Effect of Counterfeit Goods on Luxury Brands – Transparent Solution?

Effect of Counterfeit Goods on Luxury Brands – Transparent Solution?

The counterfeit market is one of $600 Billion of annual sales. How does this affect the luxury brands and what could be a more progressive and transparent solution in today’s digital age?

Let’s dig deeper!


In the previous article, we took a look at the culture and consumer of Counterfeits and what are the factors that let it thrive.
In this blog post, we are digging further into the market of counterfeit products, how it affects the luxury brands and what is the blockchain method?

The market of Counterfeits have two avenues for expansion or placement – one is the deceptive market and the other is the non-deceptive market.
In the deceptive market, the customers carry half knowledge or information about the brand and product, hence they are unable to differentiate between a genuine and a fake product which could lead to the accidental purchase of the fake product. Hence the consumer is a victim.
The non-deceptive market is just the opposite in terms of the consumer, as the buyer is well aware of its duplicate and purchases a fake product nonetheless. The ideology that works here in the consumer’s perspective is to be able to attain a certain status by showing off a brand, nullifying the need to buy the original when you could buy a fake, it’s the same in their view.
Here the consumer is more like an associate.

World Custom Organisation stated that the global market for counterfeits is to exceed US$ 600 billion, that would account for approximately 7% of world trade. US$ 12 billion per year is the estimated loss concurred by counterfeit luxury brands and products. According to the 2018 Global Brand Counterfeiting Report, the total value of counterfeit products globally is expected to reach $1.8 trillion by 2020, which is driven in part by more convincing fake products.

There has been an explosion in terms of “super-fakes” – which is high-end luxury goods that look like the real thing, sometimes even to the trained eye. Alibaba founder, Jack Ma went on record and stated that counterfeits “are made in exactly the same factories, with exactly the same raw materials [as authentic goods]”. Hence, sometimes even business management in luxury training could fail a person from making a sound judgment.
It means that legitimate luxury good producers have incurred billions of dollars losses in terms of sales caused by counterfeit items. Even the International Chamber of Commerce cites a similar estimate where counterfeits account for 5% to 7% of worldwide trade, which is worth US$ 600 billion annually.
However, since the counterfeiting industry operates in a ‘grey market’; solid figures are hard to estimate and establish.

Brands like Louis Vuitton, Chanel, Gucci, YSL and a few suffer in terms of counterfeit products. When it’s a deceptive counterfeit market and the quality of a fake handbag isn’t up to the mark, the owner doesn’t realise it’s a poor-quality fake. They think that the real brand has poor-quality standards which result in loss of customer trust factor. There is also no resale value of a counterfeit product, unlike original brand products that are still sold at a high value if it’s a vintage edition.
The situation is malicious to the personal luxury goods industry as well as the customers spending money within it, hence a number of companies are moving to provide solutions to this ever-growing problem. There are now several blockchain startups planning to take advantage of the blockchain technology in countering the counterfeit madness. It is obvious as the current traditional centralized setup hasn’t achieved much in bringing the situation under control.
Harvesting the solutions blockchain tech can provide, startups like Luxchain is creating a de-centralised verification solution for the personal luxury market. Personal luxury products like handbags can be authenticated by verifiers who will upload the information about the handbag to the blockchain as a Digital Asset.
How does that help? So, with Digital Assets, anyone can access the detailed information which estimates the handbag’s origin and authenticity as potential buyers can see relevant data including the serial number, point of origin, and authentication history. Then, the bag will be tagged with an unforgeable QR code which would store all of the information previously stored on the blockchain. The QR code is created in such a way that it cannot be copied or duplicated by ambitious forgers. Despite that, if a copied or forged code is scanned by the LUXCHAIN application, it will be revealed as a fake.
So, when a customer buys a luxury handbag and easily scans the QR code using the Luxchain application, he sees the bag’s entire information already stored on the blockchain will be displayed, this is the Digital Asset. Information on the blockchain cannot be altered, which promotes trust. This ensures brands less competition against counterfeit products as a consumer can verify the product authenticity through an application even if they are not expert at spotting a fake from an original.
The Blockchain technology ensures a transparent and trustworthy implementation, a much-needed breakthrough for the luxury industry. It also helps a brand to protect against future brand dilution, brand confidence and resist damage to brand reputation and lost sales

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