Stay away from the knock off markets

The Redwood Blog
Published:  08 April, 2014
Mike Redwood

There only seems to be two types of shopping in Hong Kong. Luxury goods or a trip to one of the markets or back streets to buy counterfeit goods. It's been a curious point for some time that the Chinese come to Hong Kong because they buy in shops where they can guarantee the product to be authentic whereas westerners get a delight in searching around for the rip off product to take home as some sort of trophy for having defeated the corporate world. 

Counterfeit product has been around since trade began but to most of the modern generations it has been about cheap music cassettes and videos with dreadfully poor cover artwork. For the early industry travellers the Itaewon street market in Seoul will have lots of memories from the 1980s. The era of global sourcing in the footwear and garment business largely began in Taiwan and South Korea and was not very sophisticated. Often makers were left to dispose of unwanted material lots at the end of a season and they did so by making overruns and cobbled together product, which they sold to the huge numbers of US troops based in Seoul. Sports footwear from Nike and Reebok made up the biggest volumes and the authorities only began to crack down on it when the brands opened legitimate stores there. This was a fly-by-night sort of trade and to many just a "bit of fun" to pay ridiculously cheap prices for fake branded goods they would never otherwise buy.

At that sort of level the industry did not get too worried but now that it has burgeoned into a huge multi billion dollar organised business we have to look up. At the start of the recession it was already adding up to close on 10% of world trade. You can tell how much it has become "big business" as it has slid into pirated knock offs (where they trick you by using the name "Clerks of England" rather than "Clarks of England" and copy the logo style and the shoes). I found one of those shops in Chengdu about 5 years ago. Counterfeit products fully copy the original so the shoes are sold as original "Clarks" shoes.

If you define counterfeit as anything which does not contain what it says on the box you soon get into the sort of areas where real danger lies. Consider pharmaceutical products where it can mean forgeries, substandard or repackaged out of date product. The trade from Asia into East Africa of such products is immense. Take your own medicine when travelling there. Spare parts for automobiles and aeroplanes are another sector where safety is totally ignored, and if you are selling a fake who really cares how much lead is in a children's toy?

In the leather industry designer handbags are one of the most noted target sectors and for companies such as Hermes, Louis Vuitton and Coach the damage to the brand and the cost of policing is just enormous. Equally footwear is a huge area of this near trillion dollar counterfeit trade and cheap low grade copies of branded footwear slide from Asia through Russia and the Middle East into Latin America and Africa. The supposedly secret locations where the contents of the containers get distributed into the retail channels and flea markets are well known in Central America. In Africa huge volumes of counterfeit shoes added to second hand come charity (it's really a business) footwear have made life almost impossible for indigenous footwear industries to develop. The counterfeit footwear is smuggled, no taxes are paid, officials get bribed and brands and jobs are destroyed.

No investment

A few years a ago a colleague was doing some research on the footwear market for me and accidentally found himself in a plant making these knock offs. He felt he was lucky to escape without serious injury or worse. So while we can agree with A.T. Kearney that “counterfeiting allows skipping the investment necessary to create, develop and market products and go directly to profits. No R&D headaches. No brand building. No advertising" it has become much more serious just than that.

Most of us in the leather industry are aware of the importance of innovation, research and development and the vital importance of intellectual property rights. If you buy any counterfeit article you are adding one more building block to the destruction of these values. Beyond that it looks today that you will also be funding terrorism. This is not the insignificant business that can jokingly overlooked and accommodated: it is an industry controlled by crooks and gangsters. It is an easy industry to enter with high margins and a strong, quick cash flow so very attractive to terrorists such as the Madrid Bombers who used the sale of pirated CDs to fund the 2004 bombing of a Madrid train and killed 191 people. According to the IACC Al Qaeda are linked to a steady line in fake shampoos and perfumes.

So the next time you are tempted to buy that fake Rolex or LV Handbag when attending APLF just remember that its not just the value of the brand and the concept of intellectual property rights you are undermining, but you are likely to be helping fund the drug supply to your local school as well.

Mike Redwood

mike@internationalleathermaker.com

Follow Mike Redwood on twitter: @michaelredwood

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