Counterfeiting can be good for luxury goods sales

A pair of studies, one of US consumer and one of Chinese consumers, show that counterfeiting of high-end branded goods can generate more sales. The Slate article discusses the notion of counterfeits as gateways to the real thing, and of successful strategies for distinguishing fakes from licensed goods.

But there's another dimension to the relationship of counterfeits to luxury goods. "Positional goods" are products whose value is derived in part from what they say about their owners ("I can afford to buy this expensive thing"). When a positional good -- this year's Prada handbag -- is knocked off and widely distributed, the legit goods no longer convey their intended message. For people who scrimped and saved to buy their one real handbag, this is terrible news. But cost-insensitive (rich) customers, who are the core market for luxury goods, are spurred to go out and buy this year's Prada bag, to distinguish themselves from the hoi polloi.

But a dirty little secret is that Prada rip-offs can also function as free advertising for real Prada handbags--partly by signaling the brand's popularity, but, less obviously, by creating what MIT marketing professor Renee Richardson Gosline has described as a "gateway" product. For her doctoral thesis, Gosline immersed herself in the counterfeit "purse parties" of upper-middle-class moms. She found that her subjects formed attachments to their phony Vuittons and came to crave the real thing when, inevitably, they found the stitches falling apart on their cheap knockoffs. Within a couple of years, more than half of the women--many of whom had never fancied themselves consumers of $1,300 purses--abandoned their counterfeits for authentic items...

That said, global brands might devote more of their efforts to upgrading their own products, taking a page from the playbook of footwear manufacturers challenged by Chinese counterfeiters in the 1990s. In addition to ramping up their own enforcement efforts to substitute for the work of government investigators, these manufacturers made their high-end items even more expensive, to further distance their products from imitators. They added more top-tier leather, more crocodile hides, more use of imported machinery. Most of these improvements came in the form of upgrades to surface and side materials, which would clearly distinguish authentic shoes from knockoffs. The manufacturers seem to have come to the same conclusion Qian did: For top-of-the-line products, imitation isn't merely flattery--it's also good for business.

The Highest Form of Flattery (Thanks, TimHarford)


  1. The thing is, Louis Vuitton, Prada, et al. don’t agree. Neither does PayPal. They got so many chargebacks on knockoffs sold as “real” they eventually refused to do those transactions.

    My instinct says this report is completely correct. And you’re never going to stop Hong Kong bootleggers. But maybe they know this, and corporate attempts to stop knockoffs are merely the expected thing to do, to ‘defend the integrity of the brand.’

    Mainly so the not-quite-rich that are a good chunk of the customers can continue to feel superior.

  2. The problem is that planned obsolescence isn’t that great for other reasons. But at least the quality is presumably there so that it’s just planned obsolescence of style, not of functionality.

    Still, not very green.

  3. My personal experience…
    An ex-GF bought some knockoff Louboutins after I went off relentlessly about how they are, by far, the sexiest thing a woman can put on her feet. She got 2 pairs for $150 each, Chinese counterfeits.

    After having them for a couple of weeks I asked her why she didn’t just buy real ones. We were both aware of how much they cost and she could easily afford it. While the knockoffs were decent quality and easily fooled the world, we agreed that there was something about *knowing* that you had actually dropped the $1200 for the real thing, that one had reached a station in life where that could be done, that made the genuine article more valuable internally. So the knockoffs acted as a gateway. She eventually gave the fakes away to friends an cherishes the real ones immensely.

  4. Yes, seeing a fake makes the owner of a real feel superior. That’s the whole game. Never sure why people play it though.

  5. Doesn’t this all assume the buyer knows they are getting a knock-off? Not getting the genuine article via eBay is a pain for the faked (they might get blamed for poor quality), eBay and the buyer.

  6. Counterfeiting issues are a constant topic of debate in the crafting and art worlds, not just in fashion. There’s an interesting TEDTalk about the topic here:

    But at the heart of it all is the simple moral quandary: Are our desires for whatever we want more important than respecting the original maker? It boils down to something quite simple–does our insecure need to be fashionable trump a maker’s right to make money off their creation?

