Abstract
Luxury counterfeits are appealing to certain shoppers because they provide the signaling value of luxury brands at a lower price. Because of the myriad challenges facing policymakers and law enforcement, the stigma of using counterfeits has been diminishing and counterfeit sales have been on the rise. Research has been conducted on the characteristics of those more likely to purchase counterfeits, and investigations into the social and emotional motives that underlie counterfeit use have also been undertaken. Despite all of this attention, it is still unclear which levers can be utilized by law enforcement to enact demand-side limitations that will reduce the on-going proliferation of counterfeits. The chapter reviews the literature, particularly in marketing, in order to provide some insight to brand managers, policymakers, and law enforcement agencies who are attempting to curb counterfeit consumption.
TopBackground
Luxury Branding
In order to understand the effects of luxury counterfeits it is necessary first to understand the unique status of luxury goods. Luxury goods display a different set of dynamics that often result in marketing actions that are directly opposed to standard marketing practices (Kapferer & Bastien, 2009). As a result, luxury branding is “much less understood and less well serviced by the literature” (Wall & Large, 2010, p. 6). It should come as no surprise then that there is no universally agreed upon definition of luxury brands (Wall & Large, 2010).
While there is little agreement on a single, succinct definition of “luxury” (see Wall & Large, 2010 and Wiedmann, Hennigs & Klarmann, 2012), experts appear to agree on some critical characteristics. For example, luxury goods are very high in quality and craftsmanship, they are associated with rarity and exclusivity (real and artifactual) and they are typically related to a history, heritage and tradition that usually goes back to an individual (e.g. Coco Chanel, Thierry Hermès, Ralph Lauren). The innately hedonic nature of luxury brands is strengthened and conveyed through high levels of service and, while quality and craftsmanship ensure functional satisfaction, luxury products provide more important psychological and social needs than other products (see e.g. Lu, 2013 and Amaral & Loken, 2016). The desire to fulfill these social and psychological needs has driven the luxury goods market to over $1 trillion in 2016. These characteristics also create brands that consumers form personal connections with, which further strengthens the usefulness of these products as signals about the social groups with whom the users wish to be affiliated.
The high signaling value, and low accessibility, of luxury products draws consumers to their counterfeits. As a result of lower prices, and more accessible distribution channels, counterfeiting has become a significant problem for luxury producers. Estimates of the annual costs of counterfeiting are as high as $600 billion (International Chamber of Commerce, 2013). This figure includes losses in diverted revenue for luxury goods manufacturers, losses in the labor market, and losses in tax revenues to various levels of government (Cunningham, 2011; Thomas, 2009). While counterfeiting is also a problem for many other sectors (e.g. pharmaceuticals and sporting goods; see Kollmannova, 2012), luxury brands are among the most commonly seized counterfeit items by the U.S. Customs and Border Protection Agency (Cunningham, 2011). At this point it would be informative to provide the definition of luxury counterfeits that will be the focus of this chapter.
Key Terms in this Chapter
Counterfeits: Unauthorized replicas of products, intended to deceive or defraud a consumer or business.
Counterfeit Luxury Goods: Unauthorized replicas of luxury goods. They differ from most other counterfeit products because they can be deceptive or non-deceptive. In the latter case consumers knowingly purchase the replica product.
Trademark Counterfeiting: A broad term that describes replicas of the brand, logo (fashion brand) or overall appearance (fashion design) of a product. The definition differs in important ways between nations. For example, in the United States fashion design protections are typically not included in trademark laws, whereas in much of Europe they are.
Luxury Goods: Products, typically related to a heritage and/or traditional associated with a founding figure. They are high in quality and price and unique in the extent to which they convey important social signals to the user and serve as symbols of social status to others.
Intellectual Property: Refers to literary, musical, and otherwise artistic innovations as well symbols, names and even colors and scents that are unique to one producer or organization. It includes for categories of protections, trade secrets, trademarks, copyrights and patents.
Fashion Design Counterfeiting: Products that are made and/or distributed by another company but is a replica of the overall look or design of a luxury product. Any product that displays the brand mark or logo of a luxury brand but is not produced and/or distributed by the luxury company is a fashion design counterfeit.