Jones_JAliya_Fake it until you

Fake it Until You Make it: The Impact of Counterfeits on the Luxury Market
J’Aliya Jones
Submitted in Partial Fulfillment of the Requirements
For the Degree of Master of Fine Arts in Luxury and Fashion Management
at
The Savannah College of Art and Design
© August, 2013, J’Aliya Shantee Jones
The author hereby grants SCAD permission to reproduce and to distribute
publicly paper and electronic thesis copies of document in whole or in part in
any medium now known or hereafter created.
Signature of Author and
Date_____________________________________________________
_______________________________________________________
______/_______/_______
Professor Sarah Collins
Committee Chair
_______________________________________________________
______/_______/_______
Professor Pat Trautman
Committee Member
_______________________________________________________
______/_______/_______
Professor Catherine Ramsdell
Committee Member
Fake it Until You Make it: The Impact of counterfeits on the Luxury Market
A Thesis Submitted to the Faculty of the Luxury and Fashion Management
Department
in Partial Fulfillment of the Requirements for the
Degree of Master of Fine Arts in Luxury and Fashion Management
Savannah College of Art and Design
By
J’Aliya S. Jones
Atlanta, Georgia
August 2013
Dedication
This is dedicated to everyone who wouldn’t let me give up, no matter how
hard I tried.
THANK YOU!
Acknowledgements
I would like to thank my thesis committee— Sarah Collins, Pat Trautman,
and Catherine Ramsdell—for swooping in at the last minute, when
everything seemed to be going wrong, and getting me through this monster
of a paper.
To my family for giving me the swift kick I needed every time I wanted quit.
Thank you for your love, support, and putting up with my insistence to read
every last word of this thesis. I Love you and couldn’t have done it without
you.
To James, the longest hour of my life, thank you for supporting me through
this process and dealing with the good, and bad writing days.
To Tamara Joyner, who got me through my years at SCAD, and always had
a smile for me no matter how crazy of a question, or crisis, I had for her
To all the professors who have gotten me this far and never gave up on me.
Table of Contents
List of Images .....................................................................................1
Abstract ...............................................................................................2
Introduction ........................................................................................3
Image One ............................................................................................3
Image Two ...........................................................................................5
Evolution of Luxury fashion:
From Ancient Egyptians to Modern Luxury ..........................................9
Before the Nineteenth Century .................................................................10
Table One .............................................................................................14
The Nineteenth Century and Beyond .........................................................18
American Fashion ...................................................................................21
Fashion and the Twentieth Century ...........................................................22
Intellectual Property Rights ................................................................24
Trademark and Copyright Laws:
A History ...............................................................................................25
Table Three ...........................................................................................27
Image Three ..........................................................................................28
Image Four ............................................................................................28
Counterfeit Culture ..............................................................................31
Image Five ............................................................................................36
Counterfeit Crimes...............................................................................38
Counterfeit Grading System .....................................................................46
Grade B/AB............................................................................................47
Grade A.................................................................................................47
Grade Ultra A .........................................................................................48
Methodology and Fieldwork .................................................................53
Meaning of Counterfeits ......................................................................56
Theory of Distinction ...............................................................................58
Democratization .....................................................................................60
Omnivore ..............................................................................................61
Counterfeit Consumer .............................................................................62
Table Four .............................................................................................63
Counterfeit Social Network ..................................................................66
Counterfeit Consumption .....................................................................73
Image Six ..............................................................................................77
Scenario Plan:
The Future of Louis Vuitton and Counterfeit Goods .............................80
Company Challenge ................................................................................81
Company Profile .....................................................................................81
Environmental Issues ..............................................................................82
Counterfeit Impact .................................................................................84
Table Five ..............................................................................................84
Impact/ Uncertainty Matrix ......................................................................85
Table Six ...............................................................................................85
Scenario Grid .........................................................................................86
Table Seven ...........................................................................................86
Visualization of the Future...................................................................87
Scenario: Obsession ...............................................................................88
Scenario: Back to Basics .........................................................................89
Scenario: Cheap Chic ..............................................................................90
Scenario: Designer Imposter....................................................................91
Implications for Louis Vuitton .............................................................92
Table Eight ............................................................................................92
Scenario Recommendations.................................................................93
Table Nine .............................................................................................93
Thoughts/Recommendations...............................................................94
Terms ..................................................................................................101
Work Cited ...........................................................................................106
Appendix A ..........................................................................................111
Illustrations.........................................................................................115
List of Figures - See citation page for full image source citations.
Image
No.
1
2
3
4
5
6
Image Name
Coach Signature Scribble Hamptons Weekend Hobo
Handbag
Global Counterfeit Market Value
Coca-Cola Bottles
Tiffany & Co. Blue Boxes
Proenza Schouler PS1 bag Vs. Target
Personalized Louis Vuitton bags
Page
No.
3
5
28
28
36
77
1
Fake it Until You Make it: The Impact of Counterfeits on the Luxury Market
J’Aliya Jones
August 2013
Abstract
The Counterfeit industry continues to grow throughout the world. The
manufacturing, distribution, and selling of fake luxury is showing no sign of
stopping, as consumers hungry for the next “it” bag, and a high status,
continue to purchase billions of dollars in counterfeit merchandise.
Counterfeits have plagued the luxury market for centuries, providing lowerclass consumers with an opportunity to fake their way into high-society.
Mostly and underground industry, counterfeits provide both positive a
negative effects, to the luxury market. This thesis will explore the impact of
counterfeits on the luxury market, and will attempt to answer the question:
Are counterfeits damaging to luxury brands and can they provide positive
benefits to the brands being copied?
2
Fake it Until You Make it: The Impact of Counterfeits on the
Luxury Market
“I would be worried if my product wasn’t copied”
- Patrizio Bertelli, Prada CEO
Someone once said that imitation is the sincerest form of flattery, but
for many luxury brands their imitators have left them feeling less than
flattered. My interest in counterfeits started when I was 16 and I visited New
York for the first time. Naturally I paid a visit to Canal Street, where I
purchased my first counterfeit item, a Kangol bucket hat, a la 1980s
LL Cool J. My true descent into counterfeit consumption occurred when I was
19 years old, and COACH released
their Signature Multi-color
Canvas Scribble bag.
I had to have this bag, but the
near $400 price tag didn’t really work
for my college student budget, so my
mother purchased a “replica” of the
bag for me. The counterfeit version
Image one
was nearly identical to the genuine
product, but cost much less. I deflected questions about whether the bag
was real or not, by saying “it was a gift, so I’m not sure” or just flat out lying
and saying it was real.
3
I was hooked and slowly began purchasing more and more counterfeit
handbags and as long as I purchased items that fell within the affordable
luxury category I was happy. It was my attempt at owning a Louis Vuitton
backpack that changed my outlook on counterfeits. I had my brother buy a
counterfeit version, during a business trip to New York. When I received the
bag I was disappointed in the quality of the bag, it looked and felt fake, I
was heartbroken. From then on I looked at counterfeits in a different light, I
noticed their flaws and the differences in materials, and I was officially
turned off by counterfeits, no matter how good they were.
Counterfeits are a worldwide occurrence that continues to find a place within
developed and developing countries. According to the International Anticounterfeiting Coalition, counterfeits are estimated to account for 5 to 7
percent of worldwide trade, or an estimated $600 billion annually. Since
1982, global trade of illegitimate goods have increased a staggering 10,000
percent, fuelled by an increase in consumer demand ("About counterfeiting,"
09).
E-commerce sites like E-Bay have also aided in the “spike” of
counterfeit goods sold, making it easier to not only distribute fake goods,
but also for consumers to acquire them, without having to leave the
comforts and safety of home ("The spread of," 2010). It’s estimated that the
sales of counterfeit goods via Internet sites reached $135 billion in 2010
("The spread of," 2010).
4
Image Two
Counterfeits have been defined as the unauthorized, close copies of
labels, logos, or other distinctive markings, as well as the deliberate attempt
to deceive consumers by copying and marketing goods bearing well known
trademarks, generally together with packaging and product configuration, so
that they look like they are made by a reputable manufacturer, when in fact
5
they are inferior copies (Hoe, Hogg & Hart, 2003).Counterfeits are known by
a variety of names including, knockoffs, imitations, fakes, and copies.
Though each of these names has a slightly different meaning, they all create
a similar problem for businesses.
Luxury fashion is one of the top victims of counterfeits. Other product
categories plagued by counterfeits include: pharmaceuticals, cigarettes,
automobile parts, cell phone parts, DVDs, alcohol, computer chips, video
games, computer software, and even baby formula. The products being
counterfeited are vast, if you can think it; it’s probably being reproduced.
Some of these counterfeits threaten the safety of consumers, for example in
Eastern China dozens of infants died from malnutrition due to consuming
counterfeit formula that contained virtually no nutritional value ("Fake milk
kills," 2004).
According to the U.S. Customs and Border Protection (via USA Today
Finance), agents have seized 24 percent more shipments of counterfeits in
the last fiscal year (ended September 30, 2011) than in its previous year.
Three Hundred and twenty-five percent more goods have been counterfeited
from 2002 to 2012, than in the previous decade. Counterfeit
pharmaceuticals were up 200 percent in the 2011 fiscal year (O'Donnell,
2012). China, one of the worst offenders of counterfeiting, produced fakes
that are estimated to have cost the U.S., Europe, and Japan more than $60
billion in retail sales in 2004 ("Handsbags at dawn," 2006).
6
Counterfeits have earned themselves a negative reputation, and in the
past two decades, have come to be viewed as a threat to businesses,
affecting a brand’s reputation, revenues, and profits. As the manufacturing
and distribution of counterfeits continues to grow and be perceived as a
greater threat, companies and government agencies are spending millions
on legal teams and private investigators, who work with international
custom officials to bust rings of organized counterfeiters. Louis Vuitton, one
of the world’s most copied brands, is one of the most aggressive
manufacturers. Vuitton employs forty in house lawyers and 250 outside
private investigators. Along with aggressively policing counterfeits,
companies are also employing various labeling techniques, including Radio
Frequency Identification, or RFID (Betts, 2004).
Some brands are using counterfeits to their advantage. Spanish
brandy maker, Fundador used the counterfeiting of their product as a way to
convert consumers of the fake brandy into legitimate consumers. Fundador
developed generous advertising promotions on their bottle’s labels.
Counterfeiters were unable to compete with, or copy, the advertisements
because the offers changed every six weeks. Hoping to benefit from these
promotional offers, consumers of the counterfeit brandy stopped purchasing
the counterfeit product. The introduction of the promotion offers also led to
easy brand recognition (Whitwell, 2012). Counterfeiting forced Fundador to
think of ways to innovate their brand and increase brand loyalty.
7
Companies, especially luxury fashion brands, continue to struggle with
counterfeits, but are they wasting millions trying to eradicate something
they could be benefiting from? Counterfeits possibly provide cheap
promotional opportunities that could assist in building and maintaining brand
loyalty. This paper will seek to answer the question, Are counterfeits really
bad for luxury businesses? I will argue that, illegal activity aside;
counterfeits do not cannibalize a brand. In fact counterfeits help build brand
awareness, allow brands access to new markets, provides a benchmark of a
brand’s health, and increases sales of legitimate goods.
Research has shown that counterfeits increase brand awareness in
such a way, that as the economic climate of a country or an individual
improves, sales migrate from counterfeits to the original, as well as force the
authentic brand owner to protect, innovate, and expand its product services
and markets to keep ahead of their imitators and squeeze out the
competition. Through secondary and primary research, I will seek to prove
that counterfeits hold more benefits, then cons, when associated with luxury
fashion brands.
8
The Evolution of Luxury Fashion
From Ancient Egyptians to Modern Luxury
9
Before someone can truly understand the allure of counterfeit luxury
products, one must understand what luxury is, and how it has evolved into
coveted part of societies all over the world. This section will explore how
luxury fashion has morphed into the multi-billion dollar sector it is today.
Before the Nineteenth Century
Luxury is defined as an inessential, desirable item that is expensive or
difficult to obtain, or the state of great comfort and extravagant living. The
desire to live in comfort and have unique and expensive items is not a new
concept, but in terms of fashion, the concept of luxury and its association
with appearance, beauty, and fashion didn’t gain prominence until the
ancient Egyptians (Okonkwo, 2007, p.15).
