Counterfeit Products in the Luxury Retail Market - Essay Example

? Global Marketing Contents Contents 2 Part 3 Counterfeit Products in Luxury Retail 3 Counterfeit as a Growing Threat to the Luxury Retail Market 3Reasons for the Rise in Counterfeit Products in the Luxury Retail Market 5 Managerial Implications to Counter the Threat of Counterfeit Products 7 Part 2 8 Louis Vuitton 8 Marketing Activities of Louis Vuitton 9 Impact of Counterfeit Market on Louis Vuitton 9 Managerial Implications in Louis Vuitton 11 References 13 Part 1 Rise of Counterfeit Products in the Luxury Retail Market Counterfeit Products in Luxury Retail Counterfeit or fake products are storming the retail market of luxury or fashionable commodities thereby rending a threat to the growing market for luxury commodities around the world. In fact counterfeiting is rendered on the luxury commodities in regards to the different marketing actions concerning packaging, labelling or trade marking the product in order to significantly replicate the original one. This strategy employed by the counterfeiters thus happens to populate larger parts of the global market for fashionable and luxury products. However the counterfeiting activities in regards to the fashionable or luxury products are generally divided into two aspects-deceptive and non-deceptive in nature. Deceptive practices of counterfeiting are such where the purchaser is not aware that the product procured is not a branded product, rather counterfeit in nature. Replication is created as such to totally deceit the purchaser. However in the second case the purchaser becomes aware that the product procured are a counterfeit and not a real branded product. Herein the purchaser is rendered clues by the counterfeiter of the luxury or fashionable product in regards to the area from where such commodity is made available for purchasing. Further the quality and pricing standards of the products rendered also help the purchaser in rightly identifying that the products purchased are not genuine branded ones but rather are counterfeit products (Juggessur and Cohen, 2008, p.390). Counterfeit as a Growing Threat to the Luxury Retail Market Observation made shows that regions like China are turning out as the greatest contributor of counterfeit products in the world. The Chinese economy is found to have become the largest manufacturer and exporter of counterfeit luxury products that are seeking entry into developed markets of the world like United States, United Kingdom, Russia and several other regions pertaining to Europe. Moreover the counterfeit products are also making a foray into several Middle East nations where the demand for luxury products is indeed huge in nature. This large expanse of trade and exports pertaining to the realm of counterfeit products in luxury retail is happening to render an impending threat to the market for genuine luxury products. Market shares for the luxury products are largely being taken over by the rise in counterfeit trade practices. Further the rise in the level of counterfeit activities largely impacts the brand image of the original luxury brands thereby making the branded manufacturers to increase the level of expenditures pertaining to its marketing and promotion. Thereby the rise in the counterfeit market on a growing scale has made the markets of genuine brands to largely shrink thereby impacting the job markets and also in making the price for the products to increase. The growing threat and impact of counterfeiting practices in regards to luxury and fashionable products can further be observed from some statistics. During 2005, the customs body pertaining to United Kingdom happened to seize a huge package of products out of which around 64 percent was found to be counterfeited. Similarly another statistics revealed during 2003 reflects that a seize made by customs body pertaining to United States contained around 6500 counterfeit products valued to around $94 billion. During the same period the customs body pertaining to European Union conducted a huge seize of counterfeit products of around 50 million. Further another statistics revealed by the Chamber of Commerce pertaining to the international sector states that around 7 percent of the traded commodities around the world are counterfeit in nature. Moreover the rise of counterfeit products is found to cost economies like United Kingdom in a potential manner. On an annual level the United Kingdom economy is found to expend around 2.8 billion Pounds. The above statistics clearly indicate how the rise in the level of counterfeit products around the world had led to grappling the market for authentic products and increased the cost of the economies in a surmounting fashion (Wilcox, Kim and Sen, 2009, p.247-248). Reasons for the Rise in Counterfeit Products in the Luxury Retail Market The market for counterfeit products pertaining to the luxury retail industry is found to grow in such large potential owing to some salient reasons that can be marked as follows. In the first case the counterfeit products produced by dubious manufacturers tend to render the same type of benefits or advantages to the consumer. These products being increasingly availed by the consumers in easily accessible markets and at low priced processes happen to excite the interests of mainly the younger and low income profile consumers