Counterfeits, Knockoffs, and Solutions

Counterfeits, Knockoffs, and Solutions

Siyao Liu

The luxury industry is relatively small in terms of the number of companies, but punches far above its weight both in terms of sales and more importantly, influence. The best design, the best materials, the best merchandising, and the best packaging occur in the luxury industry, and hence luxury brands frequently lead the way for the rest of the marketing world (Crane, 2000). The role of fashion marketing of luxury brands is an area in need of new developments, theories, and knowledge in light of the trends toward global luxury and fashion markets. Because of the influence of luxury brands, counterfeits and design replicas keep occurring. These products in the market is destructive to the whole fashion industry by offending the intellectual property and business revenue of original brands (Gino 2010). The following paragraphs will discuss the reason why luxury designers have to protect their designs and possible solutions and their feasibility.

Counterfeit purchases are one of the most serious problems facing luxury brand marketers. According to the International Chamber of Commerce (2010), counterfeiting has become a worldwide problem valued at more than $750 billion, with 80% of consumers all over the world regularly purchase counterfeit with little remorse or fear of any consequence. Lost revenue is the most immediate damage to the legitimate producer, who also likely suffers enforcement costs associated with trying to contain infringement, as well as erosion of consumer goodwill resulting from poorer quality look-alikes in the market. Similarly, retailers who sell counterfeits are likely to suffer product returns and loss of goodwill (Cordell, Wongtada, and Kieschnick, Jr. 1996). Admittedly, counterfeit markets may help stimulate demand for the product (Yoo and Lee, 2009) and provide symbolic benefits, such as providing consumers with social status from purported ownership at a lower quality and cost (Yoo and Lee, 2009), but counterfeiting's adverse socioeconomic effects strongly harm innovation, employment, and trade (Olsen and Granzin, 1993). Demand for counterfeits has been explored to some extent in the marketing literature (Wilcox et al 2009), with price, attitudes toward big branded companies, and the need for status signaling being cited as main factors driving counterfeit demand. On the supply side, Conner and Rumelt’s studies have examined the piracy network effects (1991), the legal responsibilities of firms and government, and Zhao’s studies have made statements about the way firms’ internal organizations complement weak intellectual property rights enforcement (2006). In a word, counterfeits and knockoffs not only harms designer brands, but also hinders the development of the entire fashion industry. Actions must be taken immediately to address the problem.

Fast fashion is another culprit regarding violation to designs. Fast fashion is the “low-cost, high-scale, rapid copying” of original designs of a lower quality at a discount price. The fast-fashion dilemma lies not in the the interpretational copying of trends or styles but in the “exact” or “close-copying” of original designs. Many large chain stores employ these fast-fashion methods of copying in order to capitalize on current fashion trends, including high street brands like H&M, Forever 21 and Zara (Ko and Megehee, 2012). These brands are making a large amount of revenue by selling close copy of high-end designers’ designs and they are continuously practicing the close-copy method in many years.