Social media and technology improvements are driving growth of counterfeit luxury products. Learn how brands are fighting these trends.
February 25, 2020
With the best of times often come the worst of times. Bain describes the luxury market as “on a tear,” and the numbers back it up.
Also up, however, are the numbers of counterfeit luxury goods.
Understanding that some of the same factors are driving both sets of numbers leads successful marketers to an improved luxury brand strategy, one that takes advantage of that growth while curtailing counterfeiting.
“The main growth engine of the luxury market is a generational shift, with 85% of luxury growth in 2017 fueled by Generations Y and Z,” states the Bain report referenced above; it’s not only that millennials are buying more, it’s that their “millennial state of mind” now influences the purchasing habits of all generations.
In addition to changing product lines (for example, the growth of streetwear categories), this influence means a shift in distribution. By 2025, online sales will account for 25% of the luxury market. For physical store sales, monobrand stores will see a decrease in sales with a shift to off-price stores and airport stores.
Innovative brands responding to these shifts will see both immediate and long term advantages.
The growing number of direct-to-consumer brands “are not ‘interesting curiosities,’ but instead represent an ‘enduring shift in the way the consumer economy operates,’” according International Advertising Bureau (IAB). Becoming a direct brand is essential for success during this shift, but it’s not a one-way street:
It’s not that mass advertising won’t matter. It’s that it will become less valuable as more and more consumer-facing brands cross the chasm and concentrate their activity on creating, reinforcing, and extracting value from their direct consumer relationships.
The biggest brands are already shifting focus to digital and the storytelling avenues it offers. Grégory Boutté, chief client and digital officer at Kering, announced his company’s brands — which include Gucci, Saint Laurent and Bottega Veneta — will begin focusing on digital, playing to the brand’s strengths of storytelling and direct sales.
This shift to selling direct also increases brands ownership of consumer experience and omnichannel presence, a core of success brand strategy today.
This online growth offers exciting opportunities for brands, but it also contributes to the growing counterfeiting problem.
It’s disturbing that 3.3% of all international trade in 2016 was counterfeit — it’s even more worrying that the number is up from 2.5% in 2013. The Organisation for Economic Co-operation and Development ties this uptick directly to “digital platforms which help connect supply and demand globally.”
“About 20% of posts about top fashion brands on social media… featured counterfeit and/or illicit products,” found a report from Ghost Data. “The internet is being used as a giant amplifier to attract more customers and finalize their orders. Then an international carrier service will deliver the ‘original’ goods on their front door. Just like any legitimate global economy.”
Besides the obvious sales losses, rising counterfeits also present dangers to consumers and to brand reputation.
“[I]t’s less about our brand and more about our consumers,” Kathy Chi-Thurber, general manager of Clarisonic, told Glossy. “Counterfeiters… put consumers at risk.”
“You start getting [negative] reviews on products that aren’t really yours,” Scott Gibbons, U.S. distributor for Baby Foot, said in the same article. “It affects the value and impression of the brand.
Successful luxury brands will respond to changing consumer mindsets in a changing marketplace by implementing measures to combat counterfeiting.
As Kering’s shift illustrates, brands creating multiple connections directly with consumers enjoy multiple advantages, including higher sales, improved lifetime value and better protection against counterfeits.
Glossy puts like this: “With the declining cultural and business impact of their traditional go-to communication tactics, luxury brands are turning their attention to always-on, multichannel content… which is critical for customer retention, loyalty and long-term brand success.”
For example, brands build dynamic experiences for consumers with Blue Bite. Activated by NFC or QR directly on the product, consumers see brand content on their phones and open a two-way communication channel directly with the brand.
One use case is authentication — brands install NFC chips into products, and when consumers tap their phones to the object the resulting digital experience lets them know their product is authentic.
In addition to being one way to fight counterfeits, this authentication inherently is another piece of content given directly to consumers — a particularly useful piece of content that reassures them that they are buying an authentic product from a brand they trust.