A brief report about counterfeit branding of goods and how it affects the ecosystem.

1. Counterfeit branding: Impact on luxury brands,
consumers and the retail ecosystem
Submitted by Arnab Aditya Sethi (PGP/17/136) as a part of the PPBM Course Assignment

2. 2
Contents
Abstract...................................................................................................................................................3
Introduction ............................................................................................................................................4
The ‘Counterfeit Branding’ Market.........................................................................................................4
Motivations for Counterfeit Branding ....................................................................................................5
A) Manufacturer’s Perspective ...........................................................................................................5
B) Consumer’s Perspective .................................................................................................................5
Impact on Original Brands and Brand Equity..........................................................................................6
How to prevent counterfeit branding?...................................................................................................6
A) Brand Perspective...........................................................................................................................6
B) Consumer Perspective....................................................................................................................7
The big question: Does counterfeit branding help the original brand in any way? ...............................7
Conclusion...............................................................................................................................................8
References ..............................................................................................................................................9

3. 3
Abstract
Tin this article we shall discuss about counterfeit branding. The main reasons behind
counterfeiting and the motivations of this kind of a branding shall be discussed. The impact of
counterfeiting on famous brands and its brand equity could be huge. Big brands suffer a lot due
to the cheap knockoffs present in the market, ultimately hampering their brand value. This
article shall also cover another interesting perspective of counterfeit branding, whether the
impact of counterfeits is always negative on the original or could it possibly be positive as
well? The article would also throw some light about the market size of counterfeit products,
the products affected by counterfeiting, different causes for counterfeit branding and the impact
of counterfeit branding on brand equity of a company in this article.

4. 4
Introduction
Counterfeiting refers to manufacturing goods which often look very similar to a high quality
product from a well-established brand. Generally, most of the counterfeit products are of low
quality and are visual replicas of the genuine products. Counterfeit products are sold under
trademarks which are very similar to a genuine brand and distinguishing it product from the
genuine product becomes very tough. Most of the counterfeit products sold in the 90s and the
early 2000s were cheap knockoffs of highly reputed and valuable luxury products. Nowadays,
the scenario is much more complex with counterfeiting becoming rampant not only in the
luxury segment but also across FMCG and retail sectors, which is quite alarming for big brands
and labels as they could be the next target for counterfeit goods manufacturers.
The ‘Counterfeit Branding’ Market
Although there are laws preventing the production, sale and purchase of counterfeit products
in most of the countries, the market for counterfeit brands seems to be growing globally. In
most of the countries, counterfeiting is considered to be a theft of intellectual property and
results in severe punishments. Earlier, these fake replica products were mostly sold on the
streets but nowadays with the advent of technology, these products are available in online e-
Commerce stores abundantly. With the advent of technology, it has become easier for these
manufacturers to sell replicas and knock offs easily and globally, making it difficult for law
enforcement agencies to nab the culprits.
Counterfeit products were typically related to high quality and coveted luxury brands like Louis
Vuitton, Rolex and Chanel earlier. The product categories were generally perfumes, leather
accessories like handbags and wallets, gemstone studded watches and jewellery. The dynamics
of this market has greatly changed now and according to a World Customs Organization report,
Nike and Apple were the most counterfeited brands in 2013 followed by brands operating in
different sectors such as Mac cosmetics and Walt Disney. This makes it clear that the
counterfeiting industry is not limited to fashion and luxury anymore, it has spread out to
technological products and daily wear items such as shoes. In the consumer beverages sector,
Coca Cola is the most replicated brand. Not only beverages but even chocolates, cakes, eatables
and what not are being sold by fake branding.
According to a report released by UN titled “Transnational Organized Crime in East Asia and
the Pacific”, more than 70% of the counterfeit goods confiscated comes from China itself. The

