50% OF MIDDLE-EAST INK CTGS ARE FAKES !
50% OF MIDDLE-EAST INK CTGS ARE FAKES !
2006-04-13 at 10:19:00 am #14950
Not Worth the Paper it Prints on
Counterfeit printer cartridges have Egyptian offices awash in sticky, low-quality toner – and bursting with frustrated purchasing managers. Authorized dealers are spreading the word that while they remain more expensive, genuine supplies will save companies thousands in printer repairs and replacements.
In the span of six months, a puzzled internet department manager at Al-Ahram watched as 50 of his Canon office printers went down one by one. Omar Samy had been purchasing ink cartridges bearing the trademark Canon logos for months and feeding them into his printers.
He had no idea that the cartridges were fakes that were slowly damaging the printer heads.
“We had Canon printers and we were buying compatible ink for the printers, not from Canon itself, but from another supplier,” says Samy. “They sold it to us as a Canon product, but it was fake. The quality of the printout looked the same as the quality of Canon, but the problem is that the ink had problems you can’t see with the naked eye.”
To replace the printer heads at a cost of LE 1,000 would have been only marginally cheaper than buying all new printers for about LE 1,200, so the company decided to buy new ones. The supplier blamed the wholesaler, the wholesaler blamed somebody else, and the newspaper was left to pay the bill. Al-Ahram’s losses came to about LE 60,000.
The black market in manufacturing, smuggling and selling counterfeit office supplies is a multi-billion dollar global business, and the Middle East is one of the counterfeiters’ favorite markets. According to the Imaging Consumables Coalition of Europe (ICCE), a non-profit association of industry leaders that monitors the counterfeit supply business in Europe, Africa and the Middle East, the supplies industry in those regions is worth 30 billion a year.
According to ICCE, fake office supplies account for about 5% of sales in Europe. The same figure for Egypt and the Middle East could stand as high as 50%.
“We believe in Egypt 50% of the market is counterfeit,” says Jag Gill, director of ICCE, from his office in England. He mentions Egypt and Saudi Arabia as the prime regional markets for fakes, saying most of the counterfeit office supplies are made in China and other Asia-Pacific countries and make their way to the Middle East and African markets through Dubai.
Abdel-Hakim Bakry, a product manager at the Engineering and Trading Company (ETCO), Canon’s distributor in Egypt, says that if you include official retailers, 80-85% of all ink cartridges on Egyptian shelves are counterfeits, and 99% of all the ink cartridges sold in street markets and in computer malls are fakes.
He estimates the counterfeit industry is costing Canon in Egypt at least $1 million in lost printer sales alone, and no less than $3 million for all products. He says those numbers continue to increase because the government is not taking adequate measures to fight the problem.
(Officials at the Ministry of Interior’s financial crimes investigation unit were unavailable for comment by press time.)
Secret in the margins
Midan Sphinx in Mohandiseen in Cairo is famous for its computer malls, which are crammed with computer and office supply stores. According to Bakry, this is the hub of the counterfeit office supply market in the nation’s capital.
“ They are selling fakes very near to our price so that the customer is not going to suspect the products they are selling are fakes.
While you can find varying prices for the same fake product in different markets and shops, Nasser Nasser, ETCO’s technical director, says retailers are making large profit margins by selling fakes; huge margins are just too tempting for retailers in the nation’s ubiquitous computer malls to turn down. An authentic ‘BCI 24 Black’ cartridge for example, sells for LE 58 in trusted retail shops like Carrefour and Radio Shack, according to Bakry. The retailer buys the cartridge from Canon for between LE 48 and LE 50, making a moderate LE 8 profit. Bakry says retailers buy the fake product for around LE 20 and often sell them at prices close to the original product.
“They are selling fakes very near to our price so that the customer is not going to suspect the products they are selling are fakes,” says Bakry. “If it’s very cheap they will say, ‘Ah, this is very cheap, maybe it’s not good.’ The biggest profit margins go to the retailers.”
Ideally, Bakry says consumables like ink cartridges account for 60% of the profit he makes over the lifetime of a printer. But with many customers buying fake cartridges from other retailers, his breakdown is closer to 85% profit from the printer itself and only 15% from the consumables. When he sells a printer on a 6-8% profit margin, Bakry is hoping to sell three cartridges per year at a profit margin of 10-12%.
“If I sell 20,000 printers per year, I expect to sell 60,000 cartridges. Instead, I’m selling closer to 20,000,” he says. “Two-thirds or more of my business went to some other people who are making fake consumables. This is how big it is. There’s not enough profit from the consumables so the business cycle is not a healthy cycle.”
Ink and toner cartridges for printers and copy machines are the products most often replicated. Bakry says that the ink dye used in the fake cartridges is not up to industry standards. Experts say fake cartridges produce inconsistent and poor ink quality and damage parts in the printers, mainly the sensitive printer head, thus cutting the life span of the printer in half, usually by clogging sophisticated nozzles.
“So the customer is losing the money he paid in the printer he bought,” says Bakry. “The effect is very bad on the printer itself and the quality of the output you are getting from the printer, and very bad on the industry.”
Spot the evil twin
When customers bring damaged printers back to the manufacturer’s workshops for repair, the first thing the service providers look for is whether the customer was using original or fake ink. In most cases, says Bakry, they find counterfeit cartridges.
