Sunday, September 07, 2014

The world of luxury counterfeits just a click away

I have a soft corner for watches and I had apparently almost twisted the arm of my former boss Mr Sanjiv Goenka, Chairman of RP-SG group, to see his brand new Breguet (It is a story that he loves to narrate). Mr Goenka knows I am crazy for watches so he is sweet enough to forgive me and let me indulge, even with his IWC. Similarly, Mr TV Narendran , MD, India and SE Asia, Tata Steel, very kindly also lets me admire his black Chopard while I narrate to him the details of the making. However, I broke the heart of a close friend with this habit. 

Very recently, a close friend of mine was sporting a Rolex day date white gold. I did the same thing with her and to my shock realised it was a fake. It was lighter than even my steel Rolex, the identification number was missing, among other details. She very confidently told me it isnt 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 a fraction of the original price, but 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 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 and to my dismay found they were counterfeits. And some were not even on the catalogues. But to an untrained eye, it will lure you and you will fall in its trap just like my friend. I was happy when I came to know that LV and Mont Blanc have noticed as well and have filed a lawsuit against Chandigarh-based ecommerce firm Digaaz in Delhi High Court.

The counterfeit market statistics
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 Rs 5,600 crore from the current level of about Rs 2,500 crore. 

A reason why the fakes luxury market is growing at such a fast pace is the advent of e-commerce platforms selling them at lucrative prices. An Assocham report says that the web shopping portals account for over 25 per cent of the fake luxury goods market in India. For instance, first copies of these premium brands are easily available on, an online portal, within a week of official launch of the original collection. Even other platforms like Quikr and OLX offer replicas. While Quikr has a replica Hermes belt for Rs 350, or the Facebook page watchmaniaforyou stocks first copies of around 20 brands, including TAG Heuer, Omega, Rado, Patek Phillipe, 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 five per cent of the overall market size of Indias luxury industry which currently is worth over $8 billion. With a share of about seven 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. 

In the past, luxury counterfeits were often shipped in large cargo containers and passed through numerous middlemen before reaching consumers on the streets. 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 owners 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 ad 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% 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% of the imitation luxury products being sold in India comes from China, says D S Rawat, Secretary General of Assocham in the report, adding, Most of these comprise 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%. The first copy was heavier, the steel quality was superior, the 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 LV. 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) cant make a mark as on the online platform, no customer will be ready to give the premium. While a Rolex fake may be available at Rs 5,999, a first copy will cost at least double that, for difference that are not visible to untrained eyes, especially while comparing online.

In defence of counterfeits 
Sometimes I tend to question 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 complicated watches 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 Rs 5999 online. Tissot and Omega both lost in the battle, for no fault of theirs.

From the buyers perspective, understand this, the difference between the cost of making a Gucci or LV 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 perceived brand quotient in a fake at an affordable price and at their door steps.

It is just a click away.  

To conclude, let me quote the bard: A fake is a fake is a fake is a fake. 

Let your quest for luxury continue.

The theory of relativity

Luxury is not universal. Luxury, as my readers will know by now, has come from the word luxe which means dazzle. Now the luxe factor is fundamentally relative. What dazzles one need not dazzle another. The second layer of difference lies in the degree of dazzle.

image courtesy: Flickr

Let me elaborate with a few Indian examples the degree to which the razzle-dazzle differs. I drool over a Cartiers Panthere ring, or a Louis Vuitton hot-stamped trunk, or a Harley Davidson Fatboy. So, for me, that is luxury. Now let me compare apples to apples. Let us see now to bring in the luxe factor what the Richie Riches of our poor nation had done: In 1926, the Maharaja of Patiala gave Cartier its largest commission till date the remodelling of his crown jewels, which included the 234.69 carat De Beers diamond. The result was the Patiala necklace weighing 962.25 carats with 2930 diamonds. In 1928, the Maharaja of Jammu and Kashmir placed 30 orders in six months for trunks from luggage maker Louis Vuitton. Not to mention that a certain Nizam had procured 50 Harley Davidsons for his postmen to deliver his messages. (Read: Democratisation of luxury)

That is a key differentiator that every luxury brands need to study understand very clearly. In luxury branding one size fits all just doesnt work. It is a space for bespoke, for customisation, for making every customer feel special and justify the brand premium in pricing.