5. 5
total worth of the counterfeit brands is estimated to be approximately 2% of the global world
trade, almost 600 billion USD. Upcoming brands need to incorporate strategies that will help
them effectively deal with this menace.
Motivations for Counterfeit Branding
A) Manufacturer’s Perspective
The question now arises that why do companies pursue counterfeit branding? Not only the
cheap knock offs but many entry level brands also try to imitate the trademarks of premium
brands to get customers on board. Countries such as China have huge manufacturing facilities
which makes the work easy for counterfeiters. The main reason behind this is to exploit the
brand value of premium products. Manufacturers know that top brands create iconic products
with a lot of branding expenditure and R&D activities which they won’t be able to pursue. So
they take the easier route and using the well established brand and its name, manufacture
replicas and sell it through various ‘black market’ channels. By this way, counterfeit
manufacturers obtain a steady cash flow and are on the hunt for another brand. Lower quality
of products coupled with cheap labour keeps the price low and provides them with huge profit
margins.
B) Consumer’s Perspective
Replicas or counterfeit branded products sell easily in the market and that is the reason why
people manufacture those. There is as much demand or even more compared to the supply in
these kinds of products. The primary reason is aspiration of premium and luxury products.
There are lots of customers who aspire to own a luxury product, such as a Michael Kors watch,
will simply not be able to afford it. In that case, they look for replicas or counterfeit branded
products, which copy the original trademark and satisfy their urge of showing their status
symbol using the exclusivity and luxury associated with the original item. It is not always that
consumers look for knockoffs. Sometimes, the consumers are cheated to buy a fake item and
they do not even realize it. The most alarming issue is that many consumers might have been
buying fake products since long but would not have realized it yet due to the advancements in
technology, which allow fake products to be very very similar to the original one. Hence, a
customer buys replicas of branded goods either by knowing the fact that it is fake but is still

6. 6
useful to satisfy his status symbol needs or the fake brand could be cheating the customer
without his knowledge. These are two completely different scenarios but have one thing in
common: they impact the actual brand and its profits in question.
Impact on Original Brands and Brand Equity
Counterfeit products are manufactured to gain huge profits by leveraging from a well-known
and established brand with high brand equity. The presence of knock offs in the market can
hamper the brand value negatively by affecting the exclusivity and uniqueness associated with
many luxury and premium brands. Also, imitating the trademark of the brand essentially puts
the brand at a risk because the manufacturers of fake products do not care about the quality of
the products, often offering poor services to customers, thereby diluting the brand equity in
minds of customers unable to differentiate between the genuine product and the knockoff.
A brand requires a lot of time, money and effort to develop its product range and build its brand
personality. Counterfeits have no such expenditures or efforts, nor is their brand value at stake.
They just identify high potential brands and copy its trademark and products, often leading to
a very low quality product and dampening the reputation of the genuine products. In many
cases, many luxury brands can lose their brand premium and market share, if knockoffs are
kept unchecked. Revenue losses are inevitable as brand loyalty is distorted and brand equity is
destroyed. Luxury brands invest large amounts of capital to ensure each and every aspect of
their product is quality checked to highest standards to command the price premium, which
goes in vain.
How to prevent counterfeit branding?
A) Brand Perspective
From a luxury brands perspective, it is imperative to bring a check on the global appetite of
customers for cheap replicas to win the fake branding war. As long as there is demand, illegal
suppliers will carry on with their business and find loopholes to escape punishment. In most of
the countries, there are stringent laws related to both, sale and purchase of counterfeit products.
Brands should take the legal route to curb the replica market. Apart from taking action on the
suppliers or manufacturers, the customers of fake products should also be dealt suitably if it is
confirmed that he/she is knowingly purchasing an illegal product. The quantity of counterfeit

