From the CEO: A rebuttal to the Highsnobiety article titled “Is Counterfeiting Actually Good for Fashion?”
The other day I came across an article on Business of Fashion with a provocative title – Is Counterfeiting Actually Good for Fashion? It was an op-ed piece published on Highsnobiety. My kneejerk reaction was to renounce the concept and continue scrolling. But if starting a business has taught me anything, it’s that you need to empathize with all points of view. So I dove into the article with genuine curiosity and an open mind. It was a fascinating read but I noticed some inconsistencies that led me to draft this rebuttal.
Just because the logo is being advertised doesn’t mean it helps the brand.
The author argues that by injecting more products from a specific brand into the market, counterfeiters cause sales to go up because more people see their peers wearing the brand. Though this may be true in some cases, luxury brands operate differently than traditional consumer businesses. They exercise meticulous control over product placement and actively avoid locations, settings, and people that are considered “off brand”. They go to painstaking lengths to ensure their image is consistent across all channels. That’s why you need to apply for the opportunity to purchase one of the iconic Birkin handbags, which may seem crazy at first glance but is actually a brilliant method for controlling distribution and creating desire. The author also points to brands using influencer marketing as confirmation of his theory that peer endorsement is the main driver of consumption. However, he misinterprets the reason why luxury brands embrace that strategy. Louis Vuitton chose to work with Jaden Smith because he is a fashion icon that embodies its values, not because he will provide the masses with another example of someone wearing its products.
What the author describes as advertising is the killer of desirability.
You could argue that my example of the Birkin handbag was disingenuous since most products don’t come with an application process. That is certainly one of the more standout examples, but there are plenty of other discrete ways in which brands control consumption. Outside of having a formal application, limiting the number of products in circulation has become common practice. Brands will even go so far as to destroy inventory if they feel the market is being oversupplied. This creates a sense of exclusivity and restricts the use of those products to specific demographics. Counterfeiters that flood the market with knockoffs interfere with this critical balance and thereby threaten the brand’s pricing power. The negative implications of saturating market demand have been demonstrated many times – Gucci before Domenico De Sole, Coach, Michael Kors. The author states that “while exclusivity is undeniably a major source of brand prestige, desirability is arguably more important”. To me, this statement signals a lack of understanding about how luxury brands build desire. In the world of high fashion, exclusivity leads to desirability. When you make products ubiquitous you put the future of the brand at risk.
Not all people who buy fakes do it on purpose.
The article does not mention the scenario in which consumers are tricked into buying fakes. This kind of activity leads to lost revenue and can seriously damage the reputation of a brand. A rebuttal to this argument is that many people know when they are buying a fake. For example, places like Santee Alley in Los Angeles exhibit some pretty clear warning signs. But that’s not true for everyone. Online shoppers in particular are at risk of being deceived since it’s much easier for counterfeiters to make themselves appear legitimate. According to MarkMonitor, 24% of consumers have unintentionally purchased a fake online. Each of those purchases is lost revenue. This problem is exacerbated in the secondhand market where consumers are not purchasing directly from the brand.
Counterfeiting is an industry that operates in the shadows without any oversight.
Many people are unaware of the link that exists between counterfeiting and organized crime. Reports by the Organization for Economic Co-operation and Developed (OECD) and the European Union IP Office (EUIPO) have shown that street vendors and fake websites are often part of a more intricate criminal network. Money funneled into these networks can end up in the pockets of terrorist groups and drug cartels. Moreover, counterfeit products are typically associated with manufacturing businesses that have poor working conditions, unsafe environmental practices, and use child labour. While these factors don’t have a direct impact on luxury brands, they collectively offset all the other good that fashion does for the world.
Counterfeits only work as a gateway in the minority of cases.
Something I didn’t know before reading the article was the research conducted by Dr. Renee Gosline, who spent her PhD studying the effect of counterfeiting on consumption. She found that just over 40% of women who purchased a fake handbag at a purse party ended up buying the real thing. The experience of owning the counterfeit gave the consumer “pseudo-access” to the brand, which triggered a series of behavioural changes that ultimately ended in a purchase. The author of this article uses that research to demonstrate that knockoffs are a gateway to the authentic product. However, he fails to recognize the unique factors at play when a group of upper middle class friends assemble to buy counterfeits – something that Dr. Gosline points out in her doctoral thesis. There were a number of socio-economic pressures that drove the subjects to buy an authentic product, none of which are likely to be present in other situations.
The effect of counterfeiting is contentious, in part because of how difficult it is to quantify. This lack of clarity leads to confusion about whether counterfeiting is truly friend or foe. Many up and coming designers relish the idea of being knocked off, mainly because it means their brand has become desirable. That’s akin to a technology startup looking forward to IP infringement lawsuits – sure it’s a sign you’re successful, but that doesn’t make it any less of a pain in the ass.
When you stack up the risks associated with counterfeiting, namely dilution and deception, they far outweigh the benefits that come from niche scenarios like purse parties. At the end of the day, we’re talking about people who profit from someone else’s creativity. That’s theft regardless of how you spin it.
Here is a link to the Highsnobiety article.