Why the luxury counterfeit problem is getting worse
At their cheapest price, a pair of Gucci rubber slides retails for $450 on the brand’s online store. On DHgate, a Chinese website that connects buyers to a vast network of wholesale manufacturers, strikingly similar-looking “designer slippers” can be purchased at one-tenth the price.
The $450 pair, of course, is real and the $45 pair is fake. But for Monica, a 30-something from Miami who asked to be identified by her first name, it’s impossible to tell the difference. She already owned the real slides and bought the DHgate version, knowing they were fakes, to see what they were for. Once satisfied, she became a regular customer in the market, buying replica Golden Goose sneakers and Ferragamo belts among other things.
Monica is one of a growing number of consumers buying counterfeit luxury goods online. In a survey conducted in June by the European Union Intellectual Property Office, more than 50% of consumers aged 15 to 24 said they had purchased at least one counterfeit product online in the past 12 months. The total value of counterfeit and pirated goods will reach $3 trillion this year, triple that of 2013, according to the Organization for Economic Co-operation and Development.
One of the reasons for the explosion of counterfeits is the easy access to these products online. Websites like DHgate and AliExpress – a Chinese website similar to DHgate that also sells cheap, unbranded fast fashion – give Western consumers direct access to counterfeit manufacturers, mostly based in China. Although users usually can’t search by brand, the right keywords generate dupes of thousands of products that will arrive at their doorsteps weeks later.
But recent moves by luxury brands themselves have sent some consumers looking for dupes. Top-tier brands have hiked prices dramatically over the past couple of years, effectively icing middle-class customers who might previously have considered splurging on the occasional splurge on a real Chanel or Louis Vuitton bag. Meanwhile, on social media, brands are playing in a culture where consumers are conditioned to covet must-have pieces season after season.
“Luxury leaned towards a fast fashion trend where they push a lot of trends,” Monica said. “Where I’m willing to buy fakes are those things that I know I wouldn’t wear years later.”
Luxury brands and retailers are adapting their tactics to deal with the growing and growing online threat of counterfeiting. Resale platforms, for which counterfeits pose a particularly significant threat, have invested millions of dollars in strengthening their authentication methods (although some offer users the option of bypassing the process entirely). High-end labels incorporate barcodes, radio frequency identification and other scannable labels into their products, allowing customers to verify the authenticity of an item in-store even if they purchased it elsewhere. Some are experimenting with blockchain technology to add an extra layer of traceability.
None of these measures have done much to stem the tide of counterfeits; counterfeiters can also imitate authentication tags and stamp products with RFID codes. Customers don’t care about verifying that they are real any more than they do verifying shoes and bags themselves. Meanwhile, the brands themselves are certainly not losing sales, despite the deluge of counterfeits around the world. More recently, LVMH saw its third quarter sales increase by 20% compared to last year.
“People have thrown a lot of spaghetti at the wall to see what sticks,” said Graham Wetzbarger, a luxury authentication expert who is working on a blockchain traceability technology called MyMarkit that would allow any consumer or retailer to access the ownership history of a product.
Standardization of counterfeits
Stephanie, a Chicago-based luxury and counterfeit shopper in her 30s, recalls her mother attending dupe designer parties with her friends. The women gathered, drank wine and went through a trunk full of counterfeits.
“It was always very quiet,” Stephanie said.
Today, not so much. In BoF’s latest Insights report on Gen Z consumer habits, 54% of respondents said they believe it’s morally acceptable for other people to buy and use luxury goods counterfeits; 37% said they would personally wear a fake luxury item, compared to 42% who said they wouldn’t.
“Now you go to TikTok and type in ‘DHgate’, you’ll find so much content,” she said (#DHgate has over 3 billion views on the platform). The most popular type of video shows young women unboxing their purchases, exclaiming with delight at the quality and attention to detail of their new fake Gucci bag or Jordan sneakers.
These TikTok influencers undermine the assumption that consumers have to pay thousands of dollars for genuine products. As more luxury brands shift manufacturing from Europe to Asia, it has helped fuel the belief among some consumers that the “dupes” they buy are actually made by the same factories that create products for big brands, according to Robert Handfield, executive director of North Carolina State University’s Supply Chain Resource Cooperative and counterfeiting expert.
“It could be your own manufacturer in China selling the real product through an unauthorized distribution channel,” Handfield said.
For some, there is a sense of rebellion against the idea that whether an item is real or fake reflects the integrity of the buyer.
“The shaming of counterfeiting has gone down and I think that’s just because in our time it’s like, ‘Yeah, we’re going to rip it off,'” said Danielle, another counterfeit seller in her 30s who prefer AliExpress. “People can’t afford to pay rent. There is no health insurance. I will buy something in the moment that makes me happy and I will be proud of it.
Brands strike back
Brands are introducing new ways to weed out counterfeits. For example, in 2021, LVMH, Prada, and Cartier, owner of Richemont, partnered with the Aura Blockchain Consortium, a blockchain solution that provides buyers with tamper-proof access to product supply chain information and proof of ownership. .
Resale platforms have another problem: their reputation is at stake when customers find a counterfeit on a site like Rebag, The RealReal or Vestiaire Collective.
Most legitimate resellers will fully refund the purchase if it turns out to be a fake. To mitigate their liability, some have invested heavily in anti-counterfeiting technologies. Fashionphile is deploying X-rays, metal alloy detectors and, more recently, an RFID isolation box to demarcate the replicas.
Fashionophile authenticators know that Cartier bracelets, for example, have a specific mix of metals: “some 18-karat gold, some nickel, and a few others,” said founder Sarah Davis. “If it’s not that particular mix, then we know it’s wrong.”
The retailer, which received investment from Neiman Marcus in 2019, has also developed a machine learning-based image recognition tool using hundreds of thousands of its own images of popular handbags. The so-called “fingerprint” for luxury textiles can verify whether a logo’s font is real or fake based on existing genuine products.
RealReal also operates a machine learning-based image recognition program called Vision that allows its authentication process to be more automated, said Rachel Vaisman, the company’s vice president of merchandising operations. Another proprietary tool, called Shield, rates the risk level of each seller and the item they sell to indicate the level of authentication needed. Together, the two methods make the overall authentication process faster and cheaper for the business.
However, no tool is infallible. Brands don’t advertise their anti-counterfeit ID systems, so resellers have to catch up every time new technology is introduced, Wetzbarger said,
Counterfeiters are constantly adapting their methods too. A common pattern is to buy a genuine product from a department store and return a duped version.
Last year there was a break-in at one of the New York stores of luxury retailer What Goes Around Comes Around. A few days later, the stolen products appeared on another resale market with their original photos from the What Goes Around Comes Around listings, according to founder and chief executive Seth Weisser.
“The secondary market enables organized crime,” he said.
Ultimately, as long as there is a demand for fake luxury goods, counterfeiters will find a way to supply it. As major brands continue to raise prices and release more and more seasonal collections, collaborations and variations on their most sought-after products, all signs point to increasing demand.
“There’s such a crude, disproportionate equation between price and aspirational desire,” said Monika Arora, handbag connoisseur and author of the PurseBop blog. “This is the breaking point that brands need to be aware of, and I don’t know if they are.”