7. 7
products confiscated by international excise departments globally are increasing at a healthy
rate every year. Brands should cooperate with these agencies and try to nab all those involved
in illegal copying of their products and trademarks. Apart from that, a certificate of authenticity
with a differentiating hologram could be provided with the product to make sure that loyal
customers of the brand do not fall victim to fake products. As for the other lot of customers
wanting to buy counterfeit goods intentionally, negative reinforcement should be created using
the legal channel with stricter punishments. If not completely stop counterfeit branding
activities, these steps will act as a barrier for new entrants in this industry.
B) Consumer Perspective
Many consumers fall in the trap of cheap counterfeit products due to the irresistible deals and
discounts offered on these items. To prevent these, consumers looking for a specific brand
should purchase only from the brand stores or authorized retail outlets. In case of online
purchases, consumers should be well versed with the return policy and purchase from a reputed
seller portal. According to many researches done in this field, the thumb rule is that if any deal
seems too good to be true, then most probably it is. Many brands have a unique identifier such
as a serial number on every product. Consumers can easily confirm the serial number with the
brand directly to make sure that the item is not a fake. This is true in case of electronic devices
as well as premium luxury products. However, it becomes dicier in case of apparels where
identifying original from duplicate trademarks could be difficult for some. In such a case, it is
always advisable to purchase from an authorized channel to prevent from being fooled by
bogus brands using trademarks of other reputed ones.
The big question: Does counterfeit branding help the original brand in any
way?
After going through many pieces of research papers and other relevant literatures on counterfeit
branding, a few questions pop in my mind such as even after having legal power in hands, why
are many brands not very eager in fighting counterfeit branding and fake products? Is there
some kind of benefit to these brands due to their replicas being circulated in the market? What
kind of advantage would these brands be getting over other brands not being ‘counterfeited’?
There are some missing parts of the puzzle which is not clear from the top. However, I believe
that there could be a few reasons for this.

8. 8
Firstly, for luxury brands, there are two different potential segments of customers. One is the
upper class person who connects well with the brand and purchases the products because he/she
finds the brand personality and values matching with their own. The second set comprises of
people who cannot really afford to buy the products because of their very high price and it
could be a long term aspirational product for them. In order to satisfy their symbolic needs,
they have no option but to purchase a replica, if available, and satisfy their needs. However,
the brand value is not generally adulterated in the eyes of the first set of exclusive customers
because they are connoisseurs of the brand and they can easily identify if a product is fake just
by looking at it. There is also almost no cannibalization by counterfeit products because the
two sets are completely different. Customers buying genuine products will never buy a fake
one and vice-versa. In the meanwhile, these fae products provide visibility to the brands in the
market. For example, Louis Vuitton is one of the most famous and biggest brands in luxury
accessories space and ironically, it is the most counterfeited brand in its segment. Similarly,
Apple is the most famous and most counterfeited technology brand. The question that still
remains is, whether popularity and brand value of the brand is responsible for the counterfeiting
or whether counterfeiting of these products have helped them gain visibility in the market
encompassed by hundreds of other brands.
Conclusion
From the article, it can be concluded that “Counterfeit Branding” is a huge market and it is
growing steadily. This means that the demand for counterfeit products is also growing with
more and more customers ready to buy the replica and show off their “status”. This affects the
actual brand and in some cases, could even cost the brand more than they had estimated. Hence,
brands need to be more proactive and take legal support to eradicate this practice. Consumers
should also make themselves aware before purchasing products prone to counterfeiting. At the
end, an intriguing question arises that whether brands have any kind of an advantage if their
trademark is being imitated and products counterfeited?

9. 9
References
 Cademan, Arvid et al (2012), The effect of counterfeit brands on luxury products: An empirical
investigation from the consumers’ perspective, Linnaeus University School of Business and
Economics.
 Wilcox, Keith et al (2008), Why do consumers buy counterfeit luxury brands? , Latin American
Advances in Consumer Research (Vol. 2)
 Kapferner, Jean-Noel and Michaut, Anne (2014), Luxury counterfeit purchasing: The collateral
effect of luxury brands’ trading down policy, Journal of Brand Strategy Vol 3, No 1, 59-70
 Penz, Elfreide and Stottinger, Barbara (2005), Forget the “Real” Thing–Take the Copy! An
Explanatory Model for the Volitional Purchase of Counterfeit Products, Advances in Consumer
Resarch (Vol 32)
 Hamm, Kathrin (2009), Effects of counterfeiting on the image of luxury brands in China, China
Business and Research 2009
 P. Chaudhry and A. Zimmerman (2013), Protecting Your Intellectual Property Rights, Springer
Science+Business Media New York