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COMMENTARY: Recession-Friendly Counterfeiting

Posted by admin

Aug 26, 2010 6:20:47 AM

Consumer spending continues to remain flat. The Commerce Department reported that in the second quarter of 2010, disposable personal income showed no growth. This certainly points to Americans remaining conservative with their expenditures as unemployment remains high, market volatility continues, and a poor housing market drags on. The lag in consumer spending affects much of the economy, but one problem that might not immediately come to mind is the increasing consumption of counterfeits. According to the European Chamber of Commerce, there is an overproduction in factories in China, which has led to a trade surplus. These same factories are also responsible for a high-volume of counterfeit and knock-off product manufacturing, which creates impetus for counterfeiters to produce the types of goods that consumers are willing to buy.

Many consider counterfeit goods to be predominately apparel and luxury items, which come with a hefty price tag that the average consumer can’t afford—therefore it is not a concern to the general population. In this stratum, we see designers such as Prada or Christian Dior whose handbags are frequently knocked-off and can be found being sold by street vendors around the world. Recently though, in this time of a struggling global economy, we are seeing more generic and off-the-rack products becoming increasingly popular in the counterfeit world—say Ugg Boots over a Gucci bag. The shift in counterfeited products can be attributed to wary buyers unwilling to spend as freely as they did just a few years ago.

Since mainstream products are becoming more commonly knocked-off, there is a causal effect on pricing. These products are such that consumers would conceivably spend easily and without much caution even when purchasing from the web. For instance, a person on the market for a luxury bag may either do so from the brand’s website or in a brick and mortar shop and would know that most luxury goods do not go on sale—so anything that is priced lower than the retail value might should send a red flag. Also, a largely inexpensive counterfeit bag costing several thousand dollars is unlikely to trick most into believing it is authentic. With mid-priced items, though, less thought is put into the legitimacy of the purchase and a slightly lower than average cost may not cause concern. This allows counterfeiters to not only capitalize on this market opportunity but also charge a similar price as the real deal. As more discounted sites pop-up, geared towards the economically savvy, it is likely that more ordinary consumer products will garner authenticity issues.

On another note, there has also been a change in the consumer psyche—where they seek products that are eco-friendly, sustainable, re-usable, and lasting. As the market grows for this niche product, counterfeiters may begin producing their wares under the guise of authenticity, and dupe buyers into believing they are purchasing goods based on ethical value when in fact they are doing quite the opposite.

With consumer spending remaining low and a new echelon of economic reality setting in, consumers will adopt or adjust their purchasing patterns and, in turn, counterfeiters will follow emerging market opportunities. This means that consumers and brands alike will have to remain vigilant and educated when manufacturing, buying, and/or selling goods. This is a ripe opportunity for brands, large or small, to enforce or recalibrate their brand protection programs.

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Topics: Counterfeiting, Luxury Goods

   

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