For All The Complaining About Chinese Counterfeits... China Is A Massive Growth Market For Luxury Goods

from the aspirational dept

A few years ago, we noted a study that suggested "counterfeit" goods weren't nearly as big a "problem" as many made it out to be. That's because in a very large percentage of cases, the buyers knew they were buying a counterfeit and did so on purpose because they knew they couldn't afford the real thing. In other words, in those cases, there was no "loss" per se, because the buyer couldn't buy the original at that time. But the really interesting part of the study was the finding that a very large percentage of people who buy counterfeit goods end up buying the real product later. In other words, the counterfeit is a form of marketing.

It appears that may be happening on a large scale in Asia (and China in particular). Despite all the claims that China and other Asian companies are homes to mass counterfeiting, apparently various luxury goods brands are seeing massive uptake and demand in China and across wider Asia. Various luxury goods companies like Prada are announcing record revenue thanks to these countries that are often supposed to be pits of counterfeiting. Perhaps that original study got it right, and lots of folks who used to buy counterfeits are now itching for the real thing.


Reader Comments (rss)

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  1.  
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    ken (profile), Sep 29th, 2011 @ 8:38pm

    Counterfeiting luxury items represents nearly zero losses to the genuine manufacturer. Those who can afford an expensive Rolex Watch are not going to buy knock-offs and those who buy knock-offs are never going to buy an expensive Rolex Watch.

     

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  2.  
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    Jay (profile), Sep 29th, 2011 @ 8:41pm

    Re:

    The GAO's piracy report came to the same conclusion. Sadly, the USTR, the Chamber of Commerce, the MPAA, and the RIAA along with a number of different industries (fashion, I'm looking at you) have not read that report...

     

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  3.  
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    Anonymous Coward, Sep 29th, 2011 @ 8:49pm

    Re:

    Well, counterfeiting items should still be illegal. Even assuming zero losses to the original (and I think it's nonzero even though it's not one-to-one), it's still fraudulent. Make your own brand if you want to sell something. Don't make your money off of someone else's reputation.

     

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  4.  
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    Jay (profile), Sep 29th, 2011 @ 8:59pm

    Re: Re:

    "Well, counterfeiting items should still be illegal. Even assuming zero losses to the original (and I think it's nonzero even though it's not one-to-one), it's still fraudulent"

    ... No customers are fooled by thinking a Prudo bag is $10 on a street corner before their payday.

    It's not a fraudulent transaction. It's one that allows for a larger number of people to trade up on a good.

     

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  5.  
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    Anonymous Coward, Sep 29th, 2011 @ 9:00pm

    It's a bit of a misleading report, because you are trying to disprove something that is related, but not connection.

    The sales of luxury goods in China is about the snob factor, just the same as it is in the US (or elsewhere). The difference is in China, people who can't afford the real thing have no problem consuming the knock offs, and it is accepted, tolerated, and even approved of socially. This is very different from the US, where someone caught with "fake" stuff would risk social issues. In China, it's considered normal.

    Also, "massive growth" isn't hard to achieve when you have (a) a country of over a billion people, (b) a people with expanding incomes and desires, and (c) a people who have not had these options ever before.

    So sorry Mike, the "success" doesn't somehow wash away the huge market in knock off goods. Nice try, but once again you fail.

     

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  6.  
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    Anonymous Coward, Sep 29th, 2011 @ 9:32pm

    Re:

    You still didn't explain why it doesn't harm the original producer, if knock offs were so bad people would just buy them and not the original, so why is that people buy the original?

    Note also that many bootlegged luxury goods are better in quality than the original today.

     

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  7.  
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    out_of_the_blue, Sep 29th, 2011 @ 9:36pm

    Mike writes "various luxury goods brands": link states ONE.

    "Hong Kong (CNN) – Asia may not be the elixir to the world’s economic ills but it sure seems to be the pill that’s pushing *** one **** luxury goods maker to some great highs."

    You inflate the claim of a piece which is at best only fluff filler for leisured parasites who interest in "fashion".

    And while large for one company, it's small in absolute terms, and may not apply to the "industry":
    "In hard cash numbers, that’s more than $244 million banked from the first half of this year versus $141 million from the first half of last year."

    Listen, Mike. You make sniping not just easy and fun but almost necessary by exaggerating "one" into "various". That's flat out counterfeiting. But where do I go for the "real" truth?

     

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  8.  
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    Anonymous Coward, Sep 29th, 2011 @ 10:49pm

    "In a very large percentage of cases, the buyers knew they were buying a counterfeit and did so on purpose because they knew they couldn't afford the real thing."

