese manufacturers for stealing and reproducing intellectual property has been a major driver of tariff action.
    • Unsecure Information
      Counterfeit merchants present higher risks for credit card fraud or identity theft, while illegal download sites can host malware that steals personal information
    • Criminal Activity
      Funds from illicit goods can also be used to help bankroll other illegal activities, such as extortion or terrorism.
    • Unsafe Problems
      It was found that 99% of all fake iPhone chargers failed to pass critical safety tests – and 10% of medical products are counterfeits in developing countries, which can raise the risk of illness or even death.

    The issue of fake goods is not only surprisingly widespread in the online era, but the imitation of legitimate brands can also be a catalyst for more serious problems.

    As a consumer, there are several things you can do to increase the confidence in your purchases, and it all adds up to make a difference.

Subscribe to Visual Capitalist
Click for Comments

Markets

The World’s Biggest Real Estate Bubbles in 2021

According to UBS, there are nine real estate markets that are in bubble territory with prices rising to unsustainable levels.

Published

on

Ranked: The World’s Biggest Real Estate Bubbles in 2021

Identifying real estate bubbles is a tricky business. After all, even though many of us “know a bubble when we see it”, we don’t have tangible proof of a bubble until it actually bursts.

And by then, it’s too late.

The map above, based on data from the Real Estate Bubble Index by UBS, serves as an early warning system, evaluating 25 global cities and scoring them based on their bubble risk.

Reading the Signs

Bubbles are hard to distinguish in real-time as investors must judge whether a market’s pricing accurately reflects what will happen in the future. Even so, there are some signs to watch out for.

As one example, a decoupling of prices from local incomes and rents is a common red flag. As well, imbalances in the real economy, such as excessive construction activity and lending can signal a bubble in the making.

With this in mind, which global markets are exhibiting the most bubble risk?

The Geography of Real Estate Bubbles

Europe is home to a number of cities that have extreme bubble risk, with Frankfurt topping the list this year. Germany’s financial hub has seen real home prices rise by 10% per year on average since 2016—the highest rate of all cities evaluated.

housing bubble index 2021

Two Canadian cities also find themselves in bubble territory: Toronto and Vancouver. In the former, nearly 30% of purchases in 2021 went to buyers with multiple properties, showing that real estate investment is alive and well. Despite efforts to cool down these hot urban markets, Canadian markets have rebounded and continued their march upward. In fact, over the past three decades, residential home prices in Canada grew at the fastest rates in the G7.

Despite civil unrest and unease over new policies, Hong Kong still has the second highest score in this index. Meanwhile, Dubai is listed as “undervalued” and is the only city in the index with a negative score. Residential prices have trended down for the past six years and are now down nearly 40% from 2014 levels.

Note: The Real Estate Bubble Index does not currently include cities in Mainland China.

Trending Ever Upward

Overheated markets are nothing new, though the COVID-19 pandemic has changed the dynamic of real estate markets.

For years, house price appreciation in city centers was all but guaranteed as construction boomed and people were eager to live an urban lifestyle. Remote work options and office downsizing is changing the value equation for many, and as a result, housing prices in non-urban areas increased faster than in cities for the first time since the 1990s.

Even so, these changing priorities haven’t deflated the real estate market in the world’s global cities. Below are growth rates for 2021 so far, and how that compares to the last five years.

housing bubble price increases 2021

Overall, prices have been trending upward almost everywhere. All but four of the cities above—Milan, Paris, New York, and San Francisco—have had positive growth year-on-year.

Even as real estate bubbles continue to grow, there is an element of uncertainty. Debt-to-income ratios continue to rise, and lending standards, which were relaxed during the pandemic, are tightening once again. Add in the societal shifts occurring right now, and predicting the future of these markets becomes more difficult.

In the short term, we may see what UBS calls “the era of urban outperformance” come to an end.

Continue Reading

Markets

Mapped: Distribution of Global GDP by Region

Where does the world’s economic activity take place? This cartogram shows the $94 trillion global economy divided into 1,000 hexagons.

Published

on

Map of Global Wealth Distribution

Mapped: The Distribution of Global GDP by Region

Gross domestic product (GDP) measures the value of goods and services that an economy produces in a given year, but in a global context, it is typically shown using country-level data.

As a result, we don’t often get to see the nuances of the global economy, such as how much specific regions and metro areas contribute to global GDP.

In these cartograms, global GDP has been normalized to a base number of 1,000 in order to show a more regional breakdown of economic activity. Created by Reddit user /BerryBlue_Blueberry, the two maps show the distribution in different ways: by nominal GDP and by GDP adjusted for purchasing power parity (PPP).

Methodology

Before diving in, let us give you some context on how these maps were designed. Each hexagon on the two maps represents 0.1% of the world’s overall GDP.

The number below each region, country or metropolitan area represents the number of hexagons covered by that entity. So in the nominal GDP map, the state of New York represents 20 hexagons (i.e. 2.0% of global GDP), while Munich’s metro area is 3 hexagons (0.3%).

Countries are further broken down based on size. Countries that make up more than 0.95% of global GDP are broken down into subdivisions, while countries that are smaller than 0.1% of GDP are grouped together. Metro areas that account for over 0.25% of global GDP are featured.

Finally, it should be noted that to account for some outdated subdivision participation data, the map creator calculated 2021 estimates for this using the formula: national GDP (2021) x % of subdivision participation (2017-2020).

Nominal vs. PPP

The above map is using nominal data, while the below map accounts for differences in purchasing power (PPP).

Adjusting for PPP takes into account the relative value of currencies and purchasing power in countries around the world. For example, $100 (or its exchange equivalent in Indian rupees) is generally going to be able to buy more in India than it is in the United States.

This is because goods and services are cheaper in India, meaning you can actually purchase more there for the same amount of money.

Anomalies in Global GDP Distribution

Breaking down global GDP distribution into cartograms highlights some interesting anomalies worth considering:

  1. North America, Europe, and East Asia, with a combined GDP of nearly $75 trillion, make up 80% of the world’s GDP in nominal terms.
  2. The U.S. State of California accounts for 3.7% of the world’s GDP by itself, which ranks higher than the United Kingdom’s total contribution of 3.3%.
  3. Canada as a country accounts for 2% of the world’s GDP, which is comparable to the GDP contribution of the Greater Tokyo Area at 2.2%.
  4. With a GDP of $3 trillion, India’s contribution overshadows the GDP of the whole African continent ($2.6 trillion).
  5. This visualization highlights the economic might of cities better than a conventional map. One standout example of this is in Ontario, Canada. The Greater Toronto Area completely eclipses the economy of the rest of the province.

Inequality of GDP Distribution

The fact that certain countries generate most of the world’s economic output is reflected in the above cartograms, which resize countries or regions accordingly.

Compared to wealthier nations, emerging economies still account for just a tiny sliver of the pie.

India, for example, accounts for 3.2% of global GDP in nominal terms, even though it contains 17.8% of the world’s population.

That’s why on the nominal map, India is about the same size as France, the United Kingdom, or Japan’s two largest metro areas (Tokyo and Osaka-Kobe)—but of course, these wealthier places have a far higher GDP per capita.

Continue Reading

Subscribe

Popular