As the launch of the latest Apple iPhone draws near, eager consumers should be cautious when buying devices from unauthorized resellers online, because they might be getting a fake.
Some experts estimate that up to 10 percent of technology products worldwide, or roughly $100 billion worth of technology product sales each year, are for counterfeit or fake products. Many of these products make their way into the U.S. market through online marketplaces, like eBay or Craigslist.
"Counterfeit devices are a very big problem in the secondary market," said Robert Auray, president and CEO GENCO Marketplace, a division of GENCO ATC . His company is a legitimate player in the secondary market. "One of the things we do is to control where the products are sold and to enforce protections for the customers who buy from us."
While Auray's company buys excess inventory from big retailers and manufacturers and then sells those devices to other sellers who may list products on a site like eBay or Amazon, the company says that all of its products are from legitimate suppliers. And it guarantees to its customers that the devices are authentic.
But Auray admitted that the launch of new and hot products, such as Apple's iPhone 4S, tends to attract the sale of counterfeit devices in many marketplaces. In fact, several Chinese online stores, including the business-to-business Website EC21.com, have already been selling the new "iPhone 5." Of course, the big catch is that there is no iPhone 5, since Apple announced the iPhone 4S earlier this week as its latest generation iPhone.
Apple unveils iPhone 4S
Apple iPhone 4S (photos)
Where, how, and when to buy the iPhone 4S
A popular online marketplace in China called Taobao.com, which has some 370 million registered users, was listing the fake iPhone 5 for as low as 200 Yuan or about $31, according to the Agence France Press.
Some of the smartphones offered are called "HiPhone 5" or "iiPhone 5" in an attempt to avoid accusations that they are counterfeit devices. But pictures of the devices show the Apple logo and look exactly like iPhones.
Chinese authorities have already seized fake versions of the iPhone 5, which the news agency Xinhua reported earlier this week.
A brief survey of popular consumer shopping Web sites in the U.S., such as eBay, Craigslist, and Amazon, didn't turn up what looked like illicit iPhone 5 or even iPhone 4S smartphones. But Theresa Mock, vice president of global marketing at Opsec Security, which helps companies protect their brands by scouring the Web for fakes, said counterfeits are likely coming.
The iPhone 4S will be launched in the U.S. and in six other countries next week. And experts are anticipating it to sell very well in all markets. Mock said that counterfeiters typically seed the market early with fake products right before a highly anticipated product launch, such as the one of the iPhone 4S.
Last year, Opsec compiled a report that found in the weeks and days before an official launch of a new smartphone, several suspicious listings for products from six manufacturers, namely Nokia, RIM, Apple, HTC, Samsung, and Motorola on reseller Websites. Opsec said that many of these products were being offered for deep discounts, with one seller offering 1,000 units per week at 65 percent below list price. The listings for devices advertised on the Websites also had features listed that hadn't been announced yet by the manufacturers.
"When it came in the mail, it was obviously a fake," she said. "The packaging didn't look right. The icons on the device and the logo from the company were a little different."
To help ensure you don't buy a fake iPhone 4S or any other kind of device, CNET assembled these questions that you should ask yourself before hitting the "buy" button.
- Is the price too good to be true?
Resellers who are offering discounts on devices that are in high demand or have not yet been released will not be sold for a significant discount by any legitimate reseller. "The secondary market is like any other market," Auray said. "It's driven by supply and demand. When there's more demand and less supply prices will not go down. Anyone who tries to sell scarce products for 20 percent to 30 percent off the market value won't be in business very long." Auray suggests checking prices online from a variety of sources to get an idea what the going rate is. And if you see a price that's too low, that you should tip you off that it's likely a fake.
- Does the reseller profess to have an unusually high number of units to sell? While some resellers are selling real iPhones, Auray said that Apple does a particularly good job of controlling its sales channel. This means that retailers won't likely have excess inventory to offer to resellers. So it's unlikely that a reseller on eBay or Amazon would be able to offer more than a few of the hottest Apple iPhones on the market. Even older models of iPhones are difficult to get, he said.
- Does the device look real? This might be tricky for online shoppers looking for the iPhone 4S, since it looks just like the
iPhone 4. But when you look at the pictures and the product descriptions, you should know which features are supposed to be available and which are not. And if the advertisement lists features that aren't on the actual spec sheet for the device, it's probably not legitimate.
- Does the seller offer a return policy? If the seller doesn't offer consumers the ability to return a product, this a big red flag. Auray said that all reputable resellers offer some type of return policy to ensure that customers are satisfied. His company offers a 30 to 90-day return policy.
- Does it have a warranty? All smartphone manufacturers provide a limited warranty, which covers the product, accessories, and software. Typically, smartphones are covered for one year from the date of purchase. Most authorized resellers also offer their own extended warranties. A reseller that doesn't offer such a warranty may be selling knock-offs.
- Does the seller have a Facebook page or Twitter account? Many resellers are using social networking sites to promote their businesses. So when you are searching for a phone, do a little research on the company you may buy your device from. If they have a Facebook page or Twitter account, see what other customers say about the company. Also, try to find out how long the company has been around. The ones that defraud customers, probably won't be around for very long before changing the name or going out of business.
Mock said that you'll know if you've purchased a fake smartphone. The knock-offs tend to use slower processors, lack features that the authentic devices are supposed to have and simply shut down after a few weeks. If you think you've bought a fake smartphone, Mock said to make sure that you keep the receipt and all other proper documentation for the phone so that you can offer it as evidence to authorities.
There are some legitimate resellers on sites like eBay and Amazon. And for consumers who can't get the iPhone 4S because it's not offered yet in their country or authorized sellers are sold out, online might be a fine place to look for the iPhone 4S. But Mock warns that there is always a risk that you may be purchasing a fake device.
"The best thing to do is to buy your iPhone 4S from an authorized Website or store," Mock said. "That's the only way to guarantee you're getting a legitimate product. When I bought my iPhone, that's what I did. And remember, if the deal is too good to be true, it probably is."