    "But the really interesting part of the study was the finding that a very large percentage of people who buy counterfeit goods end up buying the real product later."

    I just don't get it Mike! Most knockoff buyers cannot afford the real thing, and then they go ahead and buy the real thing? Just does not compute. Can someone translate, please?

     

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  9.  
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    The eejit (profile), Sep 29th, 2011 @ 11:07pm

    Re:

    Never heard of saving money?

     

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  10.  
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    Strawbear (profile), Sep 29th, 2011 @ 11:16pm

    "It appears that may be happening on a large scale in Asia (and China in particular)"

    Also apparent:
    Bears in wood defecating

     

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  11.  
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    Anonymous Coward, Sep 29th, 2011 @ 11:19pm

    Re: Translation

    It computes just fine. Aspirational buyers start off unable to afford the real thing, so they buy the cheap knockoff. They are fully aware that it is a counterfeit, but they buy it because it is as close as they can get to the real thing. There was no chance of them buying the real thing at that stage, because they cannot afford it. Therefore, there has been no lost sale by the makers of the real thing. The outrage by the makers of the real thing is entirely counter-productive.

    Meanwhile, the buyers have acquainted themselves with the price of the real thing. Then they save up, or their life circumstances change and they get wealthier. Then their counterfeit thing breaks, goes out of style, or gets shabby, whatever. Then our buyer decides to spend the money and buy the real thing. Shazam! The maker of the real thing has made a sale.

    What has happened is that the counterfeit thing has acted as a free advertisement for the real thing. Had the counterfeit thing not existed, the buyer might have bought some substitute thing which was nothing like the real thing. If that happened, then there is no advertisement, hence the sale of the real thing becomes less likely.

    The counterfeiters are actually doing the makers of real things a favor, by giving them free advertising.

     

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  12.  
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    PaulT (profile), Sep 30th, 2011 @ 1:20am

    Re: Re:

    "I think it's nonzero even though it's not one-to-one"

    Any data, or just one of your usual blind assumptions?

    "Don't make your money off of someone else's reputation."

    You realise big corporations do this as well, right?

    If something's to be outlawed, it has to be due to actual harm done, not because it feels "wrong" or someone didn't built the wheel from scratch. If nobody's fooled and the originals aren't losing sales, there's no harm. As ever, you need to start from the facts - do you have data that shows actual harm done? If so, sue. If not, well..

     

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  13.  
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    PaulT (profile), Sep 30th, 2011 @ 1:31am

    Re:

    "Most knockoff buyers cannot afford the real thing, and then they go ahead and buy the real thing?"

    It's quite simple. Note the word "later" in the second quoted sentence.

    Most people start with lower incomes. They want the designer goods, but for whatever reason cannot get them. But, they still want the cache that comes with that brand rather than a lesser name or no-name item. So, they buy the knockoff.

    Later on, they have more money and can afford the real thing. They still want the cache that comes with the brand, but now since they can afford the real thing they're not going to continue buying the knockoffs. So, they buy the real thing.

    They could not have bought the real thing earlier even if the counterfeits weren't available. They're not going to lower themselves to the knockoffs when they can buy the real stuff. Hence, the counterfeits probably don't really impact sales, even if the counterfeit buyers are actually a larger group overall.

     

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  14.  
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    JayTee (profile), Sep 30th, 2011 @ 2:35am

    What really irritates me...

    ...is the arrogance of these high end fashion labels. They attempt to price their products at prices that are so much higher than the cost of making it. They have no problem ripping people off throughout the world to further their own gain but if someone creates a knock off product at a fraction of the price then suddenly we all need to jump on the moral bandwagon with them and cry foul of these counterfeiters.

    It really is disgusting. If their product were a bit cheaper then more people would buy it... simple.

    Why the hell should I pay £150 for a shirt because it has a small horse on it?

     

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  15.  
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    jimbo, Sep 30th, 2011 @ 4:14am

    Re:

    exactly! so why shut down sites/companies that sell knock-offs? as long as people know what they are buying, i cant see any problem. sooner or later, the government gets their cut, their taxes, it may just not be straight away. the company producing the genuine article loses absolutely nothing.

     

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  16.  
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    Mike C. (profile), Sep 30th, 2011 @ 4:37am

    Re:

    So you'd rather have brand obscurity?

    The problem with the brand holders (as well as the MAFIAA and their ilk) is that they're not understanding the wider impact of having their product be ubiquitous.

