Luxury companies’ failure to stem the growth of counterfeiting reflects a weakening of brands in which luxury is a signal but one that rarely delivers an experience, a new report suggests.
Counterfeiting is a major headache for luxury companies. On top of lobbying and technology, there is significant legal muscle. The French luxury group LVMH spends as much as $17 million on anti-counterfeiting legal work every year.
It’s big business: by some estimates, the trade in fake luxury goods could be worth as much as a quarter of the total $1.2 trillion.
A new report in the Harvard Business Review discusses the findings of a project based on interviews with 32 professionals from across the luxury business, and experts on anti-counterfeiting.
“What we hear suggests that luxury firms’ failure to contain the growth in counterfeiting is rooted in a hollowing out of their brands”, the authors write.
“Many luxury brands have become symbols of status and privilege but not much else. The emphasis across the industry has been on signaling rather than delivering luxury; intangible over tangible product attributes; and the logo over all other markers of quality.”
Part of the problem is that both luxury goods and their counterfeits come from the same low-cost manufacturing countries, meaning that sometimes fakes come from the same supplier as the real version. The authors suggest that luxury brands should pivot away from aggressively inflated pricing strategies and back towards the offer of high-end provenance that made them so desired in the first place.
The authors argue that the brands least vulnerable to the issue have continued to illustrate their connections to a particular country of region, aligning internal ethos with external values. “Logos are easy to knock off,” the report states, “but good craftsmanship isn’t.”
Additionally, the report explores the need for luxury brands to focus on the quality of the experience as well as product – certain new services such as repairs, alterations, and pre-owned arms are looking ever more promising. Beyond that, there is the example of Kering, owner of Gucci and Balenciaga, which has re-focused its strategy around sustainability with an environmental P&L to appeal to more conscious consumers.
Counterfeiting is a major headache for luxury companies. On top of lobbying and technology, there is significant legal muscle. The French luxury group LVMH spends as much as $17 million on anti-counterfeiting legal work every year.
It’s big business: by some estimates, the trade in fake luxury goods could be worth as much as a quarter of the total $1.2 trillion.
A new report in the Harvard Business Review discusses the findings of a project based on interviews with 32 professionals from across the luxury business, and experts on anti-counterfeiting.
“What we hear suggests that luxury firms’ failure to contain the growth in counterfeiting is rooted in a hollowing out of their brands”, the authors write.
“Many luxury brands have become symbols of status and privilege but not much else. The emphasis across the industry has been on signaling rather than delivering luxury; intangible over tangible product attributes; and the logo over all other markers of quality.”
Part of the problem is that both luxury goods and their counterfeits come from the same low-cost manufacturing countries, meaning that sometimes fakes come from the same supplier as the real version. The authors suggest that luxury brands should pivot away from aggressively inflated pricing strategies and back towards the offer of high-end provenance that made them so desired in the first place.
The authors argue that the brands least vulnerable to the issue have continued to illustrate their connections to a particular country of region, aligning internal ethos with external values. “Logos are easy to knock off,” the report states, “but good craftsmanship isn’t.”
Additionally, the report explores the need for luxury brands to focus on the quality of the experience as well as product – certain new services such as repairs, alterations, and pre-owned arms are looking ever more promising. Beyond that, there is the example of Kering, owner of Gucci and Balenciaga, which has re-focused its strategy around sustainability with an environmental P&L to appeal to more conscious consumers.
Sourced from Harvard Business Review
