From Faking It To Making It: China's "Bandit" Brands

What happens when the producers of knock-off products become so adept at manufacturing that they become, well, legitimate?

The Financial Times reports this is exactly what is happening in the knock-off cell phone industry – in China, unsurprisingly. In fact, “bandit” phone makers are becoming increasingly worried about customer satisfaction, quality, and how their imitation brands are perceived.

“We are legitimate handset makers now. We are building our own brand,” explains Jin Hongxiang, president of SOP, the parent company of “bandit” electronics brand Xinghuabao. “Chinese handsets have a very bad reputation in export markets. We are expanding upstream to have more control over the quality of our components.”

There are now various levels to the “bandit” handset category, with brands such as Jugate, Oba, Sunup, and Lexun that offer one-year guarantees on their products.

Though these manufacturers are now submitting phones for testing and licensing, they don't always do so for handsets exported to countries where China's official stamp of approval – in the form of a blue stamp – is meaningless. Quality control issues aside, the proliferation of these imitation brands into international markets could drastically increase competition – especially for legitimate brands such as Apple, Nokia, and Samsung. Xinghuabao, for example, has stopped selling in Dubai after market saturation substantially lowered the profit margins:

"Dubai was our first foreign market but we have stopped selling to them," says Mr Jin. "Margins have become so squeezed it doesn't make sense anymore."

Developments in the “bandit” brand handset industry will be worth keeping an eye on, as it may prove a map for what happens to brands and the market when copycats go – like it or not – mainstream.