    If it's considered normal for everyone to have a Prada bag, whether or not it's a knockoff, then NOT having one is actually harmful. Then it becomes a matter of wether or not you can afford a real one or have to settle for a "fake". Being able to get a genuine article improves your social status.

    The flip side of aggressive enforcement is that only people that can have a genuine item have them. Unfortunately, that's a much smaller subset of the population which ends up giving the owners more of an negative elitist reputation than a positive role model one.

    Consider cell phones. Today, a significant portion of the US population carry one. A large number of them allow people to check email, update social media status, etc, and are considered "average". But think back a few years before the iPhone and Android phones to when just BlackBerry was the choice. People with BlackBerry's were often looked down upon as someone who needed to "get a life" and "you don't need to be THAT connected". Now that the devices are everywhere, the pressure to upgrade on people that DON'T have smart phones is immense. Even the cell providers are making it difficult to stay data free. The last time I checked AT&T for new cell phones, every last one available for their monthly plans required a data connection.

    So go ahead, push enforcement but be ready to fade into obscurity when you do.

     

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  17.  
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    Anonymous Coward, Sep 30th, 2011 @ 5:01am

    Re: Re:

    Paul, it would be true is the purchase of the knock off didn't satisfy much of the social requirements to start with.

    Further, let's consider this: A woman needs a purse. She only has a certain amount of money to spend. She can (a) buy a regular purse all legal and nice, or (b) she can buy a knock off. While both of them "feed the market", the knock off money tends to stay outside of the tax regimes, it tends to become "black" money, moving quietly outside of the economy.

    So even on an even dollar purchase, only one of the two is beneficial to society as a whole, and the other is a negative.

    So why worry about "later", there is enough of an issue "now".

     

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  18.  
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    ChrisB (profile), Sep 30th, 2011 @ 6:30am

    Re: Mike writes "various luxury goods brands": link states ONE.

    > But where do I go for the "real" truth?

    How about somewhere far away from here.

     

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  19.  
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    ChrisB (profile), Sep 30th, 2011 @ 6:35am

    Re: Re: Re:

    > the knock off money tends to stay outside of the tax
    > regimes, it tends to become "black" money, moving quietly
    > outside of the economy.

    So you are saying that items that can't be "taxed" move out of the "economy"? I'd say "tax" is antithetical to "economy", and many involved in the underground economy (trades, used goods, etc.) would agree with me.

     

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  20.  
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    Anonymous Coward, Sep 30th, 2011 @ 6:48am

    it's not totally the case; I know a guy who sells some of the high end rolex fakes online which sell for over $800 and he tells me that many of his clients already own the real one but for travel purposes, etc they buy a nicer fake so they don't beat up their authentic watch or if they get robbed its only $1,000 loss instead of 8K+.

     

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  21.  
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    PaulT (profile), Sep 30th, 2011 @ 7:21am

    Re: Re: Re:

    I love the way I answer a direct question (how can the same people buy both counterfeits and genuine items), and then try to insert irrelevant crap that has nothing to do with my explanation. Derailing threads, one of your trolling 101 classes, I take it?

    Black vs. "legitimate" economy and "benefit to society" are good points, but they have nothing to do with my post.

     

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  22.  
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    Anonymous Coward, Sep 30th, 2011 @ 9:34am

    Re: Re: Re: Re:

    They are very relevant, because if you don't understand the mentality of the people, you cannot understand why "later" isn't part of the deal, really, and why Mike appears to be trying to (once again) be a pirate apologist.

    If the knock offs are good enough (and many of them are made on the same production lines, or using the same materials and sources for things like logos), there is no reason to buy "the real thing" because nobody can tell.

    I cannot see anywhere in any of these reports that suggests that people "bought knock offs, and then saved up for the good stuff", that seems to be a Techdirt myth (repeated often enough, people like you think it is true). What is more clear is that a sudden rush of wealth has allowed many Chinese people to indulge in "true" luxury goods. The connection of knock off goods as a stepping stone just doesn't seem to exist (except in Mike's head).

     

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  23.  
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    Anonymous Coward, Sep 30th, 2011 @ 1:29pm

    Re: Re: Re:

    The uncle Sam will always, always get its cut, that money you said stays out of the economy is just baloney.

    Eventually all money get taxed and retaxed and re-retaxed to say the least.

     

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  24.  
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    Anonymous Coward, Sep 30th, 2011 @ 1:35pm

    Re: Re: Re: Re: Re:

    I'm afraid you are wrong, the reason to buy the real thing is prestige that is why it is called the market for luxury goods in the first place because it gives you status.