In ancient Egyptian society, tradition and religion were deep-seated
and clothing and appearance played a major role during religious and social
ceremonies. The Egyptian belief in life after death and the elaborate rituals
that were performed during burial ceremonies of dead nobles reinforced the
role of luxury in clothing and beautifying corpses (Okonkwo, 2007, p.15).
Regardless of social class, clothing for both men and women were
primarily made for comfort and to keep the wearer cool, thus they were
usually made from linen, the higher the status of the wearer, the thinner the
linen ("Ancient egypt fashion," 2008). The wearing of jewelry, by both men
and women became common during this time, and personal hygiene rises in
10
importance; as seen through a highly developed cosmetic sector (Okonkwo,
2007, p.16). Body cleansers, deodorants, and makeup were popular, as well
as the use of razors and other hair removers since both men and women
were to be clean-shaven from head to toe. Cosmetics such as Lipsticks, lip
gloss, blush, and eyeliner also were popular among Egyptian society (Ead).
The Cretan era led to the early Greek civilization of the 4th and 5th
centuries BC, whose society showed more attachment to luxury fashions
(Okonkwo, 2007, p.17). During this time period, fashion began to reflect an
individual’s level of upbringing and education. Men and women’s fashion
began to show distinct differences. Women’s fashion became more feminine
and elegant, through style and fabric choice, while men’s fashion became
more masculine and structured. Luxury was also revealed through the use of
heavy jewelry that was used to indicate the wealth of the wearer (Okonkwo,
2007, p.17). Also during this period society appreciated luxury living and
beauty. A well-developed beauty sector was established, with products
ranging from eye shadows, lipsticks, and foundations. These products were
widely used by women, as well as moisturizers and perfumes (Okonkwo,
2007, p.17).
The Etruscan Empire was rich in gold and its society portrayed luxury
and beauty through the use of gold. Etruscan aristocratic women flaunted
their status by wearing heavy jewelry (Okonkwo, 2007, p.17). As the
Etruscan Empire became the Roman Empire, it is believed that this is when
11
Italian fashion style was born. Fashion was a huge part of Italian society, so
much so that the ruling government decreed the models and color of shoes
of each social class, because shoe’s represented a mark of distinction. This
factor contributed to the influence of talented designers and shoe craftsmen
who were sought after by rich aristocrats and royal family members
(Okonkwo, 2007, p.18).
Since its development during the Roman Empire, Italy has remained
one of the more superior countries for the manufacturing of shoes.
According to Uche Okonkwo (2007, p.18) roman society also paved the way
for several innovations in luxury fashion, notable among them are:
1.)
The concept of elevated fashion was introduced by members of
the royal family through elaborate dressing made with rare
materials.
2.)
Seasonal fashion was invented to cater to both the changing
weather conditions and the changing taste of the fashion
conscious society.
3.)
Women’s fashion was prominently separated from men’s fashion,
through the materials and colors used in the design and
manufacture of clothes.
4.)
The legendary private thermal baths and saunas were invented
as well as the rich ingredients that were used to nourish the
12
body and improve the mind this concept was also exported to
the town of Bath in England.
5.)
Exercise and balloon balls were invented to enhance appearance.
Moving into the era of the Byzantine Empire, the capital of Byzantine,
Constantinople, was considered the richest and largest center of commerce
and fashion of the period, which contributed to its influential role in the
development of culture, fashion, and history. The Byzantine Empire also
witnessed an even higher level of a taste and demand for luxury goods than
the Romans (Okonkwo, 2007, p.19).
During this time period, Emperor Justin I and his wife, Theodora were
the equivalent of celebrity style high fashion. They emphasized the
important role of clothes and appearance as a mark of distinction. Theodora
was the first woman to exploit fashion as a source of power, wearing
clothing made from expensive silks and brocades that were adorned with
embroideries of gold and pearls (Okonkwo, 2007, p.19).
Unlike the Italians of the Roman Empire, Emperor Justin I and
Empress Theodora granted individuals the freedom to choose what they
wanted to wear. This lead to an early form of fashion knock-offs, as women
began imitating the dress patterns of the Empress, using cheaper materials.
Like other eras before them, how one dressed and their appearance
remained an indicator of wealth and status (Okonkwo, 2007, p.19).
13
As the Middle Ages started to emerge, between the 5th and 7th century,
fashion came to a standstill. While the early period of the middle Ages was
somewhat influenced by the style of Byzantine Empire, for the most part
styles of the time were drab and ugly (Okonkwo, 2007, p.19).
Notable Developments of the Middle Ages
1. England became known for its growing textile industry.
2. The influence of professional tailoring in France soared to such an
extent that by the year 1300, there were 700 active tailors in Paris.
3. Luxury materials such as silk were heavily imported from Asia, whose
textile industry was considered to be more advanced than Europe’s.
4. The rise of Italian influence in international fashion became visible.
Table One
The Renaissance era ushered in change in the way fashion was, and is,
viewed. The Renaissance was a progressive period, with an explosion of
cultural development and travel between the East and West. This period saw
a rise in great Italian artists, and the birth of literature in Italy, France,
Spain, and England (Okonkwo, 2007, p.20). Society’s outlook on art and
fashion changed, fashion became an integral part of the Renaissance and
clothing and accessories were, once again given the role of indicator of social
class, as well as knowledge. Clothing became an investment, and even in
14
England tombstones bore descriptions of how the deceased dressed
(Okonkwo, 2007, p.20).
Other countries like Germany and Spain emerged as important fashion
influencers, and Italy re-emerged as a strong fashion force, particularly in
Rome, Florence, and Venice. Florence became a major center of jewelry
production and Italy’s textile industry, which produced the best silk in
Europe, grew significantly and contributed to Italy’s development into the
authority of fashion and lifestyle (Okonkwo, 2007, p.21).
It also during this time that women become obsessed with the concept
of beauty, as luxury and art began to be fused together.
“Women were ready to do anything to be beautiful and their influence
in both fashion and society began to develop. The demand for beauty
was so high that as early as 1582, a beauty book was written by Jean
Liebaut, a Parisian doctor, titled L’Embellissment et Ornement de
Corps Humaine (The Improvement and beautification of the Human
Body). Also high-society women attended exclusive clubs where new
fashion and beauty products were previewed.” (Okonkwo, 2007, p.21)
It wasn’t until the Baroque era that France came into their own, within
fashion and lifestyle, in Europe and the rest of the world. The King of France,
Louis XIV, made this influence possible, his reign marked the return of
15
opulence and exuberance and his tastes in luxury influenced the royal
families and aristocrats of the entire continent (Okonkwo, 2007, p.21).
Louis XIV was a lover of fashion and thus supported the fashion
industry through government reforms that provided incentives and financial
aid to designers, artisans, and craftsmen. He also introduced policies that
increased the export of French fashion goods and reduced the importing of
foreign fashion goods. Due to these policies and incentives France emerged
as the biggest supplier of luxury fashion goods in the world (Okonkwo, 2007,
p.22).
French magazines and newspapers were distributed throughout Europe
and helped grow Frances fashion influence, and the social structure of the
Baroque period led to the detachment of clothing from social class. Apparel
production was no longer restricted to made-to-measure, which led to
members of the middle class adopting similar styles of the upper-class
(Okonkwo, 2007, p.22). Pearls also became heavily used all over the body
as a way to advertise taste and status, the handbag also emerges has an
important accessory (Okonkwo, 2007, p.23).
While France was rising to become the center of fashion and lifestyle,
Italy’s influence on fashion was fading. The Palace of Versailles was now the
center of fashion and dictated fashion and lifestyle to the world. Known for
their splendor and opulence, the Palace of Versailles’ taste for luxury was
seen through the dress styles and fabrics made from very expensive
16
materials. Anyone that wanted to be recognized adopted the style that
emerged from the Palace. Palace fashion led to the creation of haute mode
high society fashion (Okonkwo, 2007, p.23).
During the 1770s fashion magazines began to emerge from France,
Germany, and England which aided in the emergence of English tailors, who
would go on to develop a highly stylish and original English men’s fashion
sector. Also around this time “fashionistas”, or fashion icons gained a
prominent role in fashion. The style of notable French women would be
copied throughout the world. These women included Madam Pompadour and
Marie Antoinette, and they changed clothes frequently causing several
women to go bankrupt attempting to imitate their style, much like women of
today of traded food and rent money for shoes coveted by fictional character
Carrie Bradshaw (Okonkwo, 2007, p.24).
17
The Nineteenth Century and Beyond
The nineteenth century marked the beginning of modern luxury and
was the launch of many of the luxury fashion houses that consumers covet
today, brands like Cartier (1847), Louis Vuitton (1854), and Burberry (1856)
(Okonkwo, 2007, p.25). Like periods before it, consumers of the nineteenth
century used a person outward appearance as an indicator of one’s wealth
and social status. Fashion was also being recognized as an important
contributor to economic growth (Okonkwo, 2007, p.25).
In France the government showed their support for the fashion and
textile industry through the creation of incentives and favorable policies. It is
also during this time that Paris rose as a world leader in textiles and fashion,
which was mostly segmented into two parts: dressmaking, which was mostly
controlled by highly influential women, and textile merchandizing and
professional tailoring, which was mostly controlled by men (Okonkwo, 2007,
p.25).
As mentioned before, the nineteenth century marked the opening of
some of the most coveted fashion houses of today, but it was in an
Englishmen by the name of Charles Fredrick Worth (1825-1895), that
changed the face of luxury and its marketing and merchandising style. The
inventor of haute couture in 1858, Worth was the first prominent male
couturier, and was the private designer of Napoleon’s wife, Empress Eugenie
and other high society women (Okonkwo, 2007, p.25).
18
Worth also influenced the way luxury fashion was marketed,
introducing models and private shows. He also utilized celebrities and
influential women of the time to publicize his creations. Along with new
marketing practices, Worth is credited with cutting the production time for
dressmaking in half, taking only one fitting to make a dress, instead of the
usual six (Okonkwo, 2007, p.26).
As European countries continued to make a name for themselves
within luxury fashion, America was becoming both an economic and cultural
influence. Although American’s widely adopted European fashion, during this
period, their own tastes began to emerge, especially during and after the
French Revolution. This lead to less imports of French fashion and a rise in
mass fashion, with Americans embracing Jeans, introduced by Levi Strauss,
and the casual fashion of native American women (Okonkwo, 2007, p.26).
19
Important Fashion Changes of the 19th Century
1. Fashion, both men and women became simple, understated, unadorned
and classic as a result of the mind progressiveness of the people.
2. The simple and functional English fashion style for women emerged as
a complement to the French elaborate and elegant style. Men also were
influenced by the English country style.
3. French Revolution acted as a catalyst for the move towards the
adoption of simplicity and more democracy in fashion as a sign of
modernity, especially in the 1780s.
4. The rise of the Victorian era from the 1820s to the middle of the
century also heralded the commencement of ready-to-wear as sewing
machines were introduced to everyday women.
Table Two
20
American Fashion
While the century before it marked the rise of European countries
within the world of fashion, the nineteenth century is where Americas
influence on global fashion begins. Opportunities within different sectors of
the industry become available, especially within New York. Due to extensive
travel Americans had developed sophisticated taste, and the introduction of
fashion magazines further feed their taste for European fashions. America’s
growing middle class and their increased wealth, continued to influence
fashion growth within the states, and the invention of the sewing machine
and paper dress patterns established a means of copying the styles of
Parisian and London women. Additional technology also leads to the rise of a
ready-to-wear market (Okonkwo, 2007, p.27).
As mentioned above, American’s still had a preference for French
fashion, and many imported their goods from France. The rest of society
relied on New York to produce “knock offs” or “copies” of French style. The
nineteenth century also ushered in high-end department store, like Macy’s,
and new ways to market fashion, such as decorative window displays and
trunk shows (Okonkwo, 2007, P.27).
21
Fashion and the Twentieth Century
The twentieth century ushered in the opening of such well known
fashion houses, like Chanel (1910), Vionnet (1912), Gucci, and Prada
(1913). We also see an expansion in product categories to include
accessories and cosmetics, with cosmetic giants Elizabeth Arden (1910) and
Coty, Inc. (1900) launching their businesses.
During the first World War, society’s view of luxury fashion shifted.
Due to the hardships endured during the war, consumers sought out
simplistic luxury goods over prewar extravagance. The post war era also
introduced us to popular youth culture that replaced the sorrows of the war
years. Movies gained popularity as an established, a valid, form of
entertainment. It’s during this time that movie stars begin to replace
aristocrats as fashion icons and influencers (Okonkwo, 2007, p.29). The
popularity of Hollywood celebrities greatly influenced the development of
fashion in the 1920s and 1930s.