to increasingly purchase such. Moreover the producers of counterfeit products also tend to largely take resort of technological and logistic interfaces to help reach a large number of consumers mostly in the emerging economies thereby gradually infiltrating the markets for luxury and fashion products. Again the consumers procuring such counterfeit products tend to have a feeling that such products would help them gain the same amount of benefits as like the high priced authentic branded products (Safa and Jessica, 2005, p.160-162). Thus they fall in the vicious trap of counterfeit products tending to going on purchasing the same in a repeated manner. The above reasons relating to pricing and non-pricing modes like design, package and branded quality tend to increasingly cultivate the market for counterfeit products in the luxury retail industry. Thus the managers pertaining to the production of luxury products need to become increasingly aware of such impending threats and need to work on distinctive policies that would help the company in rightly countering the growth of such counterfeit market for luxury products (Juggessur and Cohen, 2008, p.390-391). Again the reasons or factors for rise in the level of counterfeit market in the different regions can also be studied in regards to the behaviour or attitude of the consumers towards such products. Two consumer behaviour theories can be effectively dealt in regards to the study of the intentions of the consumer to procure counterfeit products. Firstly the consumer can reasonably behave to procure such counterfeit products as it helps the consumer in gaining on price points and more or less serves the needs of the consumer as would have happened if additional expenditure had been incurred to procure branded products. The second theory works to deal with factors in background that instigate the consumer to procure counterfeit products other than high value branded products. It is understood here that factors concerning the personal and social environment of the person often lure him or her to procure such counterfeit products. Other than one’s personal and social environment the ease of access to such counterfeit products, the price and quality advantage derived from the gaining of such counterfeit product, the level of personal satisfaction gained from the use of such counterfeit products together with the increased intention of availing the brand at cheaper cost often lure a person to procure such counterfeit products in a repeated fashion (Phau, Teah and Lee, p.6-7). These two understandings of the consumer behaviour help one to understand the growing importance of counterfeit activities in the luxury and fashion retail market of the world. A diagrammatic illustration would help in understanding the discussion in a more effective manner. The illustration is rendered as follows. Figure 1 (Phau, Teah and Lee, 2008, p.7) Managerial Implications to Counter the Threat of Counterfeit Products The mangers of fashion and luxury goods companies need to work out separate strategies to help counter the growing threat of a rising market for counterfeit products. Therein the managers are required to invest in large amounts in effective brand promotion activities by largely reflecting on the long term benefits that would be derived on procurement of such. Large amount of investments need to be conducted in regards to significantly conducting advertising and promotional activities along with active sponsorships in regards to events that match the attributes of the product. For example the brand manager of luxury and fashionable commodities pertaining to sporting and adventure can effectively take part in sponsorship activities of adventure or sporting events to help enhance the image of the brand to mass number of consumers. Such promotion strategy would evidently help the brand in gaining an enhanced market in the region. Moreover in another set of managerial implication the managerial body of the fashion companies can actively work in bringing about new fashion in design and styles of the commodities depending on different seasons. The seasonal mix of fashion, style and design would evidently help in attracting the consumers in a new way every time and thereby in creating effective market hype. The above strategy in bringing about new fashion and styles in every seasonal cycle would also help the brand in deterring the counterfeit manufacturers from producing such commodities. In fact the counterfeit manufacturer would fail to avail such resources through which the counterfeit company can bring about new designs and fashion to the market and in high frequencies (Juggessur and Cohen, 2008, p.391-392). Other set of managerial implications include of creation adequate intellectual property for the different innovations rendered in regards to product styles and designs. The production manager is thus required to not only apply for the creation of intellectual property pertaining to product designs and styles but also needs to carry out a review mechanism in evaluating its effectiveness from time to time in protecting the designs and styles created. Thus the management body is required to take the resort of effective insurance and legal measures that would in turn enhance the protective environment in regards to such intellectual property rights applied for. Henceforth the