Squeeze on consumer spend to drive demand for fake luxury goods

Demand for counterfeit luxury goods may be set to rise as consumers face a spending squeeze but retain their appetite for luxury brands.  A recent PricewaterhouseCoopers survey of over two thousand UK consumers highlighted the ongoing risk of counterfeiting to luxury brands, with a third of 18 to 45 year olds prepared to buy fake luxury clothes and accessories.

Only half of consumers surveyed think that it is unacceptable to buy fake luxury clothes and accessories, typified for the purpose of the research as brands such as Burberry, Gucci, Prada, Louis Vuitton, Mulberry and Jimmy Choo.  Curiously, ABC1 respondents, considered more affluent and skilled than C2DE consumers, were slightly more likely to buy fake goods.  Younger consumers were less concerned with authenticity, with more than a third of 25 to 34 year olds prepared to buy fake goods compared to only 20 per cent of those aged over 55.

The research also showed that younger consumers are motivated by the brand image of luxury goods – almost a quarter said it was their reason for owning them, whereas 30 per cent of more mature consumers were influenced by the ‘quality and feel compared to high street items’ of the genuine articles.

Consumer demand for luxury items has manifested itself by:

• High street shops and supermarket chains bringing items which emulate designer goods into their stores in record time
• Well-known designers developing diffusion lines for their stores, so they have one foot in couture and one on the high street
• Celebrities designing ranges to sell on the high street
• Mix and match style – cheaper clothes blended with one designer piece
• A new breed of consumer magazines showing us where we can buy affordable versions of designer goods on the high street
• The stretching of luxury brands into more accessible and affordable items such as mobile phones, sunglasses and fragrance, for example.

Designer brands are continually paraded in our popular culture and this has heightened demand, particularly for accessories, which provide a cheaper way to emulate the luxury brand experience.  Yet during a period where consumers are facing a squeeze on their disposable income, the desire for this experience may increase the appetite for fake, unlicensed luxury items.

Unlicensed goods can be the result of missing stock that has been copied and distributed royalty free by the manufacturer.  Unlike counterfeits – made by unscrupulous companies to varying degrees of quality – unlicensed goods are produced by licensed manufacturers under agreement with the original designer but not declared.  These can end up being sold on the internet, for example, with no royalties paid on them.  Analysis by PricewaterhouseCoopers found that of 1,000 royalty examinations carried out by the firm’s licensing team, a striking 90 per cent identified misreported royalties.  In addition, eight out of ten licensors do not proactively monitor their royalty arrangements.

So while the growing demand for luxury goods presents a great opportunity for the industry, the survey highlights there is also a tangible threat in the form of pirated items, particularly given the tightening economic environment.  Developments in technology and consumer demand mean that product piracy will continue to tread on the toes of luxury brands however, forensic examinations of licensing arrangements offer one solution to help businesses isolate leakage to the black market and avoid lost royalties.

Contact details
Email: Andy Lyon
Tel: +44 (0)1908 353000