Counterfeiting gangs in China and eastern Europe are costing the global economy an estimated £380 billion each year. So what can brands and retailers do about it
You didn’t have to be a European brand protection manager to know that the products, found in China, were illegal fakes. But the find underlined how audacious criminal fashion counterfeiters are becoming.
Addressing a fashion industry audience at a London conference called Protect the Brand: Fighting the Copycats and Fakes, Morse put on a jovial front about the discovery. She quipped that the counterfeiters had achieved something Timberland had not – collaboration with some of the biggest luxury brands in the world.
But in truth, for Timberland, Louis Vuitton, Burberry and other such household names, counterfeiting continues to harm the reputation of brands, diminish consumer confidence, and cause loss of direct and future sales. It can also decrease incentive to invest in product research and development in order to produce new designs. And on a wider scale it damages the broader economy, bankrolls crime, and encourages the proliferation of poor working conditions.
However, counterfeiting should not be confused with copying. Copying in the fashion industry most commonly refers to the practice of producing cheap replicas of a designer item, perhaps making a few changes such as moving a zip or altering a hemline to ensure the image is not exactly the same.
According to Julie King, head of fashion and textiles at De Montfort University, copying is largely a by-product, and also a perpetrator, of the consumer penchant for obtaining celebrity looks at affordable prices. Recent examples include a yellow dungaree from Topshop, the similarity of which to a Chloé design led to a dispute with Topshop. Chloé’s lawyers were successful in demanding the item be removed from Topshop’s stores.
Similarly, Esprit Europe was ordered in October to remove a style of jeans, a T-shirt, jacket and a blazer, as they were judged by The Hague district court to be copies of styles originally produced by G-Star.
In comparison, counterfeiting occurs in an environment of international organised crime with fakers replicating luxury fashion items as closely as possible, but generally in cheaper materials, in a bid to pass them off as real. In many cases, they can be good quality and hard to differentiate from the true product. The practice is rife in China and eastern Europe, where counterfeiting organisations are set up like real companies – with directors, managers and factory workers. Yet they have no validity to exist, no research and development expenses, and no concern about the monitoring of ethical business practices.
Research conducted in February by the Alliance Against IP Theft demonstrates the financial impact of counterfeiting. It esti-mates the total UK spend on fake clothing and footwear is more than £3 million a year.
Such goods are commonly purchased at markets, car-boot sales, on international holidays and via the internet. The cost to retailers and manufacturers is £3.5 billion each year in legitimate sales, equating to £800 billion in lost tax revenues. Easily replicated jersey T-shirts are the most popular fake item, with more than 43 million fakes sold across the UK in the past three years.
Despite the damage caused by counter-feiting, there is no clear way for brands to tackle the problem. One necessity is for designers to document, register or patent original designs in case proof of ownership is required. According to Pentland Group’s best practice manager, Alan Holder, when his designers create styles for brands including Boxfresh, Speedo and Lacoste, they keep stringent computer records of every step in the process. This documentation would prove invaluable should a case of counterfeiting or copying arise.
Similarly, Robert Glenn, brand director at underwear components supplier Stretchline Holdings, emphasises the importance of patenting an original product design. The company did this for its product Forbitube, a bra underwire protection tube. The patents have enabled the company to tackle counterfeiters with evidence of design ownership.
In hindsight, Glenn believes Forbitube would have benefited from having some form of “DNA” embedded to enable authenticity to be verified quickly, and he is looking into options for future development.
For high-end brands wishing to take pro-tection further, such authentication on the actual product is emerging as a necessary step. John Farrell, associate director at Re-connaissance International, a firm specialising in authentication devices, said that to date, most authentication technologies, such as holograms, have only been applied to high value items such as passports and banknotes. However, he said that work was being done to make similar systems readily accessible for luxury goods.
Farrell insisted the best approach is for brands to adopt both an overt option for consumer confidence and a covert option that counterfeiters cannot access. Overt options include weaving into a garment a printed label or barcode containing information on the item’s brand and distribution.
A covert option might entail using a chemical formula, which can only be read with a detection device, to embed information into a product. Such covert technology would allow authentic products to be tracked and traced across the global market.
Kodak Security Solutions (KSS) has developed a series of overt and covert authentication devices. Its most covert system is called Traceless – a combination of forensically invisible marker materials and digital technology. Traceless can be embedded into woven fibres, inks, varnishes and paper pulp and applied to labels or incorporated into garments. The marker materials do not alter the appearance of the host product and contain coded information about an item that can only be detected using specific Kodak reading technologies.
Solos, an Italian brand protection company, has used the KSS technology to help a number of fashion houses protect their brands – embedding the technology into security threads, hang tags, woven labels, garments, eyewear and fragrances.
KSS general manager and director, Steve Powell, says installation is straightforward, but adds that without specific details it is difficult to calculate the cost for a full luxury fashion collection. “If, for example, phone companies are losing billions of pounds as a result of counterfeiting, they may gladly spend £5 million trying to get that money back,” he explains.
Patents are proven to be useful against counterfeiting and authentication devices have great potential, but Simon Tracey, head of intellectual property and brands at law firm Davenport Lyons, argues that unless consumers are educated against buying fake goods, then the counterfeiting industry will continue to thrive.
Tracey has researched consumer behaviour in relation to making fake purchases and found some alarming statistics. He discovered that in 2006, 28% of the UK population purchased a genuine designer item. Yet in the same year just under three million people bought a fake luxury item. “There is no stigma attached to buying fake,” he believes.
Tracey discovered there was actually a sense of pride at finding a counterfeit “bargain”, with 64% of people admitting to their friends that their fake purchase wasn’t real. He believes it will take a cultural shift, whereby consumers understand the criminal links to counterfeiting and the potential implications, before the fashion industry has any chance of beating the counterfeiters.