Retailing Fake Fashion and Luxury in China

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Counterfeit LV Product Catalog With Counterfeit LV Bags

Recently I was asked: “what is the busiest mall in Beijing?”. While there is solid data that reveals which malls have the highest sales, calculating foot traffic into malls is very difficult. Therefore the answer was left to my own intuition and experience. One of the malls I came up with as possibly the busiest in Beijing was the Silk Market. Although more of a market than a mall, but for all intensive purposes it acts the same way – a building full of vendors selling home wares, food, fashion and accessories etc. The Silk Market is a massive tourist attraction with literally busloads of tourists pouring into it all day, everyday. The single reason the silk market is so popular is that it is packed wall to ceiling with counterfeit products sold at very cheap prices.

Yesterday on a visit to the Silk Market I was amused to see numerous propaganda signs and slogans promulgating that “intellectual property laws should be protected” and “only buy authentic products”. Not only was the English translation of these signs amusing, but the fact that there was absolutely no attempt to enforce or even acknowledge these ‘rules’ with vendors blatantly selling counterfeit products right beside the signs.

Counterfeit products are one of the biggest issues in the China fashion and luxury industry, causing companies to ‘lose’ millions in sales every year. The term ‘lose money’ is open to interpretation. The fact that someone buys a fake handbag doesn’t necessarily mean that the original maker of the bag would have made a sale if the fake wasn’t available.  With fashion exploding in the media in China everywhere you go one is bombarding with images, editorials and advertisements about fashion. Chinese consumers are becoming enlightened and hooked on fashion and famous brands yet for many, the cost of authentic products is still too high, so they turn to fakes.

Fashion companies complain about counterfeit products, as they rightly should. It is an infringement on their IP. Yet they also understand that fake goods with their logo and designs scattered across the country will increases their brand coverage and recognition. Often a brand will show up in the fake markets before that brand even has a retail store set up in China. Although distressing for brands, this can actually be taken as a positive sign that there is demand and growing recognition of the brand’s products and logos. Another positive that can be taken out of all this is that aspirational consumers will ‘trade up’ and buy the original products once they can afford too.

In China the fake goods industry is one of the most evident forms of organized crime. It still astounds me how the vendors of fake products will have up to date information and full product catalogs of the latest season’s products from the various luxury brands. It seems the only way they could be so current with their offerings is if they have insiders at all the major fashion brands who provide information on new product designs, materials and construction. Imagine that! Spies inside every luxury brand!

In China, getting the latest seasons offerings is as simple as walking up to a stall and telling them you want to a Gucci/Loewe/Mulberry etc. bag from the latest fall/winter collections. They will pull out a brochure, make a phone call and within minutes the bag you requested is in your hands. Last week I was offered a Gucci Bag from the latest season that wasn’t even available in stores yet. Even if your not after counterfeits, its almost impossible to find a non-branded leather product in these markets. I was hoping to buy a simple and economical non-branded leather satchel, yet absolutely everything had a famous brand logo on it. In the end I bought a well-priced and designed item and simple removed the fake brand logo patch when I returned home.

Who buys fakes in China? The answer I dare to say is everyone! From the taxi driver who has fake Fendi seat covers to the university student with the Chanel clutch, people across society purchase counterfeit products. I also know of a few extremely rich individuals who mix and match fake luxury goods with real ones. The fact that they can afford and own a lot of genuine products also allows them to use fake ones without being suspected of doing so. While foreign governments bemoan the proliferation of fake products in China it is foreign tourists to China that drive a large percent of the counterfeit trade.

So although China’s lax IP laws are a very worrying to the multitude of fashion and luxury brands operating in China, it is also prudent to consider how the whole fake goods industry works. It is not only devious Chinese trying to make quick and easy income from stealing IP, but a much larger, international problem.

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