Why knockoffs are good for fashion

James Surowiecki (author of the great book The Wisdom of Crowds) has a fantastic, tight little article about copyright and fashion in this week's New Yorker. Fashion designs aren't covered by copyright, and this means that couture designs are knocked off and sold at huge discounts in department stores and shops like H&M within seconds of appearing on the runway. This upsets many designers, but there's plenty of evidence that it's good for the industry as a whole -- the knockoffs sell to people who'd never buy the couture originals, so they don't really cannibalize sales; what's more, by making a hot new look ubiquitous, the knockoffs contribute to making it look tired and boring, which creates the market for next season's clothes.

This reminds me of the story of database copyrights, which exist in Europe and not the in the USA. Advocates for these monopolies argue that a copyright spurs investment and makes the industry bigger. But the fact is that the European database industry has stagnated over the past 25 years, while the US industry has grown 25-fold, and the biggest difference between the two is that European firms can prevent competition by using the database right.

Even though the evidence is that a database right has retarded the industry and limited growth, European database firms still profess a great love for their regulatory monopoly, and American firms still bemoan its absence.

The recipients of regulatory monopolies are like kids getting candy: they all believe that they need more, and nothing will convince them otherwise. But monopolies end up costing the public and the next generation of creators: by limiting competition in databases, Europe has created a smaller and less useful database industry. By encouraging competition in fashion, the world has created an easy means for all of us to get cheap clothes, while creating a huge amount of investment in the "next thing," making it easier for new designers to break into the field.

Designers' frustration at seeing their ideas mimicked is understandable. But this is a classic case where the cure may be worse than the disease. There's little evidence that knockoffs are damaging the business. Fashion sales have remained more than healthy--estimates value the global luxury-fashion sector at a hundred and thirty billion dollars-- and the high-end firms that so often see their designs copied have become stronger. More striking, a recent paper by the law professors Kal Raustiala and Christopher Sprigman suggests that weak intellectual-property rules, far from hurting the fashion industry, have instead been integral to its success. The professors call this effect "the piracy paradox."

The paradox stems from the basic dilemma that underpins the economics of fashion: for the industry to keep growing, customers must like this year's designs, but they must also become dissatisfied with them, so that they'll buy next year's. Many other consumer businesses face a similar problem, but fashion--unlike, say, the technology industry--can't rely on improvements in power and performance to make old products obsolete. Raustiala and Sprigman argue persuasively that, in fashion, it's copying that serves this function, bringing about what they call "induced obsolescence." Copying enables designs and styles to move quickly from early adopters to the masses. And since no one cool wants to keep wearing something after everybody else is wearing it, the copying of designs helps fuel the incessant demand for something new.

Link (Thanks, Scott!)


  1. You could do a lot of posts on fashion, or you could just do one post on why following fashion is a waste of effort and money…

  2. What’s wrong with following fashion? Do you listen to the same music year after year?

    I never understand why so many guys (especially–but not exclusively) have such an antagonistic view of looking current. You don’t have to follow every little thing (I’m sitting this round of hairstyles out, for example), but showing some interest in the world around you is generally considered to be a good thing.

  3. This part of the fashion industry was mentioned before in that essay about copyright vacuum’s in the professional magic industry.

    Both magic and fashion seem to be able to work without copyright because there are different classes of consumers. The high-class consumer protects copyright for a short while, enabling profit – then the low-class consumer breaks copyright, preventing monopolies.

    High/low class sounds a bit pejorative, I know, it’s just what came into my head.

    To Jackgreg – there are many benefits to staying current with fashion because of the way others will perceive you. Looking similar to other people is not JUST following the herd, it is saying that you are a social person who is part of society. People respond to that. Obviously some people take that too far, become ‘fashion slaves’ and that impresses no-one. The balance, as it has always been, is to look good in a way that is your own but people can understand.

  4. I generally agree that James Surowiecki is a keen observer of economic realities and an astute analyst of trends in markets and labor but I must admit that I find that his “tight” essay a little trite in its attempt to encapsulate all the levels of capital involved in a subject like — the clothes the world wears on its back.

