Combating the Menace of Counterfeits
How often do you see a dubious Hermes scarf or a pair of Prada shoes on sale in the street markets?
Counterfeiting is regarded as one of the ‘oldest crimes in history’. The origins of pirated brands of luxury articles can be traced back to 27 AD when a wine merchant named Gaul feigned expensive Roman wines and sold cheaper wine to earn huge profits.
The use of counterfeit products has proliferated enormously, by about 10,000% in the last two decades, to be precise, contributing to the sheer volume, sophistication, and increasing ‘globalisation’ of the counterfeit market.
The International Anti-Counterfeiting Coalition (2012) estimates that counterfeiting is a $600 billion problem representing a sizable and growing percentage of all world trade. Fuelled by consumer demand, this counterfeit market has increasingly been putting an acute burden on companies as they grapple with the intricate challenges of protecting intellectual property rights and safeguarding the integrity of their products.
There are various interpretations of counterfeiting as a concept. Some researchers say that counterfeiting involves imitating product attributes to make them indistinguishable from the original and selling them at a lower price. At the same time, others say that it is the production of copies that are identically-packaged, including trademarks and labelling, to make it seem like a genuine article.
Counterfeiting can essentially be defined as the forgery of a product whose unique characteristics are protected as intellectual property rights.
From the consumer’s perspective, counterfeiting has two forms, that is, deceptive and non-deceptive. Under deceptive counterfeiting, the consumer is a victim of a sham since he/she is not aware of purchasing a fake product. Non-deceptive counterfeiting identifies consumers as active and enthusiastic players in counterfeiting transactions. This form of counterfeiting is commonplace in the luxury brand markets, where consumers are often able to discern the ersatz products based on the differences in price, quality, and distribution channels.
Consumer complicity with counterfeits has attracted vibrant controversy over the years. Price difference is the chief advantage of forged goods since they give consumers the same prestige without making them pay a hefty amount. A significant relationship has been established between the place of origin, consumers’ ethnocentrism, and psychographic variables. Buyers of these substitute goods are usually characterised by low-income levels and, sometimes, low self-esteem.
Brand visibility is equally recognised as a substantial decisional factor in buying intention. Brands that are globally more conspicuous and have ‘loud logos’ are more susceptible to piracy.
Another dimension of counterfeit consumption consists of the mood and situational context of the buyer. For instance, consumers are likely to purchase pirated goods while abroad or on a holiday since these goods can provide an authentic experience to tourist consumers. Tourists visiting Morocco constitute a vital segment of the counterfeit market. Moroccan hawkers are well known amongst European tourists for carrying a wide range of phoney labels such as Chanel, Fendi, and Louis Vuitton. A fake Levi’s shirt, for example, is sold for less than one-tenth of the price of the genuine brand.
The existence of the counterfeiting phenomenon may also be associated with consumers’ ethical and lawful cues. A consumer’s ethical awareness is measured along two axes.
The first is his or her own judgement. This refers to the feeling of pride or culpability arising from the use of cheap knock-offs. A majority of buyers do not perceive any harm and feel less accountable for counterfeit-buying behaviour. Consumers are willing to jettison avowed ethical principles for low prices and other product attributes. Their hedonic motivations far outweigh their ethical concerns.
Many times, ethical constraints may be directly linked to legal punishments. Some buyers hold a lax attitude about legal protection of intellectual property and indulge in counterfeiting transactions despite unscrupulous and illegal underpinnings. For them, breaking the relevant law heightens a sense of pleasure and adventure. As the product attributes’ salience increases and becomes progressively alluring, buyers also become ready to take risks related to dissatisfaction with the product as well as legal violations and sometimes, health risks too.
The second axis comprises societal judgment. The ‘status-seeking’ paradigm is often applied to explain the motivation of proletariats to purchase rip-offs since they seek to imitate consumption standards of their wealthy counterparts to communicate a desired self-image and provide a self-concept reinforcement, a visible proof that the consumer can afford premium prices. These consumers construct an identity wherein they perceive themselves as savvy individuals.
Social influence can have both a negative or positive stimulus in consumer purchasing intentions and conformity motives. ‘Without a brand, nobody looks at you in the street’-
This general consumer opinion throws light on the fact that consumers are more interested in the social necessity of luxury than the luxury in itself.
For instance, Chinese society has traditionally focused on social behaviour over the personal, which explains the extreme sensitivity of Chinese consumers towards the attention and reaction of others.
