Spot The Difference: The Invincible Business Of Counterfeit Goods

Selling cheap fakes of a successful product makes horribly good business sense. Is there any way to stop it?

By Alice Sherwood | Guardian

I was standing in front of an imposing townhouse in the swish 16th arrondissement of Paris. Its classical lines, marble staircases and delicately wrought iron balustrades belied the fierce sense of purpose inside. The Musée de la Contrefaçon is an unusual kind of museum – it specialises in counterfeits. I hoped that my visit would help me understand a problem that luxury brands have been battling for decades: that of mass-market knock-offs and blatant counterfeits.

According to some estimates, the trade in fake products is worth $600bn per year. As many as 10% of all branded goods sold may be counterfeit. It is estimated that 80% of us have handled fake or falsified goods (whether wittingly or not). Sales of luxury goods have soared in recent decades, but fakes have grown even faster: one estimate suggests that counterfeits have increased by 10,000% in two decades.

It’s not just the overall figures that boggle the mind. One French customs raid confiscated enough fake Louis Vuitton fabric to cover 54 tennis courts. A swoop on a seller on the online Chinese shopping platform Taobao netted 18,500 counterfeit bags, aprons and footwear. A bust in Madrid impounded 85,000 counterfeits ready for the Black Friday and Christmas markets. In Istanbul, in 2020, almost 700,000 counterfeit haircare products were seized.

Usually, when there are many more counterfeits than the real thing, you see a correction of some kind. But despite the growth of an authentication industry with an ever-expanding list of anti-counterfeiting tools – thermally activated tamper-proof seals, security numbers, RFID (radio frequency identification) tags, colour-shifting inks, holograms – that doesn’t seem to be happening. I wanted to make sense of this discrepancy. Why can’t the designers and the big brands stop, or at least slow down the counterfeiters? And how do you tell the difference between the real thing and the fake anyway?

In the Musée de la Contrefaçon there is a typically French answer to that question: glass vitrines displaying products and their counterfeits side by side, helpfully labelled vrai and faux. I looked at what seemed to be the famous quilted 2.55 Chanel handbag. In fact, the tour guide told me, it was a Turkish-made knockoff. Where the original boasts regular and robust stitching, the fake was glued together. The signature quilting was made of cardboard and cotton wool. At first sight, a Korean bag looked just like a Louis Vuitton; on closer examination, I noticed that the distinctive trefoils had been replaced by a circle and a bar, the LV logo by some superficially similar characters in Hangul, the Korean alphabet. Not a single element of the design matched the original, yet the overall effect was unmistakably “Vuitton”. The guide explained that this illustrates the difference between fakery by imitation and fakery by “passing off”. Another cabinet held a 2,000-year-old Gaulish fake of a Roman amphora; what should be a Roman name on the stopper was replaced by random symbols. I got the feeling that the museum staff were quite proud that their oldest fake was made on French territory.

Rather unstylishly, I was carrying my notebook, wallet and keys in a supermarket plastic bag. Leaving the hotel earlier that day, I had realised at the last minute that my shoulder bag was a fake Longchamp. In the museum the guide showed me the real thing. On mine, the little gold tchotchke that hung off the zip was a plain gold ring, where it should have been a leaping Longchamp horse and jockey. The inside of mine lacked the deliciously thick, rubbery, almost sticky quality of the genuine article. Compared to the real thing, the leather on my bag was oddly spongy and insubstantial, the stitching inadequate.

I asked the guide about the building. Was it true that it was a copy of an earlier 17th-century one in the Marais district? Did that mean – oh, the delicious irony – that the museum was itself housed in a counterfeit? The guide’s eyes narrowed slightly. I sensed a froideur. “It’s a copy, not a counterfeit. Where there is no IP, no counterfeit is possible.”