    What I will offer is that that what drives the world production in apparel has very little to do what takes place on the runways in New York, Paris or Milan, (or any one of a dozen other fashion capitals)in any given year, or several in succession, and that what is available at any retailer- trend oriented or not, except in the highest quality brands has very little to do with what is seen on those runways- except in the broadest possible strokes. This is true in the transference of most new work in the applied arts to the mass market, except those things designed expressly for the larger market by explicit use of suitably inexpensive materials and production techniques.

    Apparel trend is product of many influences, only a small part of which is the runway and attendant publicity campaign.

    Designers at work are concerned primarily with quality in expression and in materials and they know that both are in such short supply that their duplication is an unlikely menace and that litigation surrounding their copying economically suicidal.

    A worldwide trend would be an unbelievable outcome of any afternoon’s work at the sketchpad, and
    welcomed by anybody in the business, I assure you.

  5. If you create something unique, you should own it. If you believe creativity ought to be for “the greater good”, give up your income. I’m looking at you, Cory.

  6. But the point is that couture houses make plenty of money, even without copyrights and extensive ripoffs. And Cory seems to make a decent living, even with giving away a great deal of his creative output under a Creative Commons license.

  7. #4 Bob: Really astute, observations, especially about runway shows/couture being only a tiny slice of how fashion makes money. I think fashion is one of the most misunderstood businesses on earth, especially the economic side of it.

    Fashion houses don’t really make all that much cash from what you see on the runways or in the tents at Bryant Park. Very few people can afford those clothes, so very few of each piece are made. Granted, they are priced as luxury items, but if you’re only making 50 or 100 pieces, that’s a drop in the bucket compared to what it costs to design, manufacture, pay the models, pay the pr folks etc. It’s basically advertising for the pret a porter stuff, which in the last 20 years, is how fashion really its’ money. Dior Homme in NYC gets 4 of each suit each season, even at $2000 USD a pop, that won’t even keep the lights on in Manhattan.

    This is why fashion can exist without copyright, because even the ‘big’ fashion houses knock of their own items, and make cheaper versions to sell to a mass audience. Here’s a good example. Two years ago Coach puts this gorgeous gray cashmere French Cuff Pea coat on the runway, priced way way up there. They probably don’t sell too many of these. Now in the Coach stores this year, is a nice but much less expensive wool version. Coach probably sells tons of these because they are only $600 USD, and don’t cost all that much to make. Now again, the Gap, has a very, very similar grey wool French Cuff Pea Coat for $99 USD, so the Gap will probably sell a billion of these this year. It works for everybody because the runway folks, the mid range luxury folks, and the Gap folks are not the same market. It’s actually a pretty fair, non-selfish way of doing business.

    Besides this tiered system, it’s the lifestyle items that make money off the cachet of runway shows. Every fashion house makes glasses that Midwestern moms can afford and wear. Polo Sheets, Marc Jacobs canvas bags for $20 bucks, it goes on and on. You even see this model in streetwear. A Bathing Ape starts coming out with insane, flashy patent leather Dunk ripoffs that are $300 USD and up, plus they are extremely hard to get. Nike sees people go crazy for them, so it trickles down and Nike starts making patent leather dunks in nutso colors. Nike and Bape are both making money off the same idea. It’s different markets.

    And to #1 Jackgreg…Fashion is art. There’s no question. Look at a Pucci scarf, a Valentino gown or a Paul Smith shirt and try to say otherwise. You don’t have to be Patsy and Edina, but there’s nothing wrong with appreciating beautiful things either. Long live Oscar Wilde!

  8. Database producers are in the right Cory. The real problem for those that care about innovation is that there is little/no funding for open materials in the US or Europe.

    In many fields where databases are central to innovation, federal funding is being poured into proprietary databases which are managed under subscriptions. To the extent that federal funding monopolizes institutional research, real innovation is pushed to the margins of markets where it happens by those without access to existing materials.

    Reducing the incentives these players have to develop competing products is not an appropriate response to a problem of badly-institutionalized funding.

  9. The fashion industry has been dealing with knock offs since the 17th century when Louis XIV moved competition among his nobles out of the military realm and into showing off at Versailles. The French designers produced a design set of “fashion babies” to show of the years line for copying around Europe. (As printing improved, they moved from doll sized mock ups to fashion plates). Being copied established French designers cachet, which is why we still use a French word to refer to cachet.

