Some research into the psychology of counterfeit goods that I was involved in has received a some press coverage recently (please see the links at the bottom of this post). I thought that it might be useful to contextualize the research and the subsequent coverage with some reflections on the fundamental factors that underpin the hugely lucrative fake fashion and luxury brand market.
An explanation of the rise of counterfeit fashion and luxury products requires a brief exposition of the concept of branding. Products are like onions: they have layers. There are basically only three layers, but like an onion they are stuck together and sometimes they aren’t easy to distinguish. There is the intrinsic core of the product or service, which provides us with the principal utility and function (the body and engine of the car; the actual flight on the airline). Then there are slightly more ephemeral elements: the design of the product, its fashionability, ergonomics etc. Then there are the other image elements, of which the brand is often the most important (these image elements are sustained by reputation, general social interaction, marketing communications, celebrity endorsement etc.). The brand part has been important for a while but we’ve gone brand mad since 1945. Branding is more conspicuous than it has ever been. These days children are socialised into brand wars from a very early age. We judge people by their brands.
Now think about Nike. If you bought the company, what would you actually get for your multi-billion dollar spend? You’d get a few shops and offices, not much real estate (manufacturing is contracted out to Asian companies whose employees are cheaper than those in the US) but also the principal staff and their expertise. The company is essentially about product development and brand management, and this model of operation is now quite common (e.g. Burberry). You’d be paying for the brand first and foremost. Yes, most of your dollars, pounds, euros, yen, krona, shillings or rands would simply buy you the rights to the logo and its associations. Think about that for a second. Why would you part with billions for a tick logo and a word that looks like a typo of Mike? It’s because the brand is worth it; consumers value it and are prepared to pay premium prices for it. Many want to be associated with it. They may genuinely like its products and believe that they are better – because a good deal of money goes into those designs and product development. It hasn’t come cheap. Nike spent $2.75 billion, yes billion, on what it calls ‘demand creation’ in fiscal year 2013 (credit crunch? what credit crunch?). That’s a lot of money on marketing communications (ads, sponsorship, celebrity endorsement etc.).
Where you find things of value you find crime. Counterfeit products are an attempt to cash in on value created by others. Making a counterfeit luxury brand handbag is easier than making a counterfeit helicopter. An LV bag is purchased to display, the brand and the design are the badges and they are readily copied. The consumer who buys a counterfeit bag is cheating the company and the rest of us. They want the kudos without the cost. However, we are all to blame because we have demonstrated our voracious appetite for brands conspicuously consumed that produce significant margins for the brand owners. This creates the perfect climate for the counterfeiter. They copy the logo and design, produce it cheaply and sell it for less (but still with significant margins) – but without investment or quality control.
However, the consumer provides the demand and without this there is no supply. For insights into the psychology of buying counterfeit goods and recent press coverage of research published with co-authors please check out the following links.
A note on copyright copyright