In the backdrop of a Confucian society, Chinese consumers behave irrationally while purchasing luxury brands because these brands are something similar to ‘must haves’ for them to gratify vanity. However, due to highly uneven wealth distribution and the consequent burgeoning gap between the rich and poor, the desire for these brands with exorbitant price tags remains unfulfilled. This contributes to a dissonance whereby consumers at lower levels of the wealth spectrum resort to replicas for manifesting their desired status.
While China, North Korea, and Taiwan have been acknowledged as the famous ‘made in’ for counterfeit products, there has been a shifting pattern to regions and countries hitherto unfocused as hubs for distributing fake brands. An example of such a region is the Middle East and North Africa region (MENA), which is flourishing in the international trading scenario and concomitantly shifting astronomical volumes of counterfeit goods to Europe, exploiting the contiguous and porous borders with the continent.
The number of dummy products seized at the European Union Border rose from 10 million in 1990 to 41 million in 2016 with a total worth of $780 million. Should the growth of this illicit trade remain constant, according to the Organization for Economic Cooperation and Development, total losses for industries of original goods should be profoundly debilitating. The US industries would be the most drastically impacted with a possible loss of more than 75 million jobs per year.
Consumers seem to value quality in their intention to purchase counterfeit items. If the quality of replicas is fairly perceived in terms of relative quality, consumers’ disposition to purchase increases manifolds. This suggests a critical challenge for companies. A strong brand is a ‘moving target’ for counterfeiters, especially when it appears to serve ‘social adjustive’ rather than ‘value adjustive’ functions.
Marketing communications should emphasise product credibility and ethical credentials, as well as the pitfalls of buying dummies and the hidden human costs of a counterfeit economy which would act as a negative enforcer for this type of purchasing behaviour. Communication campaigns should be aimed at increasing consumer awareness of the superior quality and the value delivered by authentic brands.
Public education and enlightenment could be the key to fight the demand for counterfeits. Companies should adopt marketing strategies with sensitivity to the operating environments of consumers in developing countries. Some companies have begun adopting a product adaptation strategy as opposed to a product standardisation strategy to act as a countervailing factor on behavioural intentions towards purchasing rip-offs.
High performance, durability and low health risk should also be a part of a company’s promotional message. Brands should improve a consumer’s product usage experience which refers to cognitions, fantasies, and sensations evoked by brand-related stimuli. They should keep design high on their agenda whilst developing new products. The more distinctive the design is, the more difficult it becomes to imitate it, especially using low-scale technology.
In all its ramifications, counterfeiting strikes a massive blow to the most valuable asset of an enterprise, that is, the brand image. The symbolism of a strong brand image lies in how it underpins the brand's strength in the market. Companies cannot overcome this obstacle alone. Counterfeiters are imaginative, flexible and above all, pursue continuous adaptation to the market much like leading innovative companies do.
There is a public policy dimension to this issue. Governments have an imperative role in protecting all property rights and curbing the flow of imitations along with multilateral agencies like WTO.
For instance, in an effort to crack down on counterfeit trade, raids in New York alone resulted in a seizure of over $200 million worth of bogus brands and about 34% of national intellectual property. Moreover, in many developing countries, anti-counterfeiting legislations exist but have glaring lacunae which are never resolved.
However, tackling counterfeiting is not an exclusive preserve of any single entity (government, business, or para-governmental agencies) but a shared obligation. There is a lot at stake for manufacturers, consumers, and the industrial nations if the peril is not effectively checked.
The underlying issue with counterfeiting is not so much about consumer protection from potential risk implications per se. The real issue is much more convoluted. It is about creating a fair and safe environment for the main actors in global trade and society.
Apart from the dire consequences for corporates and genuine item innovation and economic welfare, counterfeit production also escalates illegal practices in the unorganised sector where workers are denied their fundamental rights, and there is little or no attention paid to social or environmental concerns. Equally grave are the skyrocketing social problems which include drug trafficking, terrorism, and human and capital insecurity.
For instance, Morocco’s counterfeiting industry has been linked to organised criminal clans who smuggle these goods and re-export them to Europe. The demand for counterfeit goods shows little or no sign of abatement. Instead, it appears likely to increase remarkably in tandem with the growth of the country’s tourism industry.
Essentially, the fight against counterfeiting is a legal battle to promote marketplace righteousness and a conflict for the mind of the consumer.
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