The Musée de la Contrefaçon specialises in luxury fakes, but the explosion in counterfeiting over the past two decades has mostly taken place in the mid-market. Brand knockoffs that used to be sold on market stalls are now just a couple of clicks away on the internet. The products most affected are those known in the unlovely jargon of marketers as “masstige” products (combining “mass market” and “prestige”): goods that are premium but still affordable. No clear line separates these from luxury goods, but instead of emphasising craftsmanship and tradition, superior quality and exclusivity, masstige goods sell themselves on artisanal touches, wish fulfilment, celebrity association and trends. As one commentator puts it, masstige focuses on aspiration, “the implicit distance between the world they [the brands] represent in their communications and the product their consumers can actually afford to buy”.

Earlier that week, in Amsterdam, I met Bjorn Grootswagers, regional director of the anti-counterfeiting organisation React. React has 30 years’ experience fighting the counterfeit trade. It handles around 20,000 cases a year, working with customs and law enforcement agencies across 107 countries. Its 300 or so clients are a roll-call of the world’s most powerful rights owners, many of whose products fall into the masstige category: Adidas, Abercrombie & Fitch, Converse, Nike, Puma, Levi’s, Tommy Hilfiger, Fifa, Ducati, Jack Daniel’s, Jaguar, L’Oréal, Procter & Gamble, Unilever, Warner Bros, Yamaha, PlayStation, Hello Kitty, Playboy.

As the taxi taking me from the station drove along the Amstelveenseweg boulevard, office towers turned into blocks of flats, and then into smaller and smaller terraced houses.

The driver asked me why I’d come and sounded unimpressed when I told him. “Why fighting fakes in Amsterdam? They don’t make them here. I am from Turkey,” he said proudly. “And we make many!”

We came to a halt outside a two-storey, sharply gabled house. In the front parlour, which serves as a meeting room, I was plied with extremely good coffee by Grootswagers and his colleague Mary-Ann Kouters. The shelves to my right overflowed with the sort of knockoffs you might see on a stall on Oxford Street in London: polyboard squares holding about 50 diamante stud earrings in the shape of Chanel’s double C, a floppy stuffed Paul Frank Julius monkey, plastic purses with garish multicolour LV logos. Boxes of fake Ariel washing powder stood alongside an unopened four-pack of Braun Oral-B electric toothbrush heads – indistinguishable from one I’d opened that morning.

Twenty-five years ago, when the company started, Grootswagers said: “If we stopped 5,000 fakes a month we thought we were doing a good job. If we caught 100,000 a year, we would pat ourselves on the back.” He smiled. “Then we changed what we did, and now we are stopping 25m counterfeits a year.”

React used to inspect the markets and shops where fakes are sold. Now they monitor the points at which bulk consignments of counterfeits enter the EU – container ports such as Rotterdam, Antwerp and Bremen. One shipping container can hold a thousand times more than a smuggler’s suitcase. Pick the right port, the right ship and the right container, and you can stop tens or even hundreds of thousands of fakes in a single swoop. But it’s not easy. Around 180m shipping containers whizz around the globe each year, 15m of which pass through Rotterdam. Grootswagers and his colleagues have to pick out which of these identical containers might be storing counterfeits and ask customs officials to wheel the giant box off the ship to see if they are right.

For obvious reasons, Grootswagers couldn’t tell me too many of the clues and techniques he uses to spot potential fakes, but he says he often finds himself flagging up what’s not there, rather than what is. If it just says “shoes” on the list of a ship’s cargo, that’s suspicious, he told me. “Because if it’s Nike shoes it would say Nike, and if it’s Adidas it would say Adidas. Most of the counterfeit goods come from Asia, mostly China, and we have a blacklist of factories of course. We’re often looking at shipping agents rather than factories, and they change their names all the time. They’re called things like Unit 1234 and it’s all in Chinese characters, but sometimes there are giveaways – say, if the address is on a third floor. Well, you can’t ship from a third floor, can you?”