The greatest challenge that a luxury brand faces is in mixing the right portion of snob-value. It cant be so much that you alienate others but it cant be so less that the clients dont feel the exclusivity. The magic potion lies in the right portion. It is both the presence and the absence of snob quotient, both co-existing, side by side.

You need to have the low-hanging accessories like sun glasses or perfumes or key chains or coin purses or scarfs or what have you. They will not only lure a genre of clients who are heavy spenders in premium brand space and are yet to turn big spenders in luxury space as they are not sure the return on investment or RoI as we call it in the corporate parlance. For them, these low-hanging fruits are only value-for-label. So they just pay for the logo and are happy as they spend it within their budget and not frivolous but smart. They think of these spends as it is a deal man to own an LV for such a price, the product may be a key chain or a coin purse but who cares. Logo rules!

With time, a certain segment of this class realises the efficacy of the entire experience of luxury shopping, it is just not the product, it is the experience that you pay the premium for. Again to some it is worth the buck, to others it isnt. Everythings relative.

The ease with which they migrate may differ but the migration is destined. You are no longer satisfied by the key chain, you need to flaunt the wallet, shoe, handbag, specs, pens, ties, what have you. This is just stage 2. The more you rise the stages the stickiness increases with the brands. Stage 3 is when you are a regular user of luxury brands and you have made a complete migration from super-premium to luxury, even in your articles of daily use to daily wears. You are so used to luxury shopping experience that you start feeling uncomfortable if you shop anywhere else -- there is a little unease, out of place feeling. You are officially a luxury man or woman -- it is a part of your life. And you embark on the big tickets buys. Congratulations, you are now a member of the world of dazzle, not a guest. So the LV key chain that used to dazzle you some time back seems relatively less prominent amidst the Cartier wallet, Bulgari frame, Bottega Veneta bag, Salvatore Ferragamo shoes, Gucci belt, an LV briefcase and a Rolex. You are no longer dazzled by these but you become a luxury who inspires others, just the way a member invites guests to an exclusive high-brow club.

The critical part remains for the brand in handling clients of all Stages-- from 1 through 3 -- in the luxury world so that the ever-changing dazzle-quotient remains intact. That quotient is their bread and butter, no luxury brand should ever forget that. 

Let me give you an example of the Cartier store. My friend, the boutique manager, tells me that every client is important, no matter whether he/she is here for a wallet, a watch, or a Trinity. However, there is a subtle difference in the degree of engagement among all the three segments. Clients in every segment needs to feel special but they must also feel a little left out in terms of the treatment that is meted out to big-ticket buyers. This aspiration keeps the store running. There is a room in the store, beautifully decorated where hi-value deals are made. It is beautifully decorated with a touch of the history of Cartier and its India connect. The special Trinity and Panthere are on display, which are no longer crafted or sold, they are for your eyes only. So for the watch buyer, an entry into that coveted room is an aspiration and that brings them back. Relativity rules and makes big bucks for these brands.

The mortal crime for any boutique assistant or manager is to judge a client by his or her clothes or the capability to talk in English. This deserves a capital punishment. This kind of exclusion will end up shutting that store. My friend, who is pretty rich and has a great collection of luxury-branded handbags, including Burberry, visited the Burberry store in Kolkatas Quest mall. She was wearing a torn jeans, a white tee and flip-flops. The boutique assistant was to her surprise, not clean shaven and had a day-old stubble, which was criminal as it shows how callous you are and how you are not bothered about grooming, and so how unfit you are for a luxury boutique. When she asked him to show a particular bag, he first told her its price and looked at her. She immediately left the store and swore not to visit it again. A permanent loss of a potential client and a lot of bad publicity, the latter is lethal for a newly launched boutique, just for a wrong judgement.

This is how a mix of snobbery and relativity can make or break the reputation of your boutique and thus brand. It is all in the soft skills and presence of mind as to how to lure clients and nothing to do with the quality or design of the luxury product.

