Can Knock-Offs Benefit Luxury Brands?

Posted by Barry Silverstein on June 8, 2011 01:30 PM

Happy World Anti-Counterfeiting Day!

Celebrated each June 8th, this year's 13th annual event sees the launch of a global portal that aims to help consumers avoid knock-offs and "find safe and genuine online stockists of popular designer goods." That new website (launching with brands including adidas and UGG Australia): Brand-i.org, which enables consumers to distinguish between genuine sellers of big brands and rogue traders of counterfeit goods. 

Naturally, luxury brands are alarmed at the rise of counterfeits on a global scale, vigorously defending their brands by taking legal action. While customs and law enforcement officials around the world attempt to squash purveyors of fake name brand luxury goods, academic research on counterfeits increasingly supports a counterintuitive position: these phony goods may actually be good for business.

Last September, we reported on a study funded by the European Union that counterfeit goods have "greatly" improved in quality and seem to promote the brands they're trying to copy. The report concluded that people who buy counterfeits "would never pay for the real thing anyway." The co-author of the report, professor David Wall, stated, "There is also evidence that it actually helps the brands, by quickening the fashion cycle and raising brand awareness."

An MIT professor, Renee Richardson Gosline, in 2009 reported on the results of a 2-1/2 year study she conducted, indicating that counterfeit brands sometimes verify the desirability of the brand they're copying. "She also found that counterfeits are not viewed as substitutes for the real thing. Instead, they are often used as trial versions with 40% of consumers subsequently purchasing the real brand," according to the MIT Sloan School of Management.

Yi Qian, a marketing professor at the Kellogg School of Management at Northwestern University, also found that "sales of designer bags actually rise when sales of fake versions are also increasing." Her research (recently covered in the UK's Daily Mail) found authentic brands may be getting free advertising from fake brands.

Professor Gosline's research supported Qian's findings, showing that, "within a couple of years, more than half of the middle-class women she spoke to... actually swapped their counterfeits for authentic items." One theory is that a counterfeit handbag, for example, is a "testing ground" for a consumer who aspires to the real thing — a "gateway" if you will. The thinking is that the consumer will, eventually, tire of toting a low-quality fake and trade up to the authentic item. 

Despite all that research and with a business to protect, it should come as no surprise that luxury brands aren't buying the argument that fakes are helping, not hurting, their sales. When it comes to knock offs, luxury brands want copycats to knock it off.

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