FEATURE: THE INS AND OUTS OF COUNTERFEIT COMPETITION
Counterfeits: the vexatious impostors of luxury fashion are now proving to be as vital as some fashion designers’ own products. A study recently published in Market Science academic journal examines 31 brands that sold fashion leather and sport shoes in China between 1993 and 2004. The Asia-Pacific region, particularly China, is a favorable area for researchers due to the major influx of counterfeits after 1995 in the Chinese market.
Co-author of the study Yi Qian, professor at University of British Columbia Sauder School of Business, comments: “Established companies don’t sit idly by while they are copied shamelessly. They react by improving their products to set themselves apart from their illegal competitors.”
The study, “Untangling Searchable and Experiential Quality Responses to Counterfeiting,” shows that amidst a moderate amount of counterfeiting, fashion brands will not only not accept competition from these competing fakes but will actively improve their products to capture “high-valuation expert consumers if the innovation cost is not too high.”
The study states: “When counterfeiting grows too rampant and fools too many consumers, the market incentives turn….The authentic brand will invest to innovate and differentiate itself from counterfeiters in terms of searchable quality….Counterfeiting induces the authentic producer to invest more in the product’s searchable quality (e.g., appearance) and less in experiential quality (e.g., the functionality of the shoes, not apparent to consumers at the time of purchase).”
Qian further comments that this research also shows that in addition to counterfeit goods, spurring innovation is proving to assist brands in advertising by acting like buzz agents to promote high-end brands to vertically integrate their distribution methods and open licensed specialty stores.