The 21st-century branded product is made wherever manufacture is cheapest. Sitting at the centre of a vast and complex biome of designers and manufacturers, suppliers and shippers, workshops and sweatshops, customs and border officials, it will likely be sold thousands of miles away from where it was either conceived or manufactured. Some products are made from as many as 100 parts supplied by a dozen or more contractors in different countries. Even the best-intentioned manufacturers (and not all of them are well-intentioned) may not know what is finding its way into their supply chain. As the world’s manufacturers become concentrated into a few crowded industrial zones, techniques and technology are easily imitated or stolen. Craft skills can be replicated too. As Rain Noe, a writer on industrial design, says: “If a human being contracted by Nike can accurately sew a pattern, a human being not contracted by Nike can, too.”

Almost never openly discussed by brands is the fact that many people must be complicit in buying fakes. The polite presumption is that those who buy fakes must be in error. But if China can make the same goods, to the same standards, and at a fraction of the price, isn’t buying the cheaper unofficial version what any rational shopper should do?

When I put this question to Grootswagers and Kouters, an intense look came over Kouters’ face. “Even if you made it exactly the same – which counterfeiters never do – you’d still be stealing from the brand manufacturer because the manufacturer has invested money in advertising, sponsorship deals, building the brand,” she said.

Grootswagers nodded. “When you buy a brand, you’re investing in the dream. You know Beats who were bought by Apple? They make headphones that are good, but not amazing. People buy them for cool. You are buying quality, but you are also buying being part of a group.”

He looked up at me and smiled. “The designers aim to make a nice product with a nice dream. You buy it and your self-esteem will be good.”

When people would rather buy a more expensive genuine article than a cheaper fake – even if the two items look almost identical – it’s because they are buying not just the product’s tangible qualities, but also its intangible ones. We buy into the reputation of the brand and the reassurance that gives us. We buy into the image that companies create around brands through glossy advertising and PR. We buy into the cool they conjure up by sponsoring the right parties, by getting the right actor or rapper to be the face of the brand, by getting the right people to be seen drinking the product, or wearing it, or using it. The power of the intangible attributes of a brand is that they change not just how you feel about the product, but how you feel about yourself.

Many different words are used to describe a brand’s intangible qualities. Some talk about “meaning”. Grootswagers spoke of “the dream”. Kouters used “goodwill”. Advertisers like to talk about “image” and marketing professionals prefer “brand equity”. From the counterfeiter’s point of view, it’s easy: intangibles are simply the part of the product that they don’t need to copy.

It suits companies that produce branded products to separate the tangible from the intangible, to locate manufacturing wherever is cheapest and to spend more on beaming out the brand message. But what is becoming increasingly obvious is that the brands’ business strategy suits the counterfeiters even better. All they have to do is make a copy of the physical product at the lowest possible cost, and they can free-ride on the money that the real manufacturer has spent on advertising, sponsorship deals and all the other costs of building the brand. Free-riding on all the effort it takes to develop and market a successful product (no one ever bothers to fake a failure) is a supremely low-risk way of making money. Yes, counterfeiting is illegal, but the penalties are much lower than for drug-trafficking and other organised crime. It’s betting on a winning horse after the race has been run. The more brands spend on promotion, and the less, proportionally, on the physical product, the bigger the window of opportunity they leave open for counterfeiters.

Why are intangibles important? Why do brands bother with them in the first place? Once products start to travel further from home and into bigger markets, their producers need to give potential customers more information about them if they are to compete successfully. Because we are storytelling animals, this is often best done in the form of a backstory. Brussels lace, the uber-luxury good of the 16th century, was superior because it was spun from linen thread more delicate and beautiful than coarse English flax. The story went that Brussels lacemakers sat in damp, darkened rooms, with only a shaft of light to illuminate their painstaking work, so that the still-moist thread did not dry out, and finer and more intricate patterns could be created than would ever have been possible with thread that was dry and brittle. This story captured the imagination and kept the product at the forefront of customers’ minds.