As new designers Coco Chanel, Jeanna Lanvin, and Madam Vionett
rose to prominence, the fashion houses of Charles Worth and Paul Poiret
slowly died out. It’s also during this time that American fashion developed
within retailing and distribution through department stores versus Parisian
style boutiques. This made fashion more visible and accessible to the
growing American middle class (Okonkwo, 2007, p.30).
22
The Twentieth century also saw society’s wealthy dominate and
influence luxury fashion In a similar manner to the royalties of other eras.
The strict social structure provided major designers with a clientele
comprising royal family members in Europe, and the world’s wealthy. Like
todays luxury consumer, the leather goods and luggage of accessories
designers were in high demand by the aristocrats in Europe and beyond
(Okonkwo, 2007, p.30).
23
Intellectual Property Rights
“A great trademark is appropriate, dynamic, distinctive,
Memorable, and unique.”
- Primo Angeli
24
Trademark and Copyright laws: A History
Although counterfeits have only recently gained the attention of the
masses, in the past twenty years, they are nothing new. Modern luxury has
been copied since the late nineteenth and early twentieth century. In 1896
to combat cheap counterfeits of striped and checked canvas Louis Vuitton
trunks, Georges Vuitton created their iconic logo print of interlocking LVs and
Japanese floral symbols (Thomas, 2009, p.273).
During the Roman republic (100 b.c) the way a person gained
acceptance from the upper class, was to possess the thing that the upper
class possessed, that meant objects. The way luxury consumers of today
covet the Hermes Birkin bag; Romans felt the same about popular statues,
tables, and other home décor. Reproductions of well-known statues entered
the market, and provided those who couldn’t afford the real thing, a small
piece of luxury (Thomas, 2009, p.273).
During the middle ages the production of counterfeits increased, and
may have accounted for at least a large share of the market, as they do
today. Due to a lack of legal protection for intellectual property, the market
became oversaturated with low-quality counterfeits that were knowingly
being passed off as the real thing (Richardson, 2008). To distinguish
themselves from the counterfeiters, and to protect their product, medieval
craftsmen formed professional guilds that sold marked goods with seals of
quality approval, in addition to the craftsman’s personal stamps or
25
signatures. Guilds provided manufacturers and consumers with early form of
trademarking (Richardson, 2008, Thomas, 2009, p.272).
Trademarks are a symbol, word, or words legally registered or
established by use representing a company or product (“Trademarks”,
2005). Trademarks are used to distinguish and protect a company’s product
from competition ("Overview of trademark"). Companies trademark their
work and logos, to provide consumers with a guarantee of consistent quality.
The use of marks has been around as early as 500 b.c.e. Man has used
marks to designate ownership, sometimes as a property, sometimes as
manufacturers. It wasn’t until the rise of the Roman Empire that
documented economic use of trademarks is seen. Around the fourteenth
century, Baker’s Law, one of the earliest known trademark laws is passed in
England and around 1353, a statue is passed enabling merchants whose
goods had been counterfeited to provide evidence of ownership using marks
appearing on goods (U.S. trademark history). As time passed, trademark
laws became increasingly strict and manufacturers started involving the
courts in counterfeit disputes. One of the earliest cases, referring to the
improper use of trademarks, took place in England. Southern Vs. How,
involved a clothier making inferior cloth using the marks of a superior
clothier (U.S. trademark history).
26
Patents and trademarks initially rose during the fourteenth century in
Italy. Their use spread to industrial centers in the Low Countries during the
fifteenth century and England during the sixteenth century. The United
States didn’t adopt trademark laws until the 19th century, under the
recommendation of Thomas Jefferson, in the consideration of the request of
sailcloth manufacturers. In 1870 the United States passed federal trade
legislation, Averill Paints received a trademark under this law, becoming the
first modern trademark issued in the United States (U.S. trademark history).
Trademark Laws timeline
1876: Bass Brewery registers first trademark in the
U.K.
1887: Coca-Cola first used as trademark for tonic
beverage
1895: Quaker Registered as a trademark for oats
1957: Trademark laws enacted in France
1962: Trademark laws enacted in the U.K.
Table Three
27
Originally state common law provided the source for trademark
protection. Today trademarks are governed by both state and federal law,
Image Three & Image Four
and can extend beyond words, symbols, and phrases to include other
aspects of a product, such as color or packaging. The shape of a Coca-Cola
bottle or the color blue used by the Jeweler, Tiffany and Co., would fall
under the term “trade dress” and may be protected if consumers associate
the feature with a particular manufacturer rather than the product in
general. However the design features are not protected if they convey any
sort of functional or competitive advantage (“Overview of trademark”).
For a trademark to be protected it must contain the following: 1.) The
company claiming the rights to the mark must be the first to have used the
mark in commerce; or 2.) The company must be the first to register the
mark with the U.S. Patent and Trademark office. The use of marks in
commerce is only protected within a geographical area in which Its used, in
28
order to gain right to a mark; one must register with the Patent and
Trademark office, even if actual sales are limited to a certain area (U.S.
trademark history).
As the manufacturing and distribution of counterfeits rises, luxury
fashion brands depend on trademark laws to protect themselves from
infringement. Trademarks also carry an added advantage of advertising, as
trademarks also carry the reputation of the brand (Gosline, 2009). In today’s
market consumers use logo to brand themselves and define their status
within society, and companies use their logos and signatures to convey a
message about their brands. Like societies before ours, marks are used as a
status symbol and brand signatures like Louis Vuitton’s interlocking LVs and
Japanese floral symbols have come to represent wealth and upper class
status, creating a demand from lower classes looking to be a part of the
upper crust.
While Luxury brands are able to protect their logos and signs, their
designs are not protected under copyright or trademark law, in the United
States. Clothing is considered foremost as a Utilitarian item, not an artistic
expression or scientific invention (Wilson, 2006). Yet Designers argue that
the legal reason for excluding fashion from copyright protection – a 200 year
old idea that useful objects should be unregulated to encourage the growth
of industry- is outdated in an era of mass copying (Wilson. 2006). Designers
do not see a reason to be innovated, if their designs are just going to be
29
copied a matter of days after being introduced to the public. Others have
argued that there is no such thing as original designs, that designers are
influenced by designs of the past and have no claim to particular silhouettes
or styles. Designers go on “Shopping Trips” scouring vintage shops and little
known boutiques for inspiration, modifying designs of yesteryear, and in a
way participating in the practice they hope to make illegal.
30
Counterfeit Culture
“Ten years ago we said it wasn’t a problem that it was
Proof of our success.”
-
Marc-Antoine Jamet
31
Within the world of fashion copying is nothing new; designs trickle
down from the runways of high-end fashion houses to the mass market
(Betts, 2004).Designers once took pride in their work being copied, and
some designers of today are still flattered by their “imitators”, but
counterfeiting has grown up and is no longer viewed as “small time”, but as
a threat to luxury fashion.
Counterfeiting has morphed from a cottage industry to a multibilliondollar industry, and luxury fashion has started to put fourth efforts to stop,
or at least hinder, the spread of counterfeits. Today brands employ
extensive legal teams and private investigators, whose sole purpose is to
focus on intellectual property theft and to chase down leads on illegal
factories and checking out known counterfeit markets (Thomas,2009, p.277
,Balfour, Matlack, Barrett, Capell, Roberts, Wheatly, Symonds & Magnusson,
2006). What caused such a boom in counterfeits? According to Dana
Thomas, author of Deluxe: How Luxury Lost its Luster (2009, p.274), two
things changed the counterfeit game:
1.) The democratization of luxury
2.) The rise of China
32
When luxury brands went democratic they believed that by introducing
lower-priced items, like handbags and perfume, it would satisfy the middleclass craving for higher end goods. However companies didn’t expect the
middle-market consumer to turn to counterfeits, to satisfy their desire for
luxury goods. As middle-market consumers were snapping up fake versions
of popular luxury items, China was going through the process of
globalization, establishing a capitalist market economy and becoming the
world’s manufacturing center(Balfour, Matlack, Barrett, Capell, Roberts,
Wheatly, Symonds & Magnusson, 2006,Thomas, 2009, p.280-286). The
convergence of the two created a huge supply to meet the developing
demand for counterfeit goods.
As mentioned before, the growth of counterfeits over the past two decades
has been exponential and shows no sign of slowing down. As counterfeits
get more entrenched and more global, they will be increasingly hard to
eradicate (Betts, 2004). Coincidently, the same marks that have made
counterfeit luxury in such high demand are the same marks that help luxury
fashion brands get counterfeits off the market.
Designers are able to go after counterfeiters for trademark
infringement, most commonly on the basis of, “likelihood of confusion”, or if
the use of the trademark is connected with the sale of goods that are likely
to cause consumer confusion as the source of the goods or as the
sponsorship or approval of such goods (“Overview of trademark” ).
33
Unfortunately the enforcement of these trademark laws do not always rule in
favor of the luxury brands being copied.
According to Harvard Law School (“Overview of trademark”), when
deciding whether consumers are likely to be confused the courts will
typically look to a number of factors including:
1.) The strength of the mark
2.) The proximity of the goods
3.) The similarity of the marks
4.) Evidence of actual confusion
5.) The degree of caution exercised by the typical purchaser;
6.) Defendant’s intent
Although these standards are in place, there is little respect for trademark
laws, especially from Chinese counterfeiters.
Trade restrictions have loosened since Beijing joined the World Trade
Organization, in 2001, making it easier for Chinese manufacturers to escape
government scrutiny. Once goods hit U.S. soil, there are few penalties to
those caught selling counterfeits. More profitable than trafficking narcotics,
with much less risk, those convicted of counterfeiting get off practically scott
free, with a fine of a few thousand dollars and very little jail time (Balfour,
Matlack, Barrett, Capell, Roberts, Wheatly, Symonds & Magnusson, 2006).
It should be noted that although many counterfeiters are beating the
system, some luxury brands are getting justice, as some counterfeiters are
34
having to pay out major damages. According to Forbes, Federal Court of
Canada awarded a total of $2.5 million (CAD) to Louis Vuitton and coplaintiffs Burberry Limited and Burberry Canada LTD. The fashion houses
filed suit against Singga Enterprise, Inc. and Carnation Fashion Company,
both located in Burnaby B.C., Altec Productions located in Markham, Ontario,
and all respective owners, operators, importers, distributors, and online
sellers of each company. These companies were charged with the highest
punitive damages allowed for a counterfeit case, in Canada. Although the
Canadian courts chose such a severe punishment, in regards to
counterfeiting, the defendants still seemed to laugh in the faces of the courts
and plaintiffs. Even after the counterfeiters were charged, they continued
the importation and distribution of counterfeit goods through a newly formed
website (Elliot, 2011).
Cases like the one stated above are rare, especially within the United
States. In New York State, where counterfeits handbags and sunglasses can
be bought on almost every street corner, ninety-nine percent of those
caught selling counterfeits do not go to jail, as judges don’t have the laws to
sentence (Thomas, 2009, p. 292). With very little overhead the fines that
counterfeiters are ordered to pay, amount to very little of the profits made.
While luxury fashion attempts to make counterfeiting harder to manufacture
and distribute, they still must deal with distribution and manufacturing of
knockoffs and imitations. Many people use these terms when talking about
35
counterfeit goods, but in some countries like the United States,
knockoffs/imitations are different type of copying, one that is legally
protected (Gyben, 2011) Knockoffs are considered copies that don’t include
the label or other types of designer signatures (Gyben, 2011). In today’s
market luxury brands are plagued by fast fashion, and privately owned
boutiques, selling legally protected knockoffs of high-end handbags,
clothing, and other accessories. Proenza Schouler designers, Jack
McCollough and Lazaro Hernandez learned first-hand how vulnerable their
designs are.
Image five
Retail giant, Target, is accused of copying the designer duos “it” bag
The PS1. Target denies knocking off the messenger style bag, yet the two
bags host a variety of similarities (Gyben, 2011). This “loop hole” in the
legal system is often exploited to the advantage of counterfeiter; with many
altering the labels of their faked goods to get pass customs. The Signature
36
interlocking C’s of Chanel become O’s, with the help of a sticker rr Coaches
signature C becomes a signature G (Thomas, 2009, p.279).
