Handbags, scarves, watches and shoes are the associations most people seem to make spontaneously as soon as we bring up the topic of counterfeiting and us at Blue Cromos fighting it.
We've grown a habit of responding "Sure, but not only. All industries are affected by counterfeiting." But let's stay in the realm of luxury products for now and take a closer look.
Impact on the luxury goods industry
With counterfeit goods accounting for 9.7% of the luxury goods market in the European Union (EUIPO/OHIM report from 2015) there's no doubt that it's a major problem for the industry. For the consumers of luxury goods, too, of course. Especially when you take into consideration the money spent. Financially, it's of course a bigger issue to spend 5,000€ on an item only to realise later that it was counterfeit than if you spent 10€.
However, the luxury industry is also victim of a gigantic industry of trademark infringements. Maybe a technicality to many, but still a difference. While counterfeiting is a matter of selling imitations of existing products as originals, trademark infringements is a matter of putting a famous logo on anything. There is no original, but you parasitise on the value of the famous brand. Then we're typically talking about products sold by street vendors and in outdoor markets. Buyers of such fakes cannot reasonably expect them to be legitimate.
The EUIPO report from 2015 on "clothing, shoes and accessories" (which we and many others equate to the luxury goods market) mentions lost sales of €26 billion each year and 363,000 jobs lost. Taking the knock-on effects on suppliers into account, that grows to €43.3 billion and 518,000 jobs lost. Plus some €8 billion lost in taxes (as counterfeiters don't care about tax regulations either.
Big money, quite simply. Big money that could have come to better use in the hands of honest companies. Plus all the jobs.
Company examples
Specific brands are not as open about how they are affected by counterfeiting, but from what we can find through open sources, it seems as if Louis Vuitton, Gucci, Michael Kors and Rolex are favourite targets for counterfeiters.
According to a 2020 article in Business Insider, Louis Vuitton loses an estimated €4.5 billion annually from counterfeiting. In 2020 alone, US Customs seized counterfeit Louis Vuitton products to a value of USD 825,000. The company has zero tolerance with counterfeiters, investing heavily in fighting counterfeiters. In 2017 alone, they initiated 38,000 anti counterfeit procedures worldwide (Fujiwara, 2018).
Gucci is another brand often mentioned as a prime target for counterfeiters, but we haven't found much detail, more than Gucci's IP team in 2020 managed to remove 4 million counterfeit product listings, seized 4.1 million counterfeit products and got 45,000 websites shut down.
The US Chamber of Commerce estimated in 2018 that Michael Kors lost sales of handbags worth USD 8.9 billion, equating to a loss of market share of 10%.
Rolex, finally, is estimated to have lost USD 500 million on revenue in 2018 due to counterfeiting.
Losing sales, just a beginning?
Sales is probably not all that companies stand to lose due to counterfeiting.
The risk of brand value erosion is substantial, especially for brands subject to heavy attacks by counterfeiters and trademark infringers. These are brands whose value is built on exclusivity. Exclusivity that erodes when seen with "every Tom, Dick and Harriet".
When T-shirts are sold by street vendors and in open air markets for just a few € sport prestigious brands and characteristics, those brands start being perceived as less exclusive. We actually suspect that trademark infringement is at least as harmful to brand value as "proper" counterfeiting.
With counterfeiting, however, comes the added loss of trust. As the public awareness of certain brands are heavily counterfeited, trust is reduced, and hesitation increases. "Do I dare to buy this item for this much? I've heard that there are lots of fakes around of this particular brand. How can I be sure it's legit?"
A 2022 paper at Lund University in Sweden, Strategic Brand Management, explored this with a small sample of research subjects (less than 100) and came to the conclusion that, there was indeed some hesitation to buy brands heavily exposed to counterfeiting, but not as significant as expected. The hypothesis put forward was that the impact on brand value was related to how well established the brands were. Newcomers being more vulnerable.
Would you hesitate to buy goods from a brand which you knew was heavily counterfeited?
Would you appreciate an easy way to make sure it was authentic?
Image by frantic00 on iStock
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