Moneycontrol
Jul 15, 2017 10:44 AM IST | Source: Moneycontrol.com

Book Excerpt: How e-commerce is boosting luxury counterfeit market

Growing at a compounded annual growth rate of almost 40-45 per cent, the counterfeit luxury products market in India is likely to more than double to RS 5,600 crore from the current level of about RS 2,500 crore.

Book Excerpt: How e-commerce is boosting luxury counterfeit market

The following is an excerpt from Decoding Luxe, a book by Mahul Brahma that explores the various facets of luxury brands.

Click Click

I ended up breaking the heart of a very close friend with this habit. She was sporting a Cartier gold watch. I did the same thing with her and, to my shock, realised it was a first copy. She very confidently told me it isn’t as there was a certification of authenticity given by the company and the portal that she bought it from. The price she had shelled out was just a fraction of the original price, but it was significantly more than of a first copy. The news that she has been duped by an e-commerce firm broke her heart.

On Facebook you might encounter a page where they are selling luxury products at a tempting discount of 70 per cent or 80 per cent all-round the year. The product ranges from shoes to watches to handbags of the luxury brands like Rolex, Louis Vuitton, Gucci, Mont Blanc and what have you. Tempting! So I decided to check them out. To my utter dismay I found that these products were counterfeits. And some were not even on the catalogues of the brands. These counterfeit versions were a result of overflow of creative juices of the craftsman. To an untrained eye, it will lure you and you will fall into its trap, just like my friend did. I was happy when I came to know that LVMH Moët Hennessy Louis Vuitton and Mont Blanc have noticed as well and have filed a lawsuit against a Chandigarh-based ecommerce firm in Delhi High Court.

The counterfeit market statistics

Dear Reader, let me give you a sense of the size of the market with some statistics. Growing at a compounded annual growth rate of almost 40-45 per cent, the counterfeit luxury products market in India is likely to more than double to INR 5,600 crore from the current level of about INR 2,500 crore.

A reason why the market of luxury fakes is growing at such a fast pace is the advent of e-commerce platforms selling them at lucrative prices. Web shopping portals account for over 25 per cent of the fake luxury goods market in India. For instance, first copies of these luxury brands are easily available on ***offer.com, an online portal, within a week of official launch of the original collection. Even other platforms like Qui** and O** offer replicas. While Qui** has a replica Hermes belt for Rs 350, Watch**.com or the Facebook page watchmania****** stocks first copies of around 20 brands, including TAG Heuer, Omega, Rado, PatekPhillipe, Chopard and Bvlgari. These are just a few of the numerous options from which you may choose from and all from the comfort of your home with a doorstep delivery and cash on delivery provision.

The size of counterfeit luxury industry in India is currently about 5 per cent of the overall market size of India’s luxury industry which currently is worth over $14 billion. With a share of about 7 per cent, fake luxury products account for over $22 billion of the global luxury industry worth about $320 billion.

Luxury counterfeits are not a new phenomenon, but with technological advances and sophisticated new ways to reach consumers, the business is increasing rapidly.

Historically, luxury counterfeits were often shipped in large cargo containers and passed through numerous middlemen before reaching the final consumers. However, now counterfeit sellers set up online presences on auction or marketplace sites and ship luxury counterfeits directly to consumers. They also use the internet and social media tools to generate web traffic and to divert consumers to rogue e-commerce websites selling their goods which often have the same look and feel as the brand owner’s site. Compared to the purchase of a fake handbag on the street, the purchase of a bag online makes it harder for a consumer to tell whether the product is genuine. An online advertisement by these portals for a Gucci bag could show a photo of a genuine Gucci bag, but the purchaser would actually receive a fake one. The counterfeit seller may create pseudo product reviews, blog entries and rogue social media profiles to enhance its legitimacy. Susceptible consumers may fall for this fake content.

According to a report by Anna Maria Lagerqvist and Hanna Bruck in Valea International, in 2009 Eurobarometer statistics, 22 per cent of EU citizens have unknowingly bought counterfeit goods. As shopping online is considered entirely legitimate, online counterfeit products may attract consumers who would never purchase a Louis Vuitton handbag in a dark alley. The internet creates a situation where the marketplaces for counterfeit products and for the genuine article are suddenly the same.

Further, online shops give the buyer a sense of anonymity and impunity. Given the seemingly boundless scope of the internet, luxury brand owners come across anonymous online counterfeit sellers every day.

Over 80 per cent of the imitation luxury products being sold in India comes from China and most of these consists of handbags, watches, shoes, clothes, hats, sunglasses, perfumes and jewellery.

According to a 2012 report on the luxury retail market by Cognizant, brands such as Kate Spade and LV typically hire private investigators to find where counterfeits are sold. On the other hand, Indian stores like Kitsch, offering high-end labels inform the head offices of brands when they come to know about an individual or a store selling copies.

Quality difference among fakes

There is a world of difference between replica, first copy and fake. There are huge qualitative differences between counterfeits. In my recent visit to Bangkok, I was exploring the counterfeit market. The two brands that dominate the world of replicas are Rolex and LV.

Take for example a Rolex watch. I was checking out a Rolex all gold Day Date counterfeit across quality standards. The difference in prices between a first copy and a fake is 75 per cent. The first copy was heavier, the steel quality was superior, the gold plating was much neat and there was even an identification number! While the fakes even had models that never made it to the catalogues of Rolex, the first copies were sold with the original catalogue by their side. Very impressive indeed!

Similarly, was with the replicas of Louis Vuitton. Even to a trained eye the monogram or Damier Ebene will be hard to decipher.

On the online platform however, the fakes dominate. The first copies and replicas (in the true sense) can’t make a mark as on the online platform, no customer will be ready to pay the premium. While a Rolex fake may be available at INR 5,999, a first copy will cost at least double that, for difference that are not visible to untrained eyes, especially while comparing online.

However, some counterfeit ecommerce sites take a contrarian view. They think that selling first copies at a higher price will be able to make them more credible as the prices are double compared with replicas on the other sites and so that will add to credibility. Moreover, as the quality is far better they think they will get repeat customers.

In defence of counterfeits 

At times I ask myself whether these brands have a legitimate justification for charging such a prohibitive premium for their brands.

A few counterfeit watch dealers have showed me copies of watches with complicated movement and how their watchmen were able to replicate to the very details of the original. The cost of their labour? Well, just a fraction of the cost of the labour of a legitimate watchmaker with a luxury brand. When I see the detailing my heart goes out to them, but not to the dealers.

The counterfeit market is eating into not only the pie of the luxury brands but also into pie of the premium brands. Say if someone can afford a Tissot and aspires to wear an Omega Seamaster, gets a Rolex first copy at INR 5,999 online. Tissot and Omega both lose the battle, for no fault of their’s.

From the buyer’s perspective, understand this, the difference between the cost of making a Gucci or Louis Vuitton handbag and the MRP is significant and that is the brand value. The buyer is getting a cheap quality leather handbag but along with that the “perceived brand quotient” in a fake at an affordable price and that too at their doorsteps.

Luxury (counterfeit) is just a click away.

To conclude, let me modify a bit a quote by Gertrude Stein:

A fake is a fake is a fake is a fake.
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