Within other countries, including all of Europe and Japan, brands are
legally protected from knockoffs. The United States is one of the few
countries where knockoffs are legal. Here in America we are no strangers to
knock-offs or copying. In the 1930s, up until the 1960s, American
department stores attended Paris Couture shows and purchased original
patterns, which they would bring home and mass produce (Wilson, 2006).
Even first lady, and fashion icon, Jacqueline Kennedy had designers make
copies of French designs in order to maintain her loyalty to America’s
garment industry (Menkes, 2002).
37
Counterfeit Crimes
“There are hundreds of millions of hungry customers and hundreds
of thousands of very sophisticated entrepreneurs.”
- Moises Naim, editor of Foreign Policy magazine
38
Consumers see counterfeits as a victimless crime, because many are
unaware of whom they’re purchasing from. Authorities believe that much of
the money made from counterfeits, helps fund organized crime and
terroristic groups. Groups like Al Qaeda and Hezbollah are making money
trafficking consumer goods like, counterfeit Nikes, Sony products, and Calvin
Klein jeans. It is speculated that Al Qaeda used funds, from the sales of
counterfeits, to finance their organization and carry out terroristic attacks
("Officials: Counterfeits fund," 2003). Police Commissioner Raymond Kelly
believes that the group accused of the Madrid train bombing, in 2004, which
killed 191 people, used proceeds from the sale of counterfeit CDs to fund
their activities. It is also believed that counterfeit t-shirt sales financed the
bombing of the 1993 World Trade Center (2012).
A rise in the manufacturing and distribution, by terrorist groups and
organized crime rings, can be attributed to the attacks on New York, on
September 11, 2001. After the attacks, the United States responded by
forcefully shutting down terror financing sources ("Officials: Counterfeits
fund," 2003). This forced terrorist groups to look for other methods of
funding, turning to both legal and illegal entrepreneurial endeavors.
Counterfeits provide these groups with high profits, low overhead and
minimal punishment.
Before the recession began in 2007, the sales of counterfeits was
already high, but as the job and real estate market started to decline,
39
Counterfeiters saw an increase in sales of fake luxury handbags. In the
United Kingdom, British law firm Davenport Lyons found that two-thirds of
British consumers are proud to tell their friends and family that they
purchased fake luxury items (Thomas, 2007). In the United States,
consumers delight in the idea of purchasing fakes of high-end handbags and
accessories. Little do these consumers know that counterfeiting rackets are
run by crime syndicates that deal in, not only terrorism, but narcotics,
weapons, child prostitution, and human trafficking (Thomas, 2007)
Produced mainly in China, consumers also chose to turn a blind eye to
the fact that many counterfeits are made by children, many of who have
been sold or sent off by their families to work in clandestine factories that
produce counterfeit luxury goods. Dana Thomas has a first and account of
children being put to work in these factories (Thomas, 2007).
“On a warm winter afternoon in Guangzhou, I accompanied Chinese
police officers on a factory raid in a decrepit tenement. Inside we
found two dozen children, ages 8 to 13, gluing and sewing together
fake luxury-brand handbags. The police confiscated everything,
arrested the owner and sent the children out. Some punched their
timecards, hoping to still get paid. (The average Chinese factory
worker earns about $120 a month; the counterfeit factory worker
earns half that or less) As we made our way back to the police vans,
40
the children threw bottles and cans at us. They were now jobless and,
because the factory owner housed them, homeless. It was “Oliver
Twist” in the 21st century” (Thomas, 2007).
Profits from counterfeits have also funded the Shiite terrorist group,
Paramilitary organizations in Northern Ireland and FARC, and the
Revolutionary Armed Forces of Columbia ("Officials: Counterfeits fund,"
2003, Thomas, 2007, 2012).
Although much of the counterfeit goods are manufactured and
distributed from factories in China, many terrorist and paramilitary
organizations have gotten into the counterfeit game, through organized
retail crime, or ORC. ORC is often equated with petty theft, like shoplifting,
and is attractive to as it is classified as “property theft” and not a federal
crime (Prabhakar, 2012, p.11, 12). Organized retail crime carries a lesser
charge than an offense that would fall within the jurisdiction of major crimes
division. ORC can cost retailers an estimated $30 billion a year and states
lose billions more in sales taxes (Prabhakar, 2012, p.3) Communicating via
the internet, disposable cell phones, and social media, members of these
organized retail crime rings are able move stolen merchandise from store, to
website, to seemingly legit retailers within hours (Prabhakar, 2012, p.4).
As mentioned above, after 9/11 terrorist groups were faced with a
shortage of funds. These groups quickly became decentralized, creating
41
opportunity for subgroups to setup in unsuspecting areas like, Latin America,
Africa, South and Southeast Asia, and the United States. These subgroups
collect funds that support the main organization, but are left to make money
on their own, with little to no advisement. Many of these groups raised
money by increasing the trade of cocaine, kidnappings, and conducting
scams that duped donors out of money meant for charitable organizations
(Prabhakar, 2012, p.10).
After the economy started declining, and consumers began seeking out
deals that were even better than those offered by discount stores like WalMart and Target. With money being tight, consumers abandoned trusted
retailers, and buying fake or stolen goods started to sound like a good idea.
The least detectable way for these groups to make money, ORC funds
weapons, fake visas and passports, and paramilitary equipment (Prabhakar,
2012, p.12).
Counterfeiting is a difficult trade to control, as long as there is a
consumer demand for high-end goods, there will always be a market for
counterfeits. In a perfect world brands would have full control of their
distribution and pricing, they would also be in a position to maintain their
brand equity. But this is not a perfect world and luxury brands must contend
with their products migrating into undesirable distribution channels that are
both illegal and legit.
42
“In Italy, you can find the quality leather that you need and the quality
workmanship. In Milan, taking the product, taking it to pieces, laying it
out, copying it piece by piece, makes the copies. It’s quality that
allows them to sell for a higher price. Today a good quality knockoff
sells for $1,000” (Phillip, 2005).
With increasing demand for higher margins and lower prices, many
brands have outsourced the manufacturing of goods to developing countries,
where labor and production costs are much lower. Asia has become the top
location for low cost manufacturing and is where 80% of all seized
counterfeits come from (Whitwell, 2012). The global trail of fake goods
generally begins in workshops located in the Chinese provinces of
Guangdong, near Hong Kong, and Zhejiang, south of Shanghai. Both regions
are centers for the legitimate manufacturing of leather goods, making
obtaining raw materials and other supplies relatively easy. With China’s
Dramatic expansion, comes an already established supply chain that
stretches all the way to U.S. design schools (Betts, 2004).
“They read Women’s Wear Daily; their kids go to FIT (The Fashion
Institute of Technology). When someone comes out with a new range,
it’s already being copied” says anti-counterfeiting investigator Andrew
Oberfeldt (Phillip, 2005).
43
A quarter of China’s non-farming workforce, around 35 million people,
are engaged in the production of counterfeits, many working “ghost” shifts in
which factories produce two shifts of legitimate items but stay overnight to
produce counterfeits goods, that ultimately find their way into the grey
market (Fox, 2008).
The production of legitimate goods, like Coach handbags, in countries
like China and India, has exposed luxury brands to the grey market. Grey
good are authentic products that find their way into non-authorized retail
distribution outlets, which are beyond the control of the brand owner
(Whitwell, 2012). These outlets range from street vendors to mainstream
retailers, like Marshall’s and T.J. Maxx. Grey goods are usually produced by
legitimate manufacturers who run extra, unauthorized shifts, and sell out the
back door, usually sold at a steep discount, compared to that of the
authentic manufacturer (Balfour, Matlack, Barrett, Capell, Roberts, Wheatly,
Symonds & Magnusson, 2006).
The most disastrous of distribution channels, is the black market. Here
is where we find unauthentic goods, sold in unauthorized channels (Whitwell,
2012). With such easy access to raw materials, and experienced
manufacturers, China has become skilled at producing nearly perfect fakes.
Discount retailer like Sam’s Club and Daffy’s, have been duped into
purchasing high-quality fakes (Betts, 2004) China’s counterfeiters have
developed a classification system for their counterfeits. Bags that are
44
virtually indistinguishable, sometimes better, than the real thing are
classified as grade AA. These counterfeits are exclusively exported in the
west, though lower quality grade A or B counterfeits do make their way into
sidewalk stalls within the United States (Betts, 2004).
Chinese manufacturer of counterfeits are often some of the same
producers of brand name goods. Calloway Golf Co. has found that many
counterfeiters use the same machines as legitimate manufacturers, as well
as utilize three-dimensional printers and design software to produce high
quality counterfeits quickly and cheaply. The use of new technologies has
also made reverse engineering, or the working backward from the completed
product to discover what elements went into making the product, a piece of
cake. Counterfeiters have also mastered duplicating holograms, “smart”
chips, and other security devices intended to distinguish fakes from the
originals (Balfour, Matlack, Barrett, Capell, Roberts, Wheatly, Symonds &
Magnusson, 2006).
45
Counterfeit Grading System
As mentioned above, not all counterfeits are created equal, and the
difference in price points provides evidence of their differences. Counterfeit,
or replicas as they are often referred as by counterfeit dealers, are available
in a variety of Grades that are representative of their overall quality and
craftsmanship.
On average most counterfeit consumers purchase grades A, AA, or
AAA counterfeit goods. Generally grade A counterfeits feature common
craftsmanship and various flaws, they are also priced low. Manufacturers of
grade A goods are focused on the quantity of product produced, versus the
quality. Quick profit and high turnaround is the biggest concern of
manufacturers who produce grade A counterfeits.
In contrast, grade AAA counterfeits feature top quality material
interiors and exteriors. Manufacturers pay close attention to hardware, using
metal, not plastic. Counterfeits of this grade also have protective features,
like metal feet.
This section will continue to outline the different counterfeit grades, as
well as explain their differences. Information in this section was sourced
from blog site dedicated to “replica” handbags, specifically Louis Vuitton,
called www.ithandbag.blogspot.com.
46
Grade B/AB
Counterfeits of this grade are of the poorest quality. These counterfeits
lack similarities to the genuine product, except for the logo. Counterfeits of
this grade are usually of a generic design, not found within the copied
designers collections. They feature an extremely low price tag and can
mostly be found at street markets. At casual glance it is easy to identify
these low grade counterfeits, as they are manufactured quickly and made of
the lowest quality fabrics and hardware.
Grade A
As stated before, counterfeits of this grade are what counterfeit
consumers generally purchase. Counterfeits within this grade are of medium
quality, elegant in texture, and soft to the touch, when compared to grades
B/AB. Craftsmanship for this grade is mediocre at best, but the packaging is
slightly better than that of B/AB counterfeits. The overall quality is Mediocre,
though this grade will hold up over time. However, it will not age the way
the genuine product does (i.e. A Louis Vuitton counterfeit will not tan the
same as the genuine.) Leather goods of this grade, are usually made of fake
leather, common fabrics, and fair quality hardware.
Also referred to as grade AA, good boosting this grade is made of
better than average quality. Their texture is fairly nice, as well as the
handcrafts and details. In terms of handbags, they feel up market, and are
generally created using solid fabrics. Handbags and other leather accessories
47
are made using top layer leather, whose color won’t change overtime.
Hardware is generally made of common quality materials.
Grade Ultra A
Counterfeits that fall under this grade may also be referred to as grade
AAA. This classification is most often used to classify counterfeit Louis
Vuitton goods. AAA counterfeits are made from imported cow leather, whose
color will tan after some use, or when wet. They are sophisticatedly made
and are almost identical to the genuine product. Grade AAA counterfeits are
generally made up of top quality solid fabrics and imported leather. They
also feature YKK zippers and quality hardware.
Generally counterfeit dealers to classify handbags and other counterfeit
accessories using these grades. Sometimes these grades are used to classify
electronics like, headphones and cell phones. Counterfeit designer watches
are similarly classified, using four different levels. The four levels are as
follows (Lin, 2011, p.33):
1. B-Level: The most common and visibly distinguishable from a genuine
high-end watch
2. A-Level: Not easily distinguishable from the genuine product. The
interior materials are of poor quality, with easily torn interior fibers, as
well as easily broken clasps.
48
3. AA-Level: Similar to an A-level product, but of better quality
4. Super A-Level: An exact detailed copy of the genuine item.
The manufacturing of designer watchers, like Rolexes, is a surprising
one. Counterfeiters purchase lower priced Rolex models, and disassemble
them. The exterior is then affixed with faked diamonds and the watch is
passed off as a higher priced model. The leftover genuine Rolex case is then
used to house a counterfeit Rolex (Lin, 2011, p.33).
