Archive for August, 2013

Aug
07

The Burden of Counterfeiting, and Apple’s Clever Response to Fake Chargers

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Among the many burdens entrepreneurs face is the outright theft of their IP by companies that specialize in ripping off others by making counterfeits or knock-offs. It’s a horrific problem in China, in spite of increasing enforcement efforts by authorities. Part of the problem is that the cost of being caught is relatively small, so many of the IP thieves see the risk of spotty enforcement as just the cost of doing business. They are willing to shut down an operation and restart somewhere else, continuing the crime.

Knock-offs not only reduce profits for the innovator, but can damage a brand when the counterfeit products have poor quality or even serious safety issues that can affect the reputation of the original. Apple has faced this problem in many ways. Knock-off iPad and iPhone rechargers have recently failed and injured or even killed some consumers, a potentially disastrous situation for Apple. Apple could face criticism for making its rechargers so expensive that it has created strong incentives to use bogus 3rd-party products. But rather than remaining silent and trying to ignore the risk, Apple has taken an aggressive and bold step that shows the spirit of innovative business model creation is alive and well at Apple.  Or it at least shows Apple has some clever and creative marketers still shaping the company.

Apple’s response has been to offer a bold take-back program for the China market. Through October 18, Apple will take back any iPhone, iPod, or iPad charger not made by Apple and in exchange will sell users an authentic Apple USB power adaptor for $10—half the usual price. As reported in coverage at Quartz.com, this approach looks really brilliant. It shows Apple taking proactive steps to solve the safety problems that others have illicitly created, and will result in a lot of people coming into their stores and gaining more loyalty for Apple while properly losing trust in 3rd-party knock-offs. Smart move, one that requires some investment and upfront risk, but one that reduces risk and probably increases profit in the long run.

Even the burden of counterfeits can be an opportunity for innovation in our business models and product strategies. May we face every burden with such an innovative spirit, looking for the opportunities.

Categories : Asia, China
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