Protecting your business in distress situations: brand owners

20 April 2020

This is the first in a two part series of articles in which we look at the issues facing companies looking to do business in the UAE during the time of Covid-19.

Prior to the global outbreak of Covid-19, concerns had already been raised over signs that a global economic downturn was on the horizon. Fast forward to April 2020 and the world economy has been dramatically halted as a result of Covid-19. Whilst economists project a V-shaped "short sharp" recession, it is vital to consider not only the impact the current position is having on your brand but to look forward, to ensure that the brand makes it through this challenging time as unscathed as possible.

During such a time of uncertainty, it is important to acknowledge the light at the end of the tunnel. This article looks at both the risk the current crisis poses to brands and also, what steps can be taken to protect, nurture and even grow a brand during this time.



Rise of counterfeit products during times of distress

There have been numerous reports in recent weeks as to how criminals are seeking to take advantage of the high market demand for personal protection and hygiene products. Law enforcement agencies taking part in Interpol's Operation Pangea found 2,000 online links advertising items related to COVID-19.[1] However, the experience of 2008/2009 tells us that the rise in counterfeit and lookalike products during times of economic distress spans all industries and it is vital to ensure you have the necessary IP protection in place; are monitoring the market for such products; and, taking targeted and aggressive action against products and criminal activities which seek to take unfair advantage and diminish the value of your brand. As this is a known risk to brands, we recommend the following five step approach:

Step 1 - Review your IP portfolio and conduct a gap analysis to identify areas most at risk.

Step 2 - Take immediate action to plug the gaps as far as budget allows bearing in mind that failure to take protective action at this stage may result in significant damage later on. Covid-19 has been, in some instances, a catalyst for reduction in official fees. The UAE announced a significant reduction in official fees effective from 5 April 2020 onwards, so seek to take advantage of such reductions.

Step 3 - Consider less traditional forms of IP protection available to suit your needs. For example, in the UAE, consider 3D and non-traditional trademarks as a viable alternative to protection of designs as the registration is obtained more quickly and are enforceable locally.

Step 4 - Actively monitor online marketing and sale of suspect counterfeit and/or lookalike products and consider all available enforcement options. Once retail outlets start to open up, be alive to the potential for a sharp rise of counterfeit and/or lookalike products in stores.

Step 5 - Although more the more traditional and effective "on the ground" enforcement is currently halted due to UAE Covid-19 restrictions, evidence should be gathered so that complaints can be submitted online so swift enforcement action can be taken once restrictions are lifted. Concurrently, there are lots of online actions that remain available to brand owners such as social media takedowns; utilising e-commerce platforms takedown procedures; and domain name complaints.

Revisiting and renegotiating agreements

The Covid-19 crisis spans all industries and does present the opportunity to revisit current supply and distribution arrangements. Whilst a great deal of focus has been placed in recent weeks on force majeure provisions in contracts, there are other contractual provisions which are also important. Focusing on a brand protection point of view, questions include: Are there any obligations on your distributor to assist in their appointed regions with counterfeit and/or lookalike products? Can you lean on those partners for local assistance in those markets including both monitoring for infringing activity but also assisting with enforcement action? If such provisions are not included in your standard agreements, this is a good opportunity to revisit the agreements and seek to renegotiate.

Utilisation of e-commerce

In recent weeks there has been a sharp increase of businesses launching their own online platforms or signing up to popular e-commerce marketplaces. This is absolutely necessary during a time when stores are closed worldwide. The utilisation of e-commerce is particularly relevant to the UAE which has an established home delivery culture and logistics infrastructure.

Although the majority of brand owners will have been actively engaged in e-commerce in recent years, there is no doubt that there has been, and will continue to be, an increased demand for online delivery. In the UAE, we have seen F&B providers moving away from third party aggregator platforms previously used towards their own ordering and delivery service, thereby cutting out the middle man in order to maintain and maximise profit margins as far as possible. It is advised for all businesses to look at their current models to see where changes could be made to diversify its offerings and deal directly with customers where possible. By moving online before your competitors, it could help you retain your customers, but also attract customers from competitors who are slower to move online.

Spotlight - luxury brands

The 2008/2009 economic downturn had a monumental impact on brands across the scale. Overall, luxury brands fared better than those on the high-street but the impact had a lasting effect on the luxury market. For many luxury brands, designs became less ostentatious, minimalist and wearable thereby appealing to a wider customer base that was also able to avail discount offers making the "high-end" products more affordable. This adaptability has served the luxury products market well in recent years and will continue to do so during the current crisis.

Luxury brands are a good example of the benefit of engaging in e-commerce. The advent of e-commerce for luxury products in recent years means that this industry is well equipped to handle the current trading climate. Retail stores have closed worldwide but e-commerce marketplaces continue to operate at high volumes offering brands a direct relationship with consumers and more control over their stock.

Luxury brands and high street retailers alike have impressively stepped forward to join the fight against Covid-19 providing both essential support and engendering strong brand awareness. The contributions span donations to relief efforts (Hermes, Tiffany & Co, De Beers Group); the repurposing of factories to produce hospital gowns and masks (Burberry, Prada, Zara); and, production of hand sanitizer (LVMH, Bulgari, Estee Lauder). The examples cited are just a few that have shown remarkable flexibility to adapt to the current challenges and provide vital equipment and financial aid to those hardest hit by Covid-19.

Increased engagement with existing and new customer base

As the vast majority of the world continues to operate in a period of partial or complete lockdown, there has never been a more vital time to engage with existing customers and seek to obtain new ones. New and engaging marketing campaigns are at an all-time high and, a flexibility is at the heart of businesses that are most successfully navigating the current crisis. A marketing strategy planned for Q2/3 2020 needs to be adapted. Brands that are successfully navigating in this space have done so by taking a step back, looking to their core values; reaching out to customers to ask what products and content they want to see during this time; and creating a new, Covid-19 appropriate strategy.

We are also seeing a rise in partnerships between businesses which reinforces and strengthens brand awareness for both business. One such example is the joint marketing campaign of a bank and food delivery company to offer discounts on food delivery service to its customers. Such campaigns may seem ten a penny but are vital to keep the food delivery company front and centre of a customer's mind whilst also helping to cement the customer's loyalty to the bank who is taking proactive measures to protect its customers during this time and saving them money in focused areas.

In closing

At times of economic distress, cash is king meaning that the immediate concern of businesses is cash flow. However, it is important to not only focus on the short term but to look to the longer term future of the brand. Lessons from the not too distant past have taught businesses that engaging with customers and building brand strength and awareness in times of economic distress are of paramount importance to ensure longevity of the business. This starts with adequate protection and enforcement of a brand to ensure customer confidence in the brand and leads all the way through to how the business conducts itself during times of crisis from listening to customers' needs to proactively partnering with others to provide offers to its customers.

Brands that have the flexibility to adapt and remain open to new opportunities presented by a change in market conditions can, and will, emerge from this crisis with a stronger brand identity, more loyal customer base and a bright future.

Footnotes:

[1] Global operation sees a rise in fake medical products related to COVID-19


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