As counterfeits are being made from better quality fabrics and have
craftsmanship that rival that of genuine luxury goods, can you truly
distinguish between quality counterfeits and real luxury products. According
Yi-Chieh Jessica Lin, author of Fake Stuff: China and the Rise of
Counterfeit Goods, there is no difference between high quality counterfeits
imitations and real Coach product, and to identify a real vs. counterfeit Fendi
bag a difference in stitching, hardware, and leather accents should be
observed. There should be no loose or missing stiches, that are evenly
spaced, and the thread color will match the main color of the bag. The Fendi
logo should also be engraved not printed (Lin, 2011, p.33).
Gucci also has similar identifiers, front curves of a real Gucci bag
should be exactly the same as the picture on the Gucci official website.
49
Differences in dust covers, colors, and stitching should also be observed
when identifying genuine Gucci vs. counterfeits (Lin, 2011, p.33).
Some brands like COACH and Fendi use authenticity cards to assist in
the identification of counterfeit goods. These cards mark authentic products
and usually feature the manufacturer’s logo, embossed on the front, and
have no grammatical or spelling errors. The card also host information about
the product and will sometimes have a magnetic strip or barcode (Lin, 2011,
p.34). According to a customer service representative from Louis Vuitton,
the often counterfeited brand identifies genuine products by the outlet in
which it was purchased and receipts. According to the representative, no
RFID tags or authenticity cards are used. However many bloggers and
vintage luxury dealers dispute this claim. Owner of Vintage heirloom, a
dealer in vintage luxury goods, explains, via youtube, that there are many
ways to identify real Louis Vuitton from the many fakes that are flooding the
market.
Louis Vuitton’s Speedy bag is one of the most popular and often
counterfeited bags on the market. Created during the 1960s, the speedy
comes in four different sizes: Speedy 25, Speedy 35, Speedy 40, and
Speedy 45, so named for the width of each bag. To identify a genuine
speedy versus a counterfeit, one can start with patented monogram. The
monogram should start asymmetrically and the L, in the LV logo, should sit
at the bottom of the logo with the V slightly above. After the LV logo, there
50
should be a pattern of fleur-di-lis style flower, circle, and fleur-di-lis style
flower. Going across the bag should be a pattern of inverse fleur-di-lis,
circle, and inverse fleur-di-lis. The pattern should also be symmetrical, for
example if one corner starts with half a fleur-di-lis the pattern should end
with half a fleur-di-lis. This should occur at any point of the bag including
across. The top of the pattern at the top of the bag should be a mirror image
(Heirloom, 2012).
Another way to identify a genuine Louis Vuitton Speedy bag is to look
for the upside down LV symbols. The Speedy is made from one continuous
piece of coated canvas, thus the back side of the bag will feature upside
down LVs. The bag will also be free of bottom seams. The handles are also a
good way to distinguish real from the fake. The stitching will be mustard
yellow and, not the bright gold found on most counterfeits. The handles also
start out a pale beige color and will darken over time. The edges of the
handle will be a Burgundy red that will also darken over time. A counterfeit
will feature a more lipstick red edge that never fades. The hardware will also
be brass plated and will slightly oxidize over time, causing a slight green tint
to form along the edge of the rivets (Heirloom, 2012).
Although I was told that the only way to identify a real Louis Vuitton
bag is by where it was bought, Louis Vuitton does employ a date coding
system. Located behind the pocket on the backside of the handle, the stamp
features a combination of letters and numbers. The letters represent the
51
product’s country of origin, France, USA, Spain, Germany, or Italy, and the
numbers represent the date and year in which the item was made. The 1st
and 3rd numbers, represent the month, the 2nd and 4th number represent the
year (Heirloom, 2012).
52
Methodology and Fieldwork
53
Studying counterfeits and their effect on the luxury market possess
some methodological challenges. Because counterfeiting is a relatively
“underground” industry, it’s difficult to find concrete statistical evidence, that
truly measure consumer perception on counterfeits and how that perception
affects the luxury market.
Most luxury brands are secretive about their dealings with the
counterfeit market, and release very little information on how to identify
genuine product from counterfeit, or how they track counterfeit. Also the
values placed on both counterfeit and luxury goods, are subjective and vary
from consumer to consumer. This makes it difficult to capture quantitative
data with a focus on consumer perspective.
In order to obtain meaningful data, qualitative research is needed. Due
to the lack of time and finances, traveling to New York’s Canal street or
China’s Shanghai market, and other counterfeit markets was out of the
question. Not being able to travel hindered my ability to obtain first-hand
observations and knowledge of counterfeit vendors and manufacturers.
Archival research from news articles, professional thesis, internet
sources, and books were used to gain insight within the counterfeit industry,
as well as a glimpse into consumer perception of these markets. To get a
more rounded judgment of consumer perceptions interviews were
conducted, with the both luxury and counterfeit consumers. Each consumer
was asked to participate in a short survey and was also asked a series of
54
interview questions to better understand the value put on counterfeits and
luxury goods, but each consumer.
An attempt was made to speak with employees of some of the top,
and most counterfeited, luxury brands. While some information was given,
most employees were not allowed to provide much information, for legal
reasons.
55
Meaning of Counterfeits
How Social Distinction Shaped the Counterfeit Consumer
56
Taste is defined as an individual’s personal and cultural pattern of
choice and preference (Taste (sociology), 2013). How one presents themself
to the public, from the car you drive, the books and magazines you read,
and the clothes you wear, others can interpret all as information about your
status (Gosline, 2009). The social theory of taste draws distinctions between
social groups, marking both high and low social classes, by examining how
taste reflects and affects the symbolic boundaries that categorize competing
social groups (Gosline, 2009). According to MIT Professor Renee Richardson
Gosline (2009), the taste of dominate groups are legitimized as superior,
and become symbolic of the advantages of good taste, and the barriers
towards groups with lower cultural capital, or the non-financial social assets
that promote social mobility beyond economic means (Taste (sociology),
2013). The concept helps explain societies fascination with high status
brands, as they assist consumers in presenting a positive image to the
public.
The desire for positive self-presentation leads consumers to adopt
counterfeit goods in the hopes of being perceived as having good taste and
acceptance into higher status society, all while avoiding the high price tag.
But how effective is the adoption of counterfeits, as a means of crossing
social barriers? Is carrying the “It” bag of the season all it takes to be
perceived as a member of high society?
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Gosline (2009) argues that there are three pertinent theories of taste,
Distinction, Democratization, and Omnivorism. The theory of distinction
rejects the notion that taste is the result of innate, individualistic choices of
human intellect (Allen & Anderson, 1994). Instead the theory of distinction
argues that taste is socially conditioned, internalized at early age, and is
used as a “Social Weapon” that defines and marks social hierarchy (Allen &
Anderson, 1994). The theory of democratization argues that social
boundaries are easily crossed and are starting to disappear, allowing for
different classes to have access to symbols that were once only available to
the social elite (Gosline, 2009, Elliot, 2012). Lastly omnivorism argues that
only high status groups are able to partake in an array of taste across the
status hierarchy, allowing them to strategically coordinate with an ultimately
dominate lower status groups (Gosline, 2009).
The Theory of Distinction
French sociologist Pierre Bourdieu argues that the elite are trained to
have certain taste that guide them towards their appropriate social positions,
and distinguishes them from lower status groups, The elite are trained at an
early age to adopt particular social and consumer behaviors (Allen &
Anderson, 1994). Gosline (2009) believes that status-based exclusion is a
hallmark of distinction. Man has an innate instinct to emulate others and the
exclusion that distinguishes the high from the low, leads to the consumption
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of counterfeit. Counterfeit consumers hope that by purchasing fake version
of the high status goods, they’ll be able to cross social barriers. However,
while the counterfeit consumer is attempting to fake their way into a higher
social class, they’re actually solidifying the social barriers, by validating the
taste of the elite (Gosline, 2009). Although lower status consumers may
have the means to obtain symbols of high status, under the theory of
distinction it’s unlikely that they’ll ever be fully accepted as a member of
high society. To be a member of the socially elite you must be born from
socially elite parents, the taste and behaviors of high society must be
something you’re born with. So while you may mirror the taste of the elite,
you cannot buy your way into their favor. Railroad magnet William
Vanderbilt is a good example of distinction at work. In 1880 he attempted to
purchase one of 18 coveted boxes at the New York Academy of Music,
offering $30,000. Vanderbilt represented new money and to the old families
who controlled the academy, his attempt to buy his way into a place
reserved for them was considered a crass affront to their dignity (Elliot,
2012).
The high status consumers use of symbols as a means of distinction,
may also lead them to turn away from brands that are being appropriated by
lower status consumers, regardless of if they are real or counterfeit, as they
may believe that brand value maybe tarnished. If this is true, then as high
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status consumers turn away from certain brands, the allure of the brand also
diminishes with lower status groups (Gosline, 2009).
Democratization
The fashion world is all a buzz when it comes to democratization. The
theory of democratization separates taste and class, while arguing that taste
is not ingrained with superior taste, but prefer high status goods for the
same reason that their lower status counterparts do, because they’re well
made, have high value, and well…. are pretty (Gosline, 2009). In a
democratized society, social barriers are easily crossed, and though social
classes still exist, objects do not define them.
Fashion itself is democratized, now high status brands have been
made available to all, through diffusion lines sold at fast fashion retailers,
such as Forever 21 and H&M, and the advent of social media everyone,
regardless of class, has access to some form of high status goods. With
these goods readily available across all classes, consumers no longer
purchase high status goods as a means to validate status, but instead for
their value. Within this theory, counterfeits would serve as a substitute for
the brand, but not as a means to extend one’s status. This would also mean
that the meaning behind the authentic brand would be would be
undermined, making the counterfeits virtually the same thing as the genuine
product (Gosline, 2009, Thomas, 2007).
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Omnivore
A new kind of elite is emerging one that is classified as culturally
omnivore. The omnivore perspective retains the notion of dominate status
groups, as seen with the theory of distinction, but rejects the idea that high
status consumers only consume high status goods (Gosline, 2009). This
theory argues that social capital is more important and that the uppermiddle class have ties with lower status groups, these ties make fitting in, or
coordinating, an important goal (Gosline, 2009).
Cultural omnivores embrace diversity and cultivate tastes that provide
common ground with other status groups (Elliot, 2012). High status
consumers are not distinguished by their consumption of high status goods
alone, but instead by their social background, which is expansive, unlike
lower status groups that are likely to have singular or limited taste. It could
be said that to have exclusive taste is sign of lower social status. The elite
are defined by the diversity of their cultural and social networks. This would
cause upper middle class consumers to shun counterfeit goods, as they are
not interested in using brands to prove their social dominance. Under the
omnivore theory, the elite consumer’s goal is to achieve the same results as
distinction, but through more down to earth means. The new elite is wants
to be perceived as open minded and seek to capture the prestige of luxury
brands, but without the flash of logos. This is very different from lower
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status consumers who will purchase counterfeits featuring popular logos, as
a means to show off and be perceived as high status (Gosline, 2009).
These three theories work simultaneously within the counterfeit
market. Each come into play depending on the market in which counterfeits
are being purchased. If purchased from a street vendor or through the social
comforts of home, the counterfeit consumer will have different buying
behaviors, as well as the affect their perception of counterfeits vs. genuine
luxury brands (Gosline, 2009).
Counterfeit Consumer
As the world tries to pull itself out of a recession, the economic decline
may have fueled the rise in counterfeit buyers. While the “super” rich
continue to spend money on luxury goods, “aspirational” middle-class buyers
are feeling the squeeze. Consumers on a budget are now trading down, from
authentic luxury to counterfeits. While many would view this as bad thing,
there may be a silver lining.
Luxuries, or status goods, are goods for which the mere display of a
particular branded product brings prestige on the owner, apart from any
functional utility. The global luxury fashion sector is estimated to be worth
$130 billion and is the fourth largest revenue generator in France. Within
Italy, Spain, the United States, as well as in emerging markets like China
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and India, luxury fashion is one of the prominent economic sectors
(Okonkwo, 2007, p. 1)
Types of Counterfeit Activity
Deceptive Counterfeiting: The production of copies that are identically
packaged, including trademarks and labeling, copied so as to seem to a
consumer the genuine article.
Piracy or Non-deceptive Counterfeits: Counterfeit product’s intention is not
to deceive the consumer. The consumer is aware that the product she is buying
is counterfeit.