The move from product to brand gathered speed in the 19th century as new products began to be transported by railway to unfamiliar markets. Consider the oat. Traditionally, oats were fed only to horses and invalids. Then an enterprising mill owner had the idea of marketing them as a breakfast food. If you’re selling your oats to people a long way away, you need packaging to transport them in. And you can use that packaging as a platform to explain to new consumers how and at what time of day they should be eating this product. If you can pick a memorable name, and an image for the box that conveys reliability and honesty, and even the strength of purpose that breakfasting on oats will give you, that would be even better. Which is what the Quaker Oats Company did in 1877 when it registered the first American trademark for a breakfast cereal.

y the dawn of the 20th century, the classic four Ps of modern brands – product, place (of sale), packaging and promotion – were all in place. Over the next century or so, the globalisation of trade and communications made three further Ps – promise, personality and purpose – even more important.

Promise first. In 1931, Procter & Gamble used the results of a survey to advertise Camay soap. The survey asked 50 eligible bachelors what they looked for in a girl they would marry. Forty-eight agreed that they wanted “a girl whose charm is natural”. Just in case anyone missed the point, the writer of the survey also consulted 73 dermatologists. All of them said that they would not hesitate to recommend Camay for the most delicate complexion. A tangible product (soap) had been freighted with an implied and intangible promise (marital prospects). For a small investment in Camay (10 cents for a bar) you could buy a very big dream indeed.

The second new P, personality, came of age in the affluent postwar US. By the 1950s, quality had so improved across the board that products could no longer be differentiated on that basis alone. Now the brand manager’s chief task was to give his product an identity that would set it apart from its rivals, and stand out on the increasingly crowded supermarket shelves. One method was to make the product as eye-catching as possible. Another was to add “personality”. Products were no longer just products; they could be friends. Tide used both methods. The washing powder’s orange and yellow “bullet” design – still in use today – made it instantly recognisable. And the adverts showing houseproud housewives hugging a packet as if it were a long-lost friend – “Tide’s got what women want!” – made the all-important emotional connection.

The newest P is purpose. In response to criticism from campaigners, brands have begun to present themselves as activists. We see them burnishing their societal credentials and inspiring others to do the same. Nike released an advert, Dream Crazy, featuring Colin Kaepernick, the NFL quarterback who first knelt for the pre-game national anthem in protest at racial injustice. The slogan reads: “Believe in something. Even if it means sacrificing everything. Just do it.” Dulux proclaims that it is not selling paint but “tins of optimism”, and donates half-a-million litres of paint to teams of employee-volunteers to give a facelift to rundown urban neighbourhoods. Consumers buy Harry’s razors rather than Gillette’s because Harry’s gives 1% of revenue to men’s mental health charities. We increasingly buy brands for the lifestyle they encapsulate and the values they represent. To put it simply, the trajectory of brands over the past century or so has been to sell you more and more feelings.

Selling feelings – intangibles – is such a good strategy that no individual brand dares stop. Manufacturing cheaply, and adding more and more value to the product via narrative and image, is a good recipe for survival. But if everybody is employing a similar strategy, the only way to compete is to go bigger on intangibles than the next guy. And therein lies the problem.

The story of modern marketing has been the story of a runaway arms race. Image-building, brand-titivating, social media babble, creative advertising, celebrity endorsements: all the activities that lead the consumer to think warmly of your brand are the brand manager’s weapons. But because selling intangibles is a gift to free-riding counterfeiters, the more companies spend on this kind of brand-building, the more they fuel the rise in fakery. And that is potentially calamitous for brands as a whole.

The best way out would be for brands to decide together to put their foot on the brake and agree that everyone should simultaneously cut spending on intangibles – a move that would leave the competitive hierarchy untouched while allowing them all to spend more on their workers and their products. But the chance of that happening is almost zero. It would require the brands, first, to admit the problem openly among themselves; second, to trust all the other brands to do the right thing and not to cheat by secretly increasing rather than reducing spending on intangibles; and, third, to expose the value or otherwise of the different parts of their brands to wider view. No wonder they would rather tackle the counterfeiters than the causes of counterfeiting.

• This is an adapted extract from Authenticity: Reclaiming Reality in a Counterfeit Culture by Alice Sherwood, published by HarperCollins on 12 May and available at guardianbookshop.co.uk

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