    The debate is a lot like the debate on movie release dates. How long between the theatre and DVD. How long before cable showings and network showings? These things change, but quite slowly. Too many people are threatened.

    One real change is that the knock off artists have cut their cycle time dramatically. Designs are usually introduced almost completely out of seasonal phase so the firms can take orders, produce the goods and then ship them. It takes months to get from runway to rack; modern knock off houses can do it in weeks. They can have their stuff on the shelves before the fashion houses.

    I used to follow the fashions a lot more than I do now that I’ve retired, but I remember that they sold winter clothes in the summer and summer clothes in the winter. If I wanted a nice linen shirt, I had to buy it when it was freezing out. If I wanted a cashmere sweater so I could go shopping for a linen shirt in the dead of winter, well, I should have gone shopping in the heat of summer. The business was amazingly consumer unfriendly. (The Ab Fab joke about a photo shot for children’s woolies in the Moroccan desert in mid-summer hit home).

    Before radio, Tin Pan Alley songs stayed on the best seller list for months. Radio chewed them up in weeks. We are getting something like that change in the clothing business now that the gap between designing and making has been narrowed, but the fashion design houses haven’t caught up with this yet.

    It’s going to be good for the consumer. Imagine being able to buy winter clothes in the winter and summer clothes in the summer. A smart designer will come out with a line of Groundhog day shirts and matching socks and hit the 2/2 mark on the button. The means of production are changing, and the industry will have to change to keep up.

  10. This post reminds me of a recent Op-Ed in the New York Times about how buying counterfeit luxury bags contributes to funding terrorism. Read it here: http://www.nytimes.com/2007/08/30/opinion/30thomas.html?_r=1&oref=slogin

    What I found so funny about the opinion piece is the way it defeated its own argument in the first paragraph:

    “the average luxury bag retails for 10 to 12 times its production cost.”

    …which is exactly why I would buy a fake one, because the profit structures are so obscene (I won’t mention the aesthetics of the bags themselves, but take the LV “mash-up” bag as reference). My favorite quote has got to be the analogy to the war we’re DEFINITELY GONNA WIN:

    “Much like the war on drugs, the effort to protect luxury brands must go after the source: the counterfeit manufacturers.”

  11. Great argument Cory, from a business perspective, although it would probably do little to placate designers who think of themselves as artists.

    Attempting an analogy here, but let’s say I’m a chef who invented a delicious sandwich called a Philly Cheesesteak. Word gets out, people flock to my restaurant. Eventually, McDonald’s and Jack-In-The-Box start selling things they call cheesesteaks. These resemble but don’t come close to the original. In fact, they’re disgusting. Maybe it’s good for the food industry, but it hurts me on a soul level to see the cheesesteak taken so low.

    Fashion exists in the blurry area between business and art, so this probably won’t be settled anytime soon.

  12. Jackgreg (1), if you don’t recognize fashion as art, at least recognize it as a language. Fashion has been making statements (that’s not the same thing as a “fashion statement”) since the Burgundian court invented it. I don’t follow fashion, but I watch it with interest.

    Bob Freudenheim (4), great post. I’ve wondered about the exact relationship between the catwalk and everyday retail. I now know a great deal more, including the fact that it’s not an exact relationship.

    Jim (5), why are you looking at Cory? Your formulation bears no relationship to his views on the subject.

    Emily D. (7), my favorite part of that cycle is when Coach bags turn up on eBay at a fraction of their original price. I got my first Coach bag — $10, no sign that it had ever been used — at a stoop sale in Brooklyn. Two years later, when I lost it, I was utterly bereft. I realized that (a.) I’d liked it better than any other purse I’d ever owned, and (b.) I’d been using it daily for years, and it still looked good. That’s when I made the acquaintance of used Coach bag resellers on eBay. Hurray for that high-end quality.

    Dan Freeman (10), 10 to 12 times production cost is not a bad ratio. Production is just production. It isn’t planning, design, sales, marketing, advertising, promotion, distribution, or the retailer’s markup.

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