It is all about the theory of relativity -- sometimes special, sometimes general.

Let your quest for luxury continue.

Working Title: Seven Ages of Brand

All the world's a stage,
And all the men and women merely players.
They have their exits and their entrances,
And one man in his time plays many parts,
His acts being seven ages.
Just like the Seven Ages of Man described by William Shakespeare, a Brand also has Seven Ages. The book aims to capture these stages of a Brand – from conception till death and rebirth. Just like a man, a brand also goes through the motions of life and has its share of ups and downs and it also eveolves with time and maturity.   

Chapter 1: The infant
At first the infant,
Mewling and puking in the nurse's arms.

1A: Conception:
Conveiving a brand by accident or by planning.
Why the brand? Raison d’etre.
Some anecdotes of brand conception.

1B: Birth
Determining the Brand Gender: Brands inherently have a gender. Say a Rolex or Old Spice are msculine brands whereas Chanel or Dior are feminine.
So based on the gender of the brand the entire life journey is planned.
This will cover the facets of brand gender.

Whether incubation is needed: If the brand is launched prematurely, there is a need for immediate incubation, just like with babies. The incubation saves the brand and makes it stronger to face the world. The parents realise that the brand is too fragile to withstand competition and will die prematurely. So this forces the parents to strenthen the brand and make it fot for survival.

Chapter 2: The whining schoolboy

Then, the whining school-boy with his satchel
And shining morning face, creeping like a snail
Unwillingly to school.

2A: The early years: This is the time of doubts, the irritation of failure, the sweetness of initial success. The exposure to criticism. The is the time when you realise the strengths and weaknesses, the areas that need nourishment.

2B: The teen/adolescent/puberty: You start realising the changes (hormonal) that a brand is undergoing. This is a critical time when you need to be patient as even a well thought through plan may go haywire and this is when the brand starts developing character.

Chapter 3: The lover
And then the lover,
Sighing like furnace, with a woeful ballad
Made to his mistress' eyebrow.

A confident young brand that falls hopelessly in love with itself. It just sees how beautiful it is and keeps admiring the story of its birth and growth. This is a time when “Brand Ego” takes birth.

Chapter 4: A soldier
Then, a soldier,
Full of strange oaths, and bearded like the pard,
Jealous in honour, sudden, and quick in quarrel,
Seeking the bubble reputation
Even in the cannon's mouth.

The dominance of Brand Ego: This is dedicated to the facets of Brand Ego. “A car that runs of reputation” is one such example. Rolex, LV, Rolls Royce.
This segment will explain what is meant by brand ego and what defines it in details.

Chapter 5:  The justice
And then, the justice,
In fair round belly, with a good capon lined,
With eyes severe, and beard of formal cut,
Full of wise saws, and modern instances,
And so he plays his part.

The maturing brand: Ego grows, wisdom grows. The brand now has more clarity of its clients/TG and even about its strngths and weaknesses. But ego still plays a significant role.

Chapter 6:  Into lean and slippered pantaloon
The sixth age shifts
Into the lean and slippered pantaloon,
With spectacles on nose and pouch on side,
His youthful hose, well saved, a world too wide
For his shrunk shank, and his big manly voice,
Turning again toward childish treble, pipes
And whistles in his sound.

This is a time when the brand starts to show signs of fading. This is when there is the conception of a revamp. The idea that the brand is nearing death looms large. So the custodian/parent looks at ways to save the brand or rebuild the brand or even the birth of a new brand.

Chapter 7: Second childishness
Last scene of all,
That ends this strange eventful history,
Is second childishness and mere oblivion,
Sans teeth, sans eyes, sans taste, sans everything.[7]

The death of the old brand. The birth of a new brand. The second life of the brand.


Chapter A:
Brand perception: The consumer behaviour and classification. This will capture is details how the different categories of customers perceive brands differently. A special reference to consumers of luxury brands.

Chapter B:

The brand for te 3Ps: Personality branding/Professional branding/Product branding. How to brand your reputation, how to brand your profession, how to brand your product: aspects, what it means, dimensions.