    Bootlegs in that market act as place holders for the real things, they are the fuel that maintain and keeps the flame burning, and when suppressed some how leads to eventual decline in sales the reason being people can't show of something or claim status over something others don't know, specially if the bootlegs can be made better than the original.

     

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  25.  
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    Anonymous Coward, Sep 30th, 2011 @ 1:39pm

    http://business.blogs.cnn.com/2011/09/30/wealthiest-self-made-woman-its-not-oprah/

    More than half the super rich women in the world come from China that may explain why luxury goods do so well there.

    Apparently counterfeits, piracy and other stuff is only a problem in countries with contracting economies, others don't see it.

    As a side note, the US used to claim a perfect system but the truth is that the US system is full of problems that were masked by its success, that ain't gona happen in the future apparently, those institutional problems will get more visible with each year for at least more 10 years, because western countries are on the downside of the growth slope at the moment.

     

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  26.  
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    JMT (profile), Sep 30th, 2011 @ 1:55pm

    Re: Re: Re: Re: Re:

    "The connection of knock off goods as a stepping stone just doesn't seem to exist (except in Mike's head)."

    And apparently in the heads of the people conducting the various studies that have made this conclusion. I know you have a deep, driving need to criticise everything Mike says, but why don't you direct some of your imaginative thinking towards those people and their studies. Or is this really just a personal thing for you?

     

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  27.  
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    Anonymous Coward, Sep 30th, 2011 @ 9:53pm

    Re: Re: Re: Re: Re: Re:

    The studies that you point to don't tend to relate to virgin market places (such as China), and rather reflect on the US market, very different.

    Aspirational connections between knock off goods and the real thing just doesn't appear to be that strong in China. The increase in sales is almost exclusively because of access to a newly opened, newly affluent marketplace, and not much more.

     

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  28.  
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    PaulT (profile), Oct 1st, 2011 @ 4:17am

    Re: Re: Re: Re: Re: Re: Re:

    Do you have a study that says that, or is this another of your baseless assertions that pretends that your unfounded opinion is the truth?

     

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  29.  
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    Anonymous Coward, Oct 1st, 2011 @ 11:12am

    Re: Re: Re: Re: Re: Re: Re: Re:

    Paul, it's pretty basic.

    These companies are going from "zero" to "something". Of course they are going to see phenomenal growth amounts, because they are growing a business from nothing.

    None of the reports specifically about China is able to link the knock off sales to increase "real product" sales, because there isn't any that they can find.

    What Mike (and others) are doing is the old game of creating a correlation that cannot be supported.

    Example: Personal auto sales and ownership have also increased dramatically. It could be claimed that the sales of personal cars also spurs on the sales of other luxury goods.

    Also, there has been a significant decrease in the number of cases of burd flu in the last few years. It could be claimed that people not worrying about getting sick are more likely to buy luxury goods.

    See how it works? They are only expressing an opinion, nothing more, based on correlation of data that just doesn't have a proven, solid link.

     

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  30.  
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    PaulT (profile), Oct 1st, 2011 @ 11:22am

    Re: Re: Re: Re: Re: Re: Re: Re: Re:

    "These companies are going from "zero" to "something". "

    Too clueless to work out the actual points being discussed? I have no idea what this has to do with the assertion that counterfeits don't impact the sales of originals, which was not even the point I was making if you bother reading my post.

    "It could be claimed that the sales of personal cars also spurs on the sales of other luxury goods."

    I have absolutely no idea what your point is here.

     

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  31.  
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    fairuse (profile), May 16th, 2012 @ 8:21am

    Then you have: China based manufacturer of licensed NFL gear

    "Then you have: China based manufacturer of licensed NFL gear under cuts retail."
    My ever so alert wife found the company that makes the gear you pay way too much for in my opinion. The ball park, official web site and "the blessed" retail prices are so insanely high I wonder why folks pay for the shirts. Well, the company setup a site with discounted "Real" NFL shirts they make for "xyz" team.

    { horn SFx } Feds now display the "we shut down evil counterfeiters". I just love it when the feds protect me from saving money legally.

    I still need to photograph display.
    .

     

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  32.  
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    blabla, Nov 4th, 2012 @ 3:29pm

    Re:

    whatever...that is not necessarily true. i own both real & counterfeit. Real items of what i can afford & knock items of those I can't. For example I own real a real Louis Vuitton Speedy 30 but I will never afford an Hermes Birkin but have considered a high quality replica one :)

     

    reply to this | link to this | view in thread ]


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