The normalization of brands knockoffs and counterfeit goods: a threat for international companies?

Nowadays, brands knockoffs are well established and counterfeit products are literally everywhere: you could be wearing, using, playing, or seeing one right now.

But what is a counterfeit product? Here is a definition, by Oxford dictionaries: "Made in exact imitation of something valuable with the intention to deceive or defraud."

The international counterfeit market is huge, its sales is huge with sales totaled $461 billion in 2013, according to the Organization for Economic Cooperation and Development. 

Below are the figures from 2014 about counterfeit goods entering the US, with the origin of the fake commodities and which kind of product entered the country.

The brands most often targeted by knockoff companies are Rolex, Louis Vuitton, Ray Ban and Nike. These four firms have one thing in common - they sell high added value products.

As stated in the 2018 Counterfeit Report, "China produces 80% of the world's counterfeits".

The economic politicies led by the actual President of The United States of America, Donald J. Trump, with the threat of an increase in tariffs towards China, are favoring the spread of such products. Indeed, it is known that counterfeit products usually enter the US by clandestine ways, avoiding customs authorities and any control over the merchandise. This means that the tariffs are being bypassed and the counterfeit goods can be sold much cheaper than authentic products.

If at first glance it may seem inoffensive to buy counterfeit goods, the consequences are dire for the firm whose product and brand the knockoff company copied, but also at macro level in the wealthier countries where the real products are made. Factories can close, economic dismissals are a possibility as well, but the real problem lies in counterfeiting pharmaceutical products which are not checked out and represent a health danger for the populations. The knockoff companies and counterfeit goods can also damage a firm's image and economic situation in their home country, but the case can also happen when said company tries to enter a new market in a targeted country.

Example: L’Occitane en Province

L'Occitane en Provenceis a French company, created in 1976 in Manosque, specialized in beauty and organic cosmetics products. It has been very successful over the years. So successful, in fact, that it was in 2010 the first French firm to be floated on the Hong Kong Stock Exchange (and the second foreign company regarding Hong Kong).

The firm had to compete against knockoff companies while entering the Chinese market in 2005, when the time came to expand and internationalize the company. The knockoff competitors of the French firm used its concept as a base for the creation of their products, packaging, store front and even their website layout.

L’Occitane en Provence opted for the creation of several stores across China, to make the customer see the difference between the French company and the Chinese knockoffs. In other words, to spread awareness. These stores were situated in strategic locations across the country. For example, one of the first L'Occitane' store was built in Shanghai’s international airport. The company could have gone to trial with these firms, but they considered the process too expensive and an administrative headache. In the end, their strategy paid off as the company gained market share in the following years. Chinese customers now usually recognize the French firm and its high-quality products from the counterfeit ones.

With this ever-growing counterfeit market, we have to ask ourselves: will it ever stop? And  if so, by which means?

Allan C.

Sources:

-          CNN Business, 04/18/2016, “The ‘fakes’ industry is worth $461 billion” https://money.cnn.com/2016/04/18/news/economy/fake-purses-shoes-economy-counterfeit-trade/index.html

-          The Washington Post, 09/19/2018, “Trump’s trade war brings unexpected boom to knockoff designer bags from China”

https://www.washingtonpost.com/world/asia_pacific/an-unexpected-winner-from-trumps-trade-war-knockoff-designer-bags-from-china/2018/09/19/69d8fd80-b667-11e8-b79f-f6e31e555258_story.html?noredirect=on&utm_term=.c77894d46461

-          Le Monde Economique, 08/04/2006, ’’Les déboires de l’Occitane en Chine’’

https://www.lemonde.fr/economie/article/2006/04/08/les-deboires-de-l-occitane-en-chine_759641_3234.html

https://www.washingtonpost.com/world/asia_pacific/an-unexpected-winner-from-trumps-trade-war-knockoff-designer-bags-from-china/2018/09/19/