Siemens on the Gray Market: What Contractors Need to Know About Counterfeit Electrical Products

Counterfeit and cloned electrical products are showing up more often online. From third-party marketplaces to resale sites, contractors may come across products that look legitimate but are actually used, refurbished, cloned, or counterfeit. In the electrical industry, this is commonly referred to as the gray market.

What started as a supply chain challenge during the COVID-19 pandemic a few years ago has turned into a bigger issue online, where unauthorized sellers continue to push these products at competitive prices.

For contractors, the risk goes beyond getting a bad deal. Many of these products are designed to protect lives and property, making product authenticity a critical safety issue on every jobsite.

Trade Hounds CEO David Bauders recently sat down with Jon Duffie, Director of Channel Management at Siemens, to talk about how the problem has evolved, where counterfeit products are showing up most often, and what contractors can do to avoid them.

How has the gray market for electrical products evolved for Siemens?

It’s become a big problem since COVID. The supply chain got constrained a little bit during COVID, and these gray market sellers have really proliferated in the last several years.

These are folks that we consider to be illegitimate sellers of our product online. They are able to obtain product and then resell them online at very competitive prices, and at great risk to the consumers and entities that are buying those products.

As an example, a circuit breaker is a life safety device. It is an important piece of electrical infrastructure. To have an inferior used or refurbished product in a situation where life safety is involved or at risk is very important to us and very dangerous for consumers.

When did the electrical gray market problem start?

Cloned and counterfeit products have become a problem in the last couple of years. We have not dealt with that up until probably 2 or 3 years ago. Most of the issues we had were refurbished or used or somehow fraudulently obtained products being sold.

We have begun to really see cloned and counterfeit products in the last couple of years, and we think that is because we've had tremendous growth in the industry.

Do electrical lead times drive gray market activity?

It had in the past. Right now, lead times are pretty stable. But they absolutely have an impact.

When lead times go up, we see more fraudulent activity. And when lead times are a little softer, it's not quite as aggressive, but it never really goes to zero.

How can contractors spot counterfeit electrical products?

If the deal is too good to be true, it's too good to be true. Look for code words used online, like “performs like,” or a product that doesn't have a logo on it. This goes for all of our competitors, too.

Another good example: Siemens has a product called a Q120. If they're using that Q120 in a way that we don't use it, it's guaranteed to be a cloned or a counterfeit product.

They manipulate the identity, they manipulate the way they talk about the product, and they manipulate the way that they show that product online.

How big is the problem with counterfeit electrical products on Amazon?

We believe that almost 50% of the product that is sold on Amazon is not genuine Siemens product. It's not sold by Siemens.

Some of it may be obtained legitimately and put on Amazon — liquidated inventory or used product. But for us, about 50% of the sales on Amazon are third-party sellers.

Which electrical products are most affected?

It's pervasive across the electrical industry, but it's really pervasive in the molded case circuit breaker and plug-on residential circuit breaker.

There are lighting products, control products, automation products out there. There are certainly lugs and other products that would be counterfeit in the gray market. It's pervasive across the industry.

Where do counterfeit electrical products come from?

A cloned product is a product that looks like our product. When you put a brand name on it, then it becomes a counterfeit product.

Most of the cloned and counterfeit products that we have seen and tracked down do come from Asia, and a great majority come from China. They're probably coming from other places as well, but we've been able to identify Asia as the primary producer of cloned and counterfeit products.

How is Siemens fighting counterfeit electrical products?

Siemens has done a lot of things about this. We've actually now created a Brand Protection Office within Siemens in the United States. We now have an individual whose job it is to perform brand protection for Siemens. We have put a similar person in place in Europe.

We're focused here in the United States on circuit protection products. In Europe, there are a lot of fraudulent control and automation products in the industry.

Are manufacturers working with Amazon on counterfeit products?

That's a really good question. We haven't had a ton of luck working directly with Amazon. You have to understand how Amazon puts these products online and goes to market. It's a big revenue stream for them, so they're a little bit resistant sometimes to help.

Where we have gotten traction with Amazon is when it's copyright infringement or an infringement in the way that the product is identified. We've actually used a third party to help us identify where these sellers are breaking Amazon's rules, per se. We've been able to remove tens of millions of dollars of product and hundreds of sellers.

But tomorrow they could show up with a different name, or they might change the way they're showing the product. It's a continuous fight. We know we're having an impact, but the problem is never resolved.

Is the electrical industry working together on counterfeit products?

We've been successful in working with NEMA to form a brand protection task force. We've joined with our competitors. Eaton, Schneider, ABB, Siemens, Rockwell, and many other electrical manufacturers are now part of this committee.

We've engaged UL. We've engaged the Electrical Safety Foundation International (ESFI). We've worked with the Consumer Product Safety Commission, and also Border Enforcement and Control. We're attacking this problem from multiple angles as an industry.

Can current laws help stop counterfeit electrical products?

There's additional work that needs to be done. Not only with the laws, but with Border Protection to try to catch these products before they even get into the United States. So helping secure our borders from fraudulent product.

Want to hear more?

Watch the full conversation between Trade Hounds CEO David Bauders and Siemens’ Jon Duffie below.