Knockoff designer bags help brand owners by signaling to high-end consumers the desirability of the original item as part of an emerging fashion trend.
In a fascinating paper, legal scholar Jonathan Barnett explored how, in the fashion industry, brand owners benefited even when knockoff artists took their designs and counterfeited their brands.
Barnett argued that knockoff designer bags help brand owners by signaling to high-end consumers the desirability of the original item as part of an emerging fashion trend. Their presence on the streets signals that the dress, handbag, or shoes they are aping are especially desirable. Counterfeits communicate that even those who can’t afford to have the real thing still want it. That’s a free ad for the branded product.
CHANEL handbags and LOUIS VUITTON sunglasses, counterfeits do not hurt the sales of luxury brands.
Other studies support the power of knockoffs as a form of advertising. A two-and-one-half year study by Renee Gosline of MIT looked at people who purchase counterfeit luxury items. Like CHANEL handbags and LOUIS VUITTON sunglasses, counterfeits do not hurt the sales of luxury brands so long as they can distinguish between them.
Indeed, Gosline found that knockoffs are often used as “trial versions” of the high-end genuine branded item, with over 40% of knockoff designer bag consumers, ultimately purchasing the real brand.
People who buy them and live with them have a significant probability of being converted to the brand.
Gosline’s study suggests that knockoff designer bags are a very effective form of advertising: people who buy them and live with them have a significant probability of being converted to the brand and buying the real thing once they can afford to do so. Copies, in short, are a kind of “gateway drug” that leads to consumption of the harder (or at least, more expensive) stuff. What’s more, every time consumers go out with their fake item, they’re publicly displaying the brand’s desirability, sparking trend-driven consumption that spills over—or up—to the original version.
Gosline’s and Barnett’s findings are broadly reinforced by other recent research. A study by economist Yi Qian for the National Bureau of Economic Research looked at data from 31 branded shoe companies and several counterfeiters operating in China. The study likewise found that counterfeiting had a surprisingly positive effect on the sales of high-end branded items.
The tendency of counterfeits to advertise the branded product’s desirability—what we will call the “advertising effect”—outweighed any substitution effect, by which we mean the effect of consumers purchasing the counterfeit instead of the original. The substitution effect is harmful to creators, and the advertising effect is helpful. And only for low-end branded products did the substitution effect outweigh the advertising effect.
In short, knockoffs of branded goods—counterfeits—can have a counterintuitive effect on originals. While these copies can steal some would-be buyers of the original, they can also help create new buyers through the advertising effect. Some counterfeit buyers “graduate” to the real thing, whereas others who never buy a fake become buyers of the original because the counterfeits serve as advertising.
Being copied can reinforce a reputation as an innovator and elevate a luxury brands standing in the public eye.
This point is not limited to formal brands—that is, to the kinds of brands protected by trademark law. The advertising effect’s basic dynamic can also be seen in individual creators, who can build a valuable name for themselves as innovators.
Being copied can reinforce a reputation as an innovator and elevate luxury brands standing in the public eye. Advertising via copying is perhaps the most potent endorsement a brand can hope for. Few people believe that the celebrities in glossy GUCCI ads consume the product they are shilling: we are too jaded for that, even if the halo effect of a star somehow renders the item in question more desirable. In this sense, conventional advertisements are inherently limited because they rarely convey authentic endorsement. By contrast, a copy is as sincere an endorsement of quality and desirability as any creator could hope for.