Do counterfeits only affect brands that are heavily counterfeited? New insights

Xuemei Bian
Professor in Marketing
Newcastle Business School, Northumbria University, Newcastle Upon Tyne, UK

National governments and supranational organizations regard counterfeiting as a serious economic, social, and political problem. In extreme cases, the proceeds from counterfeiting have financed terrorism. In more common cases counterfeits pose major obstacles for global marketers of brands (Bian and Veloutsou, 2007). A common belief is that counterfeits affect consumers’ confidence in legitimate products, destroy brand equity and companies’ reputations, cause loss of revenue, increase costs associated with trying to contain infringement, and affect hundreds of thousands of jobs (Anti-Counterfeiting Group, 2016). Given the stakes, no doubt, heavily counterfeited brands are increasingly investing in combating counterfeits. For example, BMW, Louis Vuitton, and Burberry, to name only a few, have established and invested in specialist anti-counterfeiting teams both nationally and internationally.

In contrast, there appears to be little (if any) anti-counterfeiting activities by brands that are less counterfeited or not counterfeited. Guided by the seemingly common understanding – counterfeiting is a problem that only damages counterfeited brands – brands that are less counterfeited or not counterfeited do not invest in anti-counterfeiting activities until they are counterfeited. This apparent practice of “one should fight one’s own battles,” certainly seems to be pragmatic, particularly from a financial perspective. But are any brands truly immune from the impacts of counterfeiting? This is a vital question with significant practical as well as theoretical implications which, unfortunately, remains under researched. Approaching this question by reviewing research on branding, decision-making strategy, and data on counterfeit-related consumption behavior suggests that even less-counterfeited brands may be affected by counterfeiting. Business practices assuming some brands are immune from the effects of counterfeiting may not lead to desirable financial outcomes.

Counterfeits are not necessarily always in direct competition with heavily counterfeited brands, particularly in the case of luxury brands. Consumers who buy luxury brands are mainly motivated by the desirable status associated with these brands. Most luxury brands are consumed in public situations to signal social status or desirable experience. Counterfeits bear the status associated with luxury brands, but only if the fact that they are counterfeit  remains hidden from others. When consumers fear the counterfeit nature of goods may be discovered by others, they consume counterfeit goods more discreetly at home or otherwise away from public scrutiny (Bian et al., 2016). Myths of luxury brands will lure some consumers to purchase counterfeits who are reluctant to pay for or otherwise can’t afford the real brands. For these consumers, purchase behavior is largely motivated by counterfeits’ low price and relatively acceptable quality—product functionality, in other words. Given the price and quality difference between counterfeits and luxury brands and, more importantly, discrete consumption purposes (private versus public consumption), lower priced or poor-quality counterfeits are not substitutes for luxury brands nor are they directly competing with these brands. This viewpoint, although it remains to be empirically tested, is supported by Nia and Zaichknowsky (2000) who report that availability of counterfeits does not adversely affect consumers intentions to buy original luxury brands.

Counterfeits are likely to gain market share from brands which fall into the same price range and bear similar quality. Extant research has revealed a number of motivations for counterfeit consumption. The common understanding is that product (e.g., design and material) and personal (e.g., age and income) characteristics determine consumer willingness to consume counterfeits. My recent research challenges this viewpoint. I discover that, in addition to financial and social-adjustive purposes (Wilcox et al. 2009), self-image enhancement, intrinsic hedonic outputs (“thrill of the hunt” and being part of a “secret society”), and a genuine interest in counterfeit products are the most powerful motivators for buying counterfeits (Bian et al., 2016). Whilst matching or surpassing counterfeits in product features might not be difficult for some brands, they may still fall short in others that counterfeits provide, such as self-image enhancement or thrill of the hunt. Subsequently, counterfeits, if available and acceptable to consumers, grab market share from brands.

Worryingly, consumer appetite for counterfeits may be growing, particularly among the younger generation. Recently, I was invited to give a talk to the newly recruited marketing graduate students about my research. When asked, 78 of the 80 students admitted that they have either willingly bought or would definitely purchase counterfeits if these products are readily accessible. This staggeringly high proportion of acknowledged counterfeit purchase tendency among these young students came as a shock. Just over a decade ago, the large survey data I collected revealed that around 40 percent of consumers would intentionally purchase counterfeits (Bian, 2006). This figure was largely in line with a number of published research articles in the late 1990s and early 2000s; for example, Tom et al. (1998) reported that 30 to 40 percent of consumers were fond of counterfeits, depending on product categories.

Needless to say, there are some obvious discrepancies among these samples. For example, the large survey data were collected from consumers of various ages and backgrounds in the UK, whereas many of the 80 postgraduate students were from overseas, including developing countries where counterfeits may be more tolerated for many reasons, including lower financial status. At the same time, if younger generations worldwide similarly favor and accept counterfeits, then brands have a serious problem. Young people make valuable consumers (if not the most valuable in buying brands) because they will be consumers for many decades to come. They influence future trends given they are better connected through new technologies such as social media and more responsive and adoptive to innovations.

Counterfeits are widely accessible in the marketplace. Counterfeiting is not new but has become more significant in recent decades (Bian and Mountinho, 2011). Despite years of anti-counterfeiting activities, counterfeiting is experiencing an upsurge rather than diminishing. The Organization of Economic Co-operation and Development (OECD) estimated that global value of trade in counterfeit and pirated goods has increased by more than 80 percent in a five-year period and is now worth half a trillion dollars a year. Counterfeiting has evolved into international industry that impacts virtually every product category in recent years, with counterfeits openly accessible to consumers in both developed and emerging economies.

Counterfeits are very likely to be substitutes for brands less counterfeited or not counterfeited and thus are threats to these brands. This viewpoint challenges the notion that counterfeiting only affects counterfeited brands. Indeed, along with several other scholars (e.g., Commuri, 2009; Wilcox et al., 2009), my own published research papers (Bian, 2006; Bian and Moutinho, 2011; Bian et al., 2016) endorse the notion that counterfeits have impacts on four involved communities: consumers, legitimate manufacturers, brands, and society as a whole. But little attention has been given to the possible impact of counterfeits on brands which are less commonly counterfeited. Business practices to date have been guided by the common belief that brands are not affected unless they are heavily counterfeited. I, however, suggest that when counterfeits are easily accessible to consumers, they are very likely to have profound impact on brands that are less or not counterfeited. This viewpoint has yet to be recognized by brands and anti-counterfeiting officials.  Perhaps it is time to bring on board less commonly counterfeited brands in the battle against counterfeiting.