Imitation: Are similar in substance, name, shape, and color to look like the
original. Designed to look like and make you think of the original brand.
Grey Market: The unauthorized sale of garment production overruns by
legitimately contracted manufacturers.
Custom-made Copies: Replicas of trademark designs of branded products
made by legitimate craftsmen. Raw materials are usually if good quality.
Table four
With a heavy emphasis on design and creativity, Uche Okonkwo (2007, p.
11). describes luxury brands possess the following core characteristics:
1. Brand Strength
2. Innovation
3. Differentiation
4. Exclusivity
5. Premium Pricing
6. High Quality
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7. Product craftsmanship and precision
Along with rarity, these characteristics are what keep luxury goods in high
demand, among all income levels. Consumers use luxury goods as a way to
communicate meaning about themselves, to convey worth, status, and
sophistication. Frequently the status label or image associated with a luxury
product is valued more than the product itself. The functionality of the
product becomes secondary, as long as the item provides the consumer with
a sense of self-worth and importance (Gosline, 2009).
Today’s luxury consumer is harder to describe than luxury consumers
of the past, as they no longer exclusively wear a brand from head to toe.
Instead they now mix and match brands that are both high and low end.
However Uche Okonkwo, author of Luxury Fashion Branding (2007, p. 65),
states that current luxury consumers are highly sophisticated and brand
literate. They are fashionable and aware of their taste and preferences. Their
choices of luxury products are based more on understanding of their own
style needs and less on the “brand-name” factor. The average counterfeit
consumer is the polar opposite of true luxury consumers. They are more
focused on labels and logos, versus purchasing items that fit their style
needs and are of good quality.
Most companies believe that counterfeits cannibalize their brand,
stealing customers from them. The fact is, generally consumers of
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counterfeit luxury are not in the position to buy the authentic product, thus
the luxury brand is not losing a customer, but they do gain an “aspirational”
buyer. Research has found that most counterfeit consumers would prefer to
own the real thing, and as their economic conditions change, they will
purchase the original (Whitwell, 2012).
Counterfeits provide consumers, who cannot afford to purchase the
authentic brand, with a way to fulfill the dream that luxury brands portray in
their advertising and promotion. Consumers of counterfeits, find them to be
fun and harmless (Nia & Zaichkowsky, 2000), and some high-end retailer,
like Bergdorf-Goodman, the vendors who sell them to be a nuisance but not
a threat. Robert Burke, a vice president at Bergdorf-Goodman says about
counterfeit street vendors (Rozhon & Thorner, 2005):
“It’s hardly going to impact our Manolo business….No; the biggest
problem is navigating around them”
Although Luxury retailers may not be affected by the sale of counterfeits,
discount and novelty retailers are possibly feeling the effects of counterfeit
consumption. The quality of these retailers products are on par with the
majority of luxury counterfeits, sold by street vendors and in back alleys.
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The Counterfeit Social Network
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In the past decade a new network of counterfeit distribution has risen
in popularity. A clear contrast from seedy back alley shops and street
vendors, in-home purse parties provide consumers with a more comfortable,
and social atmosphere, in which to browse and purchase fake luxury
handbags and accessories. Hosted by a friends and family, guest are
introduced to an on-site vendor and encouraged to enjoy refreshments.
These vendors are usually local middle-class women who order products
from Chinatown. In professors Gosline’s research (2009), she found that
attendees of these parties are almost all white middle and upper class
women ranging in age from 24 to 72 (but mostly in their late 30’s and early
40’s).
The merchandise sold during these parties are sold at a higher
percent, than counterfeits sold from street vendors, yet it is unspoken rule
that haggling is not permitted. Like many parties similar to these, attendees
usually feel obligated to purchase at least one item, as not to appear rude or
ungrateful for the invitation and hospitality. Yet Gosline (2009) found that
unlike the counterfeit consumers who visit street vendors, there is no strong
demand for the brands sold at these parties, prior to attending the party.
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The consumers first purchase has little to do with the brand, but with the
sense of obligation and social norms, within their circle of friends.
Many attendees held a negative view of counterfeits, but felt that they
were not shallow enough or had better uses for their money, than to
purchase authentic brands. While they knew about luxury items, and for the
most part could afford them, they had no real desire for luxury brands.
However, after purchasing the counterfeit version of a luxury brand,
attendee’s interest in luxury brands increased, and they grew attached to
the brand (Gosline, 2009). Through the consumption of counterfeits
attendees of purse parties, became aspirational customers. Forming
relationships with brands they initially had no interest in.
Yet these new aspirational consumers still feel tension about whom
they believed themselves to be, someone above the consumption of luxury
items, versus how they feel about their counterfeit luxury purchase. They
enjoy the compliments and praise received because of their fake bag’s
branding, but feel the urge to tell people that their luxury purchase is fake.
Self-presentation concerns causes consumers to feel compelled to admit that
their possessions where counterfeit (Gosline, 2009).
Because these consumers feel compelled to admit that their luxury
items are counterfeits, they are constantly reminded that they’re carrying
fake versions of brands, which they are forming relationships with. They are
cultivating a desire for luxury brands and the counterfeit Louis Vuitton on
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their arm is no longer satisfying. As their fake purchase begins to fray and
show it’s true inferior quality, the desire for the authentic product increases
further, especially since consumers view their possessions as an extension of
themselves. In fact Gosline (2009) found that 40% of the purse party
consumers she interviewed, upgrade to the authentic product within 2 years.
These purse parties, while still illegal, actually aids in creating
aspirational buyers for higher end brands. Placed in a comfortable setting,
men and women, with the means to purchase high-end goods but not the
interest, will most likely purchase at least one counterfeit item. Over time
these users will grow attached to and at some point upgrade to the more
socially acceptable authentic luxury item, leaving counterfeits behind.
These parties allow consumers to sample and experience luxury
brands. Generally these women know that they are purchasing fake goods,
whose quality is inferior to that of the real thing, thus they do not expect to
receive the same results as the authentic item. This helps safeguard a luxury
brand’s equity and preserves their status in the mind of true authentic
consumers.
Amid weak economic growth, consumer spending in the U.S. continues
to be down. Yet handbag companies, like mass luxury retailers Coach and
Michael Kors, continue to beat estimates quarter after quarter. This is in part
due to the fact that handbags are one luxury women are still willing to buy
(Timberlake, 2012).
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According to Accessories Magazine (Via Bloomberg), in recent years,
women have switched their spending from clothes to handbags, which last
longer, can be worn more often, and doesn’t have to fit. In 2011, Americans
spent $8.5 billion on handbags (Timberlake, 2012). While handbag sales
continue to grow, so does the sale of counterfeits. While mass luxury brands
are more obtainable to the middle-class consumer, brands like Louis Vuitton,
Fendi, Hermes, and Prada are just out of reach. As unemployment rates
remain around 8 percent, the same since 2009 (“Labor Force Statistics”,
2013), consumer confidence is on the decline, and consumers are watching
what they spend.
While many consumers have turned to counterfeits to get their luxury
fix, many are turning too more legitimized ways of obtaining a piece of
luxury. Companies like Bag, Borrow, or Steal and Rent the Runway have
been popping up over the past decade. These companies give consumers the
opportunity to rent luxury fashions by the likes of Chanel, Gucci, Prada, and
Louis Vuitton. These companies guarantee that the luxury items available for
rent are 100 percent authentic and posse the superior quality and
craftsmanship one would expect from luxury manufacturers ("Bag, borrow,
steal," "Rent the runway,")
Depending on the company, consumers can rent handbags, clothing,
jewelry and other accessories for around $29 a month, for small jewelry
pieces, and $500 a month for large leather goods and designer gowns. This
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new business model allows consumers to rent designer fashions, as if they
were renting a DVD. Once done with their item(s) of choice, the item is
mailed back to the rental company and most likely exchanged for another
("Bag, borrow, steal,").
Today’s consumer not only values a deal, but also convenience. The
Luxury rental business model provides consumers with both of these
benefits. Rental companies also give the aspirational consumer a chance to
possess a piece of luxury, even if for a short period of time. Yet it can be
argued that unlike purchasing counterfeits, renting luxury items may provide
very little benefits to luxury businesses, but also are not worth the cost to
consumers.
As previously mentioned, nearly half of all consumers of counterfeit
luxury grow attached to their purchases and soon seek out and purchase the
real thing. While it’s true that renting luxury is a way to deter counterfeit
consumption, the life cycle of renting a bag may prove to be a problem.
People who purchase counterfeits find themselves accustom to have the faux
products in their lives. They become familiar with, and identify with, the
brand their counterfeit item is imitating. Renting runs the risk of not
providing customers with this feeling. While renting luxury goods would
provide consumers with a feeling of joy, excitement, and exclusivity, it’s only
for a short period of time. Renting does not provide consumers with the
adequate amount of time to grow attached to, and identify with the brands
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they’ve chosen to rent. This may hinder the consumers desire to “trade up”
and eventually purchase genuine luxury goods. While renting is a legitimate
avenue for consumers to possess luxury goods, compared to counterfeits,
renting is not a strong entry point for consumers, thus have little benefit to
the designers and manufacturers.
Renting may also not be as cost effective as one would like to believe.
Assuming a consumer chooses an accessory that rents for $125 a month,
and she decides to keep the accessory for a full year, she’s spending $1,500,
not including shipping and handling fees. At that price our consumer could
have purchased multiple high grade counterfeits or even the real thing.
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Counterfeit Consumption
“ If you shop on the street, you know it’s not real, you know
it’s going to fall apart, that it’s disposable. You’re buying it for the
fun of it.”
- Marshal Cohen, Chief Retail analyst
for the NPD Group
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It’s believed that counterfeits dilute the product value and brand
equity, but in the case of counterfeit luxury goods, the majority of
consumers know that their products are fakes. It is very rare for luxury
counterfeits to be sold deceptively. Deceptive counterfeiting is mainly
observed in markets for automotive parts, consumer electronics,
pharmaceuticals, and medical devices (Nia & Zaichkowsky, 2000).
Counterfeit vendors of luxury goods believe that their business is not
unlawful or wrong because the people purchasing from them, are fully aware
that are buying counterfeit products. This practice of non-deceptive
counterfeits helps to not dilute the copied brand because consumers are not
expecting to receive high quality fakes that can stand the test of time. Most
expect their counterfeit purchases to last the cycle of a season and don’t feel
ripped off or look down on the authentic brand because their fake items are
no longer functions as new. However, if someone were to receive a
counterfeit luxury product as a gift without their knowledge, than there may
be a shift in how the consumer values that luxury brand and its products.
Renee Richardson Gosline’s research (2009) on how authentic luxury
consumers view counterfeit luxury, and its consumers, found that authentic
consumers were not detoured by counterfeits. She found that a consumer’s
willingness to pay for a brand varied with their confidence in their ability to
identify legitimate consumer of luxury, versus their imitators. She also found
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that when faced with the adoption of luxury brands, by non-authentic
consumers, authentic consumers redefined the symbolic boundaries such
that legitimate consumption is based on arcane knowledge and style usage,
regardless of whether the item is real or not. This research proves that
luxury brands are able to preserve their brand equity as long as its
consumers believe that they can distinguish the real thing, from the fakes,
and if they can be distinguished from counterfeit consumers, by their
consumption practices (Gosline, 2009).
Brands are working to maintain their status, as true authentic
consumers, will develop new ways to determine authenticity and not
recognize the legitimacy of consumers that do not fit the brand image. In
other words, if a counterfeit consumer were to find the means to purchase
authentic brands, they would be considered outcast, or wannabes, to “true”
authentic consumers and not accepted socially as part of the luxury
consumer tribe (Gosline, 2009). So as they try to seek inclusion to a higher
social class, they are excluded, and sometimes pitied, based on how they
consume the product. As long as “real” luxury consumers believe they can
tell the difference between fakes and authentic products, based on social
cues, luxury brands should not experience brand contamination or see a
drop in how their product is valued (Gosline, 2009).
Counterfeits play a part in forcing luxury brands to provide innovative
product to their existing customer base. Much of counterfeit merchandise is
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heavily branded, featuring the logos and signatures of popular luxury
brands. To combat this trend and maintain their authentic consumers, luxury
brands have been forced to produce innovate product lines, which include
products that lack popular logos, signatures, or trademarks. Brands like
Gucci have moved away from showcasing their heavily logoed bags, which
are highly favored by counterfeiters, instead putting greater emphasis on
handbags and accessories that boast high design and little branding.