Canon is then in the difficult position of having to inform customers that they are using counterfeit goods. Bakry voices his customers’ frustration, saying, “‘I went to the mall and I asked for original ink and I paid the original ink price, what can I do? I can’t differentiate between the original and the fake.’ And he’s right – he can’t differentiate normally between original and fake ones.”
The problem extends well beyond ink cartridges.
Hassan Zakaria, paper business manager at Xerox Egypt, says he posed as a potential buyer, setting up a meeting with a fake paper supplier with the help of police. When the man tried to pass off the fake paper as Xerox paper, the police moved in and arrested him for questioning.
Ultimately, the whole operation proved fruitless, as the man refused to give any information on his suppliers, which is what Zakaria was really after. Nabbing one or two small-time sellers and seizing their supplies does not make even a small dent in the market. Zakaria says the fake paper business costs Xerox close to $1 million every year in lost business in Egypt alone.
“I believe that I need to open a police station for myself to go after each one selling this paper,” says Zakaria. “I don’t have the time, I don’t have the resources and I don’t have the capability. We’re facing a lot of problems with counterfeit paper. There are a lot of sources for the counterfeit paper and actually it’s a very easy process to imitate the paper.”
All counterfeiters have to do is make a box with copied Xerox logos, fill it with cheap paper, and sell it as the more expensive original. Just like the fake ink cartridges, it is very difficult for the consumer to tell a real Xerox box from a fake one, let alone differentiate between the quality of the paper. Sometimes, though, the process is so amateur that the colors used on the fake box do not even correspond with Xerox’s colors. Someone with a trained eye can spot these differences, but not the average customer.
“When you use the fake paper for the first time you will not notice the difference. With time, the maintenance rate of the machine will get higher because you are using very low quality paper,” Zakaria says. And like in the fake cartridge business, he says prices of counterfeit papers are not much cheaper than the original: the customer just thinks he’s getting a bit of a deal.
Killing two birds with one stone, retailers keep counterfeits harder to detect and increase their profit margins enormously.
Rubbing out counterfeiting
While stopping the counterfeit industry altogether is impossible, ICCE Director Gill says his association is making strides to reduce the problem in countries including Saudi Arabia and Egypt.
He says his organization assisted Egyptian authorities in conducting 11 raids over the last six months and seized 50,000 counterfeit cartridges valued at over $1 million. He praises the governments of Egypt and Saudi Arabia for taking measures to protect intellectual property rights in the last three years.
“ When you use the fake paper for the first time, you will not notice the difference. With time, the maintenance rate of the machine will get higher because you are using very low quality paper. ”
Customs officers, though, are the first line of defense, and their task is a mammoth one that involves inspecting thousands of containers every day. It is impossible to inspect every container that comes into customs; customs officials’ first worry is always about more serious threats such as drugs and weapons getting into the country. Still, companies like Canon and Xerox in Egypt want the government to impose new laws requiring anyone importing any product to produce a certificate of origin from the manufacturer to prove that the sources of the product are authentic.
“We can help the government by giving training to the customs people,” says Bakry. “We can go to them whenever they ask to investigate any products. Mainly we need to change some regulations so that you have to get a certificate of origin from the manufacturer, not from the retailer or the dealer.”
Bakry says Canon is currently trying to close sources of fake goods in China and Dubai and wants to stop the goods from entering the country. Once the products hit the local market, it is difficult for the police to bring evidence against people involved in the trade.
“When the customer claims to the police that he bought this ink from this outlet and it’s fake, the police go there, investigate the products, get the man arrested and they start asking why he sells fake products. They confiscate the products, but this is temporary action, because you stop them for one week, the next week they start again.”
Bakry emphasizes the need to stem the flow of counterfeits into the country. “It’s a kind of a joint action between us and the government and customs to stop this business.”
But Xerox’s Zakaria says the government itself is part of the problem: He alleges that government offices are the biggest purchasers of fake office supplies in Egypt as they award their supply contracts to the lowest bidder. Bakry wants government tenders to be reformed to require authentic certificates of origin.
In the meantime, companies like Canon are devising new ways to combat the counterfeit business. Canon is introducing security labels on every cartridge package. The label, bearing the Canon logo, disappears when rubbed with a finger and reappears within seconds. The labels are easy for customers to use and difficult for counterfeiters to replicate. The labels cost Canon Egypt 70-80 piasters each; with 300,000 labels slated for the first run, the whole operation is costing Canon nearly LE 250,000. Security measures vary from country to country, and Bakry hopes that it will be easy to educate the Egyptian public to look for these easy-to-use stickers through media campaigns.
Another way to tell a fake Canon product from a real one is to study the holograms on the package. The hologram when viewed directly appears golden, but when tipped into a horizontal position, the genuine hologram turns green. Fake holograms do not change color when tipped. Canon and Xerox in Egypt are also launching anti-counterfeit campaigns through newspapers and magazines, putting posters in computer malls and outlets, and distributing fliers. For now, though, the best advice is to buy from trusted sources. Bakry says the safest places to buy authentic items are established retailers like Carrefour, Radio Shack and Canon’s own branches.
As for Omar Samy from Al-Ahram, he says he now only deals with certified dealers after his expensive mistake. “From now on, we only work with suppliers who have certificates from the manufacturer which prove their product is authentic,” he says. “We learned our lesson.”