    It’s sad that there are so many counterfeiters out there that can’t figure out how to be original. But what’s even sadder are the people who can’t avoid supporting them for their own vanity. The luxury items industry is completely driven by social pretense, peer pressure, and perception. Until a person can feel better about themselves without having to have a “thing” to do it for them, there will be counterfeiters to sell them their crutch. And that says more about the consumer than the con artist.

  7. “She found that her subjects formed attachments to their phony Vuittons and came to crave the real thing when, inevitably, they found the stitches falling apart on their cheap knockoffs.”

    Counterfeiting should be legal. See, the phony $100 bills I’ve been using are pretty flimsy. And the ink is always wearing off. It’s just too difficult to match the crispness and durability of real paper money.

    It’s okay, though; it just motivates me to go out and earn some real c-notes.

  8. Yesterday I more or less decided on buying a set of 4 copy Eames Eiffel DSW chairs. They are about 40 quid each on Ebay. The plan was then to buy a real chair every year at about 250 quid, replacing a fake one each time, until I had a full set of real ones. I would have a matching set of chairs at any given point and could give the fake ones to friends or freecycle as I went along. My point being that buying the fake ones would “tie me in” to buying the real product in the long run. If waiting until I could afford the real version I would probably be sidelined and start buying other models instead.

    Now you may ask what I want to shift to genuine branded ones for? Why not stick to copies? And I admit I haven’t got a very good answer tbh.

    1. I may be wrong, but every Eames copy I have ever seen is of great quality, but isn’t really the exact same design as the exact copies by Herman Miller. So by slowly replacing your copy chairs, you would certainly have a mismatched set. I would just stick with the ‘Eames inspired’ chairs and save the cash for an Aeron for your desk.

      The same could be said for copy bags, shoes, etc.. If you look closely, you can tell that different materials are used, different stitching, slightly different design proportions. I’m pretty convinced that any rube who buys a fake on Ebay thinking it’s real hasn’t actually seen the real thing. Personally I say just buy used and old whenever possible!

    2. I have a knock-off Barcelona chair and two ottomans and, honestly, they’re nicer than the real thing. Sometimes the knockofferators solve some of the design problems that the original designers couldn’t be bothered with.

  9. No matter how much money I make, or stand to make in the future, I can’t fathom spending $1200+ on a fricken’ purse…or even being concerned in the least about what so-and-so thinks of my cheap (or not) handbag/car/house/jewelry/etc. To each their own I guess. I find it vulgar and immature — like children who keep their toys in the original package and just collect, collect, collect, covet, covet, collect.

  10. There is a bike shop near me that has fake *solar panels* made of corrugated black acrylic and aluminum attached prominently to the front-facing roof.

    Any customer that directly asks about the “panels” are told that they’re simply part of the roof and any resemblance to solar panels is incidental. However, most people don’t ask and assume that the business has made an expensive and conspicuous “green” commitment and so get warm fuzzies spending their dollars there.

    They do have a well-regarded and extensive program for recycling frames, tubes, and tires as well as supporting green initiatives (having booths at sustainable living fairs, cutting their own energy use, etc.) Perhaps it’s because those are still part and parcel of the image of a “green” business but are cheap to free to implement.

    However, a wrinkle is that a local solar manufacturing/install place has known about it from the beginning and thinks it’s great. In their view, if more people think that solar installs are common, more people will install solar so their business as a solar manufacturer increases. The owner of the shop couldn’t afford to pay them for a real install anyway, even with the federal subsidies, so they’re effectively free advertising for *real* solar.

    I also hear that some other people have installed fake windmills that are sold as “kinetic sculptures”, but those are less common as the mechanicals are a bit more expensive (part of the green cachet of the windmill is its motion, apparently), and once you have those you’re at 40% of the cost of a real working turbine whereas fake solar panels only cost 5-10% of what real solar does. Besides, residential wind power might as well be a sculpture anyway for how little power you really get from it.

    1. I guess my point which I forgot to make is that when something is fashionable (whether it’s handbags or solar panels), people will counterfeit it, people will buy the counterfeits and increase the visibility, thus making it more fashionable – until you reach an endpoint where your market is saturated and it’s now either a cliche or mainstream. (I hope that Vuitton becomes the former and solar panels the latter.)

      In either case, it’s to the advantage of legitimate manufacturers in non-saturated markets to be OK with counterfeiting.

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