Luxury brands have also had to find creative ways to provide their
consumer with new luxury experiences. This includes personalization,
personal shoppers, and special events. By doing this brands are giving
authentic consumers ways to form deeper relationships with their brand, and
increasing brand loyalty. Luxury brands are also able to retain their core
consumers, due to the fact that counterfeits usually hit the streets a season
behind the brands that they imitate. This allows for authentic consumer to
maintain their fashion forward position, and does not compromise the sales
of luxury brands (Gosline, 2009).
Authentic luxury consumers desire to be recognized, respected, and
appreciated by the luxury brands that they purchase. They also desire to
stand out from the consumers of fake luxury brands, customized and
personalized goods would allow luxury brands to fulfill this need of their
consumer. Customization is the adaption of goods and services according to
individual customer needs (Okonkwo, 2007, p.249). Personalization is
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different from customization, as it involves the adaption of either existing or
yet-to-be produced goods to particular individual demands (Okonkwo, 2007,
p.249).
Customization currently exists within the luxury market, but is
provided at a narrow level, to select group of consumer. Many brands have
yet to adopt customization on a broad level.
Brands like Louis Vuitton do offer a small selection of personalized items that
can be monogramed. Their Mon Monogram program allows consumers to
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select their preferred bag, select two colors for the stripe, and their initials,
(see above image) (“Louis Vuitton”).
Brands are missing out on the opportunity to really learn who their
customers are and design products that, not only meets, but also exceeds
the expectations of consumers. By establishing a broad level of
customization or personalization, luxury brands would be able to gain a
competitive edge on their competition, including counterfeits. Consumers
would have an outlet to help them stand out amongst the “wannabes” who
consume counterfeit luxury goods. Counterfeiters would not be able to keep
up with the production of customized goods, nor would they truly be able to
provide counterfeit consumers with the same services. Customization would
cater to the individual taste of authentic consumers and allow them to flex
their style, the way no counterfeit vendor ever could.
Customization would make all authentic consumers feel like VIPs,
ushering in a sense of exclusivity. All these factors would increase customer
satisfaction and create a deeper customer relationship with a brand, thus
increasing brand loyalty. If authentic luxury consumers remain satisfied and
are made to feel like they are still part of an elite group, luxury brands will
not be faced with a decrease in brand equity or brand dilution, due to the
manufacturing and distribution of counterfeit luxury goods. In fact, by
opening up customized products, consumers of counterfeits will aspire to
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obtain true luxury, in order to gain the recognition and experience owning an
item created to their specifications and needs.
Consumers view personal items as an extension of themselves and
luxury consumers purchase high-end items, in order to feel special, elite,
and part of an exclusive fashionable group. Customized products would help
authentic consumers maintain this perception of themselves, as they wade
through a sea of knock-off, or counterfeit luxury goods.
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Scenario Plan
The Future of Louis Vuitton and Counterfiet Goods
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Company Challenge
Louis Vuitton is interested to learn what impact internally legitimizing
counterfeit goods would have on its brand, especially facing shifts in
consumer behavior toward counterfeit goods, the downturn in the economy,
and the competition from fast fashion retailers and the growing counterfeit
market. This Scenario will seek to predict the probable future of the fashion
house, in the face of a growing counterfeit culture.
Company Profile
Founded in 1854, Louis Vuitton is the world's most valuable luxury
brand and is a division of LVMH, which boasts more than 60 luxury brands
including Clicquot, Dom Pérignon, Moët & Chandon, Christian Dior, Givenchy,
Donna Karan (DKI), Sephora, and TAG Heuer ("Louis vuitton north,") Under
the artistic direction of Marc Jacobs, the new collections are met with
immediate success and renown Its products include leather goods,
handbags, trunks, shoes, watches, jewelry and accessories. Most of which
are adorned with the LV monogram. Continually expanding, Louis Vuitton
today boasts 17 production workshops, an international logistics center, and
exclusive shops worldwide. Louis Vuitton sells its products through its own
Stores Network in more than 460 Locations, and through the e-commerce
section of its website. Recent product endorsers of the brand include
Angelina Jolie, Muhammad Ali and Michael Phelps ("Louis vuitton linkedin,").
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Environmental Issues
According to the International Anti-counterfeiting Coalition,
counterfeits are estimated to account for 5 to 7 percent of worldwide trade,
or an estimated $600 billion annually. Since 1982, global trade of illegitimate
goods has increased a staggering 10,000 percent, fuelled by an increase in
consumer demand. E-commerce sites like E-Bay have also aided in the
“spike” of counterfeit goods sold, making it easier to not only distribute fake
goods, but also for consumers to acquire them, without having to leave the
comforts and safety of home ("The spread of," 2010). It’s estimated that the
sales of counterfeit goods via Internet sites reached $135 billion in 2010
("The spread of," 2010).
One of the fastest growing, and profitable markets, luxury brands fear
that counterfeits will have a large impact on their brand image and how they
are perceived by consumers. However consumers of counterfeit fall into two
categories; the deceived and the non-deceived. Non-deceived consumers are
conscious that they are buying a fake product, as a Louis Vuitton handbag
buying from black market for example, contrary to deceived consumers that
are not aware that they are buying a counterfeit product. In most cases,
counterfeit consumers fall into the non-deceived category. These consumers
are well aware of what they’re buying and thus their purchase does not
affect their overall perception of the brand. In the case of the deceived
consumer, perception would be altered has they would be under the
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assumption that they have ownership of poor quality, genuine, products in
terms of design details and durability. Also the counterfeit market is often
the first place where consumers develop aspirational taste for genuine luxury
objects, increasing brand awareness and public consciousness.
The fight to eradicate counterfeits is neither cheap nor easy. Online
sales have boosted the counterfeit market and are becoming a more
significant problem, and with much of the counterfeits coming from china,
there is no way to truly identify how many counterfeit goods are actually
flooding the market. The battle against counterfeits is a never ending fight
that financially may not be worth trying to win.
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Counterfeit Impact
The following section will seek to identify the forces and drivers that
influence the growth in counterfeit sales, as well as Louis Vuitton’s decision
to fight or collaborate. The below chart outlines the top ten drivers that
impact Louis Vuitton and its current business practices.
Table Five
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Impact/Uncertainty Matrix
The Impact/Uncertainty Matrix pinpoints how the forces and drivers
impact Louis Vuitton’s business and counterfeit consumption their decision to
internally legitimize counterfeits, on a high to low scale. As you can see, of
the ten drivers, economic conditions, consumer behavior, and aspirational
buyer have the highest impact on Louis Vuitton and their issues with
counterfeit consumption.
Table Six
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Scenario Grid
I have pinpointed that consumer behavior has the highest impact and
uncertainty, thus will have a greater effect on the growth of counterfeit
culture. I have determined economic conditions will affect behaviors in two
ways, consumers will put importance on values and priorities or lifestyle and
status, depending on whether or not the world is still in a recession,
recovering from the recession, or economically stable.
The following grid breaks down four different scenarios based on
consumer behavior and Louis Vuitton’s attitude towards counterfeits. Each
Scenario tells a different story of how the market changes and the
prominence of counterfeits in society.
Table Seven
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Visualization of the Future
87
In this section you will find the full story of each possible scenario that
will paint a picture of how consumer behavior is affected, depending on
economic conditions and the legitimization or legalization of counterfeit
goods, by Louis Vuitton.
Scenario: Obsession
This is a world in which…
The economy has experienced little to no growth, there remains
uncertainty about what the future may hold in terms of jobs and income. A
clear division of classes will develop, with the wealthy holding much of the
buying power, and the lower class becoming the majority. Rather than curb
spending and conserving resources, a “Keeping up with the Jones”
movement occurs. Society will become status driven and as a means to
maintain a certain status within the community, consumers will turn to gift
giving. People will actively seek out luxury goods in a variety of ways,
including in store, online, and through third parties. Outside appearances will
gain importance, with designer logos becoming the epitome of style, while
living spaces will be minimal and contain only necessities, such as a bed,
kitchen, and bathroom. With consumer focus being on obtaining luxury
goods, the counterfeit market will grow significantly, as the lower class
seeks to obtain pieces of luxury. A “by any means” attitude will develop and
the purchasing of counterfeit goods will become the norm among the lower
and middle class consumer. Little enforcement of counterfeit laws will take
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place, as the sale of counterfeit goods is found to aid in global economic
growth. Enforcement
will also be a problem as distributors of counterfeit goods will be far to
numerous.
Scenario: Back to Basics
This is a world in which…
Facing economic downturn and social strife, consumers are focused on
keeping their homes and maintaining what they already have. People are
more socially aware, as economic uncertainty increases. An “All for one, One
for all” mentality has emerged and many begin to see outsourcing as aiding
in economic instability, due to poor labor laws/ conditions and possible
association with organized crime. Due to economic hardship, consumers are
more careful with how, and where, they spend their money, preferring to
purchase locally and within their communities. Budgeting and cautious
spending becomes the norm. For those who can afford to purchase luxury
items, non-branded items and home accessories have gained popularity, fast
fashion has also risen in popularity as consumers seek fashionable trends,
within their budget. Theft via e-commerce is on the rise, so many steer clear
of online shopping.
89
Scenario: Cheap Chic
This is a world in which…
Economic growth is on the rise, but consumers continue to spend
frugally, preparing for another economic downturn. People are slowly
beginning to spend on luxury items again, but most are putting an emphasis
on maintaining their households and valuing the things they already have.
As an alternative, consumers are being introduced to higher quality
counterfeit goods that give them a taste of luxury, without the high price.
Socially, purchasing of counterfeit goods become the norm, thus introducing
luxury to consumers who had no previous interest in luxury brands. Due to
the previous years of economic hardship, people not only value their
belongings, but also value quality. Counterfeit consumers will grow attached
to their purchases, but will value the quality found within true luxury.
90
Scenario: Designer Imposter
This is a world in which…
Technological advancements have opened up the market and an
economic boom is occurring. Consumer spending is on the rise, and
consumers are actively seeking out both higher end and fast fashion items,
as technology has made quick manufacturing more efficient and able to
produce higher quality goods. Counterfeit goods remain popular among
those who cannot afford to purchase the real thing. Most counterfeits
possess a higher quality than in the past and are flooding the market.
Luxury and counterfeit items are being mixed and matched, and many
luxury brands are finding that their brands have become over saturated.
Counterfeiters are inserting new styles into the market, faster than luxury
brands.
91
Implications for Louis Vuitton
This table breaks down the political, social, and economic implications
that each scenario sets for the “world”, luxury brands, and counterfeits.
Table Eight
92
Scenario Recommendation
Table Nine
93
Thoughts/ Recommendations
94
If Counterfeits are such a threat and damaging to a brand, why is it
commonly counterfeited brands like Coach, Louis Vuitton, and Nike aren’t
suffering? As retail stock of lower priced brands like Wal-Mart and Target
continue fall, dropping 1.9 percent as of August 15, 2013, heavily copied
brands like Louis Vuitton have seen the price of their stock increase by 0.6%
(Clark, 2013). LVMH, The parent conglomerate that Louis Vuitton is under,
reports that although the company has been affected by economic volatility
in Europe and a slow-down in China, their cash-cow Louis Vuitton is
reporting “exceptional” profitability, opening two new stores this year (Conti
& Diderich, 2013).
Coach has seen dips in their North American sales, but that’s being
attributed to growing competition from affordable luxury brands like Michael
Kors, Kate Spade, and Tory Burch. The brand saw a 12% dip in their fourth
quarter income to $221.3 Million or 78 cents a diluted share for the period,
this compared to 2012 income of $251.4 million, or 86 cents a. However
sales for the brands increased 5.8 percent to $1.22 billion from $1.12 billion,
in 2012, sales expanded 9 percent when adjusted for currency fluctuation. In
North America, sales rose 6 percent to 825 Million, but store sales fell 1.7
percent, this was offset by a 7 percent increase in international sales
(Steigrad, 2013).
Coach’s executive officer, Lew Frankfort states the Coach’s
disappointing performance with the handbags and accessories category was,
95
is due to the substantial decline in their logo based business (Steigrad,
2013). Counterfeits maybe to blame for the declines in demand for coach’s
signature C collections, as the signature C is what is most often copied. Yet
consumers haven’t stopped purchasing the Coach brand. What’s hurting the
Coach brand is that they’re slow to innovate their product offering, allowing
competitors to enter the market. Coach has found that their consumer’s
taste has moved away from logos and is now focused on leather and leather
based products. Coach’s move to be considered a lifestyle brand, raising
their prices, and establishing multiple categories like. Ready-to-wear,
outerwear, shoes, jewelry, watches, handbags, and small leather goods,
may also play a role in their slow growth (Steigrad, 2013).
