How counterfeit goods affect the fashion industry

Counterfeiting is a huge problem for the fashion industry, and it's only getting worse. In fact, the days of low-quality counterfeit are over. Consumers today may unknowingly stumble upon products that are copies so similar to the original that they are indistinguishable. In a recent survey by Certilogo 72% of consumers that had recently bought a fake product considered it to be practically identical to the original article. Luxury brands are particularly affected by this phenomenon.

In this article, we'll explore how counterfeiting affects the fashion industry, and what brands can do to protect themselves and their customers.

The problem of counterfeiting in fashion

The counterfeiting of fashion products is a global issue that continues to grow. It is estimated that:

• About 20% of fashion products advertised on social media platforms are fake
• Up to 3 in 10 fashion purchases are fake, and 8 out of 10 fake products bought were purchased online (Source: Certilogo data)
• In 2020 alone, the fashion industry lost more than $50 billion due to fake products; while the global counterfeiting industry was expected to hit $4.2 trillion by 2022;
• The most counterfeited products are clothing, followed by cosmetics and personal care, watches and jewelry, handbags and luggage.

Why people buy fake products

The reasons for this growth are different.

First of all, technological development has given counterfeiters the tools to produce seemingly perfect copies of original products. In addition, the internet is an inexhaustible source of photos and information for the counterfeit fashion industry.

However, consumers also have a certain responsibility. People are always attracted to exclusivity and nothing is more exclusive than a bag or a pair of shoes from brands like Gucci or Chanel. Social pressure makes people want things that aren't widely available, but most of them can't afford them. This is especially true for young people. Hence, a portion of consumers knowingly purchase counterfeit products in order to possess status symbols for little money.

However, 50% of consumers that bought a fake product were, do so unwillingly, and believed that they were purchasing the genuine article. (Source: Certilogo Data).

Indeed, counterfeiters are very good at deceiving consumers. They are able not only to create perfect copies of original products, but also perfect copies of brands' official online stores.

With the growing habit of buying online, also driven by the effects of COVID-19, users often end up shopping in online marketplaces that have no way to guarantee the authenticity of products.

Finally, luxury brands may outsource production to suppliers in third countries who rely on cheap labor to produce large quantities of goods at a relatively low cost. However, they have little or no control over their products once they leave the factory, leaving room for malicious practices.

The impact of counterfeiting on the fashion industry

• Counterfeiting undermines the unique selling proposition of luxury brands

The USP of luxury is based on exclusivity. When counterfeits are available, it becomes more difficult for consumers to justify paying high prices for luxury goods. Flooding the market with fakes lowers the brand perception, and removes control of the brand image from the brand itself.

• It also damages the brand reputation

The unique selling proposition of luxury brands is also based on the quality of the products. Consumers who unwittingly buy a fake product expect high quality. Instead, the product, although similar to the original, will not have the same finishes, durability, and details as the original. They will be disappointed and will believe that they have been deceived by the luxury brand, without actually knowing that they have bought a fake copy. In the case of low-quality counterfeits, disappointment is immediate.

When a consumer is unhappy, they are more likely to leave a negative review online. This is a problem, as users tend to trust online reviews as much as they trust the opinions of friends and family.

• It affects price policies

Counterfeiting can also affect the way that brands price their products. When counterfeits are available, brands may be forced to lower their prices in order to compete. This can have a negative impact on their bottom line.

• The counterfeiting fashion industry has a negative impact on the environment

The production of fake goods often takes place in unregulated factories with little regard for environmental standards. This not only harms the environment but also puts the workers in these factories at risk. Moreover, the lower prices cause consumers to buy more products and get rid of them more quickly (Fast Fashion).
But there is more: consumers buying fake versions of sustainable products believe their investment is making a positive difference, when in reality it is in vain.

• Counterfeiting hurts the economy.

When consumers purchase counterfeits, they are essentially taking money out of the legitimate fashion industry and putting it into the pockets of criminals. Moreover, it produces a loss of jobs.

Counterfeiting affects the most innovative companies, which register the most patents, and represent the bulk of world GDP and employment. In short, it damages the most productive sectors.

• Loss of customers

Counterfeiters often compete using the names, real images and content of the original luxury brands. Consequently, when a person buys from a counterfeiter, the original manufacturer loses a customer. Reducing revenue diverges investment from further innovation.

• Some marketing activities become difficult

The counterfeiting of fashion products has an indirect impact on marketing. Indeed, luxury brands often use celebrities and other high-profile individuals to market their products. However, when counterfeits are available, it becomes more difficult for these celebrities to differentiate between real and fake products. As a result, they may be less likely to endorse a particular brand.

• Possible damage to health

Among the most counterfeit products, there are drugs and cosmetics (but also wines and food). Counterfeiters do not pay attention to rules or follow the EU and US standards. Therefore, fake products can be a health and safety hazard.

Are there any solutions to counterfeiting?

Yes, brands can do much to protect themselves from counterfeiting.

First of all, they can focus on customer education.

By educating people about the dangers of counterfeiting, they can make it more difficult for counterfeiters to sell their products. To do so they can rely on technology. Indeed, technology helps brands to fight counterfeiting.

Companies can use smart labels, which contain a unique code that allows them to track the product throughout its lifecycle. So, when a customer purchases a product, they can easily find out if it is original or fake. Moreover, they can register it on the brand's website or app, making it easier to verify even in case of second-hand purchases. Brands can also choose smart packaging with QR codes and NFC tags. These technologies are hard to replicate even for the most sophisticated counterfeiter.

Companies can also rely on image recognition software, which identifies copyright infringements online. This tool is able to detect an item inside an image online -even an altered one- and report it.