Coach should have paid attention to the products that were getting
counterfeited and anticipated a shift in consumer taste. Coach’s C logo was
everywhere, and instead of innovating their product offering, introducing a
line of products not featuring the infamous logo, they decided to capitalize
on the trend and put the signature C print on everything from handbags, to
shoes, to umbrellas. Another highly counterfeited brand is NIKE. The
premium athletic brand also isn’t truly feeling the effects of counterfeits. The
brand reported fourth-quarter revenues of $6.7 billion, up 7 percent ("Nike,
inc. reports," 2013).
My research has also led me to conclude that consumer perception is
also not affected by counterfeits. I surveyed a variety of consumer on their
96
feeling about counterfeits, counterfeit consumers, and fast fashion (one of
the biggest offenders of knocking off designer looks). Many seemed to have
a hypocritical view of counterfeit luxury. One respondent only found them
irresponsible if the consumer was deceived into believing their item was real.
“I find it somewhat irresponsible if it is not noted upon to a consumer
that the item is counterfeit. Otherwise, people who are really wanting
a real handbag, for instance, will buy the real thing in my opinion.
However, I am not the creator of a luxury product, so It does not
affect me. On the other hand, I can see how the producer of luxury
products would be outraged at knockoffs. It's a double sided sword to
say the least.”
-
Respondent #6
This person also stated that counterfeit did not affect her view of luxury
because she knows that their fake. Another respondent stated that she felt
counterfeits tarnished the exclusivity of luxury brands, yet went on to state:
“Some look really real and it is ok to have a few counterfeit items as
long as you have the real things too. you can’t just buy all fake stuff it
looks tacky and cheap! “
-
Respondent #10
97
But most of my respondents just flat out didn’t care or were indifferent
about counterfeits, stating that those who consumed counterfeits were
wannabes or pretending.
There’s no getting around the fact that there are negatives to
counterfeiting, but I can’t say that they’re totally bad. When distinguishable
from the real thing and not sold deceptively, counterfeits hold a host of
benefits to the genuine brand owner. One of those is access to new markets,
Counterfeits are a cheap way for brands to analyze if there are opportunities
in new market, by analyzing the prevalence of counterfeit products bearing
there name. Counterfeits also increase brand awareness, by keeping their
name on the lips of their target market, as well as their aspirational
consumers, and finally affirms brand equity in the market. You could say
that it’s better to be copied, as it’s a sign of a brands popularity and
perception within the market. Only brands with recognizable logos and high
brand value get the counterfeit treatment, so in away brands should be
flatter, because the public likes them, they really like them.
If luxury brands embrace these benefits and use counterfeits to their
advantage, then they’re likely to expand quickly and easily, as well as
become a more innovative brand that creates product that’s exclusively for
their target audience, while still enticing the aspirational buyer, and blocking
out lower-price point brands from entering the market. When it comes down
to it, luxury brands aren’t hurt by counterfeits, their real issue with
98
counterfeits and copies is that they feel like they’re not getting the credit
they deserve for a certain silhouette or design element. Designers want to
be able to walk in a store and say that bucket bag, I’m the only one who has
a bag that looks like that, that’s my design. But the fact is most designer
pull from the past for inspiration and simply modifies existing silhouettes;
you could say that they participate in form of copying themselves.
Recommendations
Brands should focus on shutting down counterfeit manufacture that
violate child labor laws, treat their workers poorly, and fund terroristic acts.
There are many counterfeit manufacturers that pay working wages and
provide housing for their employees. Targeting street vendors and purse
parties is a waste of money and time.
Luxury brands should also continue collaborating with lower-priced
companies, like target and H&M, these diffusion lines satisfies counterfeit
consumers taste for luxury in a legitimized environment. For more
established brands like Louis Vuitton and Goyard, creating small, exclusive
collections, more often will assist in keeping your target consumer engaged
and interested in the brand. It will also keep the brand a step ahead of their
counterfeiter; by time counterfeiter get the fake versions of these collections
out, a new one would be introduced.
99
Luxury brands should also invest in RFID tagging. Counterfeiters have
started to produce pretty good copies of authenticity card, RFID would make
it much harder to pass a fake off as real, as well as allow the brand to keep
track of their product, making sure none of their product ends up on the
grey or black markets.
While I can’t say for sure of collaborating with counterfeits is a good
idea, I can say that counterfeits are as bad as they’re made out to be. In the
end consumers will always value the quality and craftsmanship of luxury
brands, and when they can afford them, will buy them. However as long as
we define ourselves by the objects we own, counterfeits will always be a
natural part of society.
100
Terms
101
Counterfeits: The Unauthorized, close copies of labels, logos, or other
distinctive markings, as well as the deliberate attempt to deceive consumers
by copying and marketing goods bearing well known trademarks, generally
together with packaging and product configuration, so that they look like
they are made by a reputable manufacturer.
Radio Frequency Identification (RFID): is a generic term that is used to
describe a system that transmits the identity (in the form of a unique serial
number) of an object or person wirelessly, using radio waves.
Trademarks: A symbol, word, or words legally registered or established by
use representing a company or product. Used to distinguished and protect a
company’s product from competition.
Baker’s Marking Law: Earliest English law on trademarks, which governed
the use of stamps or pinpricks on loaves of bread, passed in 1266.
Southern Vs. How: One of the earliest trademark infringement cases
involved a clothier making inferior cloth using the marks of a superior
clothier.
102
Common Law: The system of laws originated and developed in England and
based on court decisions, on the doctrines implicit in those decisions, and on
customs and usages rather than on codified written laws.
Trade Dress: The appearance of a product or its packaging, when that
appearance indicates the source of a product.
Patent: Set of rights given to an invention. There are no common law
patents and inventions must be new, nonobvious, useful, or industrially
applicable.
Trademark Infringement: an appropriation or imitation that is likely to
deceive ordinary or unwary buyers into accepting the goods of one trader as
those of another
Intellectual Property: refers to creations of the mind: inventions, literary
and artistic works, and symbols, names, images, and designs used in
commerce.
World Trade Organization (WTO): Is the only global international
organization dealing with the rules of trade between nations.
103
Knockoffs: Copies that don’t include the label or other types of designer
signatures.
Deceptive Counterfeiting: The production of copies that are identically
packaged, including trademarks and labeling, copied so as to seem to a
consumer the genuine article.
Non-deceptive Counterfeits: Counterfeit product’s intention is not to
deceive the consumer. The consumer is aware that the product she is buying
is fake.
Imitation: Similar in substance, name, shape, and color to look like the
original. Designed to look like and make you think of the original brand.
Grey Market: The unauthorized sale of garment production overruns by
legitimately contracted manufacturer.
Custom-made copies: Replicas of trademark designs of branded products
made by legitimate craftsmen. Raw materials are usually of good quality.
Aspirational Buyer: Someone who purchases luxury items, but often can’t
afford them.
104
Customization: The adaption of goods and services according to individual
customer needs.
Personalization: The adaption of either existing or yet-to-be produced
goods to particular individual demands.
Organized Retail Crime (ORC): Organized retail crime refers to
professional shoplifting, cargo theft, retail crime rings and other organized
crime occurring in retail.
105
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2-06-01/confident-consumer-jayne-odonnell/55406774/1
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109
Image Four
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Image Six
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Tables
Table One: Notable moments in the Middle Age
Table Two: Important Fashion Changes of the 19th Century
Table Three: Trademark Laws Timeline
Table Four: Types of Counterfeit Activity
Table Five: Counterfeit Impact: Forces and Drivers
Table Six: Impact/Uncertainty Matrix
Table Seven: Scenario Grid
Table Eight: Implications
Table Nine: Scenario Recommendations
110
Appendix A
Question
Consumer Survey
Conducted by: J’Aliya Jones
Response Percent
What characteristics of luxury
fashion are most important to
you?
a.
Status
b.
Exclusivity
c.
Quality
d.
Craftsmanship
e.
Other
a.
b.
c.
d.
e.
a.
0%
a.
0
b.
0%
b.
0
c.
41.67%
c.
5
d.
50%
d.
6
e.
8.33%
e.
1
How old are you?
a.
0%
a.
0
15-18
19-25
26-35
36-40
Over 40
b.
0%
b.
0
c.
81.82%
c.
9
d.
0%
d.
0
e.
18.18%
e.
2
a.
41.67%
a.
5
b.
33.33%
b.
4
c.
25%
c.
3
d.
0%
d.
0
a.
16.67%
a.
1
b.
0%
b.
0
c.
0%
c.
0
d.
16.67%
d.
1
e.
16.67%
e.
1
f.
50%
f.
3
How many luxury products do you
own?
a.
b.
c.
d.
Response Count
None
1-5
10-20
More Than 20
What brand do you own the most
of?
a. Louis Vuitton
b. Fendi
c. Prada
d. Chanel
e. Burberry
f. Other (See Comment
table)
a. 41.67%
a. 5
b. 58.33%
b. 7
111
Do counterfeit luxury items effect
your view of true luxury?
a.
No, I know it's
fake, so they
don't bother
me.
b.
No, People who
carry
counterfeit
goods are just
wannabes
c.
Yes,
Counterfeit
luxury can be
confused with
the real thing
d.
Yes, Tarnishes
the exclusivity
of the brand
Would you rent luxury Items?
a.
41.67%
a.
5
b.
8.33%
b.
1
c.
0%
c.
0
d.
50%
d.
6
a.
58.33%
a.
7
a.
No, I prefer to
own
b.
25%
b.
3
b.
Yes, More
affordable
c.
16.67%
c.
2
c.
No, Cheapens
the luxury
brand and the
experience
d.
0%
d.
0
d.
Yes, Looks like
I own the item
Do you shop at stores like
Forever21, H&M, or Zara?
a.
50%
a.
6
a.
Yes (See comment
table)
b.
50%
b.
6
b.
No
a.
41.67%
a.
5
How often do you shop at these
stores?
a.
Never
b.
58.33%
b.
7
b.
1-3 times a
month
c.
0%
c.
0
c.
4-8 times a
month
d.
0%
d.
0
d.
10 or more
times a month
112
Question
How do counterfeits and
counterfeit consumers make
you feel?
Response
Makes me laugh especially when I was in PI.
8/13/2013 12:47 AM
I don't really care.
8/12/2013 11:39 PM
Some look really real and it is ok to have a few counterfeit items as long as
you have the real things too. you can’t just buy all fake stuff it looks tacky
and cheap!
8/7/2013 11:29 AM
I pay them no mind
8/7/2013 10:42 AM
They’re are pretending
8/6/2013 1:48 PM
I find it somewhat irresponsible if it is not noted upon to a consumer that the
item is counterfeit. Otherwise, people who are really wanting a real handbag,
for instance, will buy the real thing in my opinion. However, I am not the
creator of a luxury product, so It does not affect me. On the other hand, I
can see how te producer of luxury products would be outraged at knockoffs.
It's a double sided sword to say the least.
8/6/2013 12:54 PM
Indifferent
8/6/2013 9:53 AM
Disgusted. Counterfeit good makers do not employ good factory conditions
and try to profit from name brands others have established.
8/6/2013 9:48 AM
Question
Question 4: What brand do you own the most of?
In response to the answer of other
Comments
not a big brand person
8/13/2013 12:47 AM
gucci
8/12/2013 11:39 PM
Michael Kors
8/7/2013 11:29 AM
Marc Jacobs
8/7/2013 10:42 AM
Marc Jacobs
8/6/2013 12:54 PM
Question 5: Have you ever purchased counterfeit
products?
In response to the answer of yes
LV
8/6/2013 12:54 PM
LV
8/6/2013 12:49 PM
113
Purse
8/6/2013
Question 8: Do you shop at stores like Forever21,
H&M, or Zara?
In response to the answer yes
forever21, H&M, and Zara
8/12/2013 11:39 PM
Zara
8/7/2013 10:42 AM
H&m and Zara
8/6/2013 12:54 PM
H&M
8/6/2013 9:53 AM
All three. Trendy items at an affordable price. Zara
also carries some items of lasting quality.
8/6/2013 9:48 AM
114
Illustrations
Image One
Image Two
115
Image Three
Image Four
116
Image Five
Image Six
117