creation of effective and adequate intellectual property rights should be conducted by the business managers in regard to the business objectives and also with the support of legal experts. The creation of effective intellectual property by the business managers would evidently help in protection of the mass use of technology by counterfeit manufacturers and producers (Narayanan, 2001, p.458). Part 2 Impact of the Rise of Counterfeit Market on Louis Vuitton Louis Vuitton Louis Vuitton or LVMH is one of the largest companies in regards to the global industry for fashionable and luxury commodities. The luxury brand that focuses on mass scale production to meet aspiring demands of its customers is based along large number of stores spread around the world. In regards to ranking for fashion products the brand value for Louis Vuitton in the world comes high enough in regards to other global brands like Gucci and Prada. Louis Vuitton aims to gain a large market for its products owing to large scale popularity for its brand name in the global market. The brand has become well known for its activities that range from manufacturing to sales and distribution all conducted by the organisation on its own thus aiming to rank high in the global market for luxury goods. The different sets of operational activities all performed by the brand on its own help the brand management in rendering effective control over the different functions to help the company gain due productivity and profitability. Moreover the creation of a travelling image helped the company in gaining the views of the consumer groups in an enhanced fashion (Haig, 2011, p.116-118; Catry, 2003, p.13-14). Marketing Activities of Louis Vuitton The marketing activities of Louis Vuitton work on enhancing the relationship with the people dwelling in different communities like China and Japan. In China the luxury product manufacturer aims in setting stores in such regions that reflect the rise of middle class and upper middle class population. In these regions the luxury product company works on rendering large scale advertisements and promotion reflecting the benefits of the product to the consumers. Further the use of celebrities along with conducting effective communication with the people tends to help in the creation of enhanced brand image of the company (Bloomberg Businessweek, 2007). Likewise while tending to carve out a larger market share in the Japanese market the luxury product manufacturer; Louis Vuitton aims to gain the attraction of the people to its different designs. Designs being part of aesthetics increasingly help in attracting the views of the Japanese consumer to procure such products. In addition to the incorporation of celebrities the luxury product manufacturer also aims in gaining the views and works of well known artists, craftsmen and designers to help in the large scale promotion of quality and beauty related to the products. Finally the luxury brand manufacturer also works in marketing of the luxury products through the use of internet. Marketing its products through the virtual plane helps the company in gaining the views of consumers across international markets. This fact thereby helps the firm in enhancing its market share (Bloomberg Businessweek, 2007). Impact of Counterfeit Market on Louis Vuitton The rise of the counterfeit market for luxury products happened to largely impact the market of luxury product manufacturer, Louis Vuitton. Owing to the rise in such counterfeiting marketing practices the company was made bound to change the approach of its advertisements to include leadership icons that would speak of the high cultural values in regards to the brand. Inclusion of such leaders who were once the national icon of some region associated the luxury brand to the journey these people carried on to gain the trust of the masses and thereby to create an image of their own (Wilcox, Kim and Sen, 2008, p.30-31). Again the rise in the level of counterfeit activities governing the luxury brand market has made the companies like Louis Vuitton gain consumer ideology as being countering deceitful activities in regards to charging extra cost for the products. This ideology gained among the consumers made the company counter many suits where the people argued that they had obtained the same product at reasonable or cheaper rates from other sources (Yoo and Lee, 2009, p.284; Okonkwo, 2009, p.287-288). Louis Vuitton is found to have been largely affected by the size of counterfeiting activities on the global scale. The company management owing to the growing impact of counterfeiting activities had worked to the development of a monogram ‘LV’ to help reduce the impact of the growth of such fake items. However still the brand had to incur heavy expenditure in regards to raid, a large number of arrests and had to file many cases in the courts to gain legal action for seizing of counterfeit items and thereby ceasing the trade related to such. Moreover the company had to carry out propaganda both at the physical level and through the virtual level to persuade people to purchase items only from its own stores and websites and not from other areas. Similarly the company is recorded to expend heavily in terms of advertising campaigns. The advertising campaigns were conducted in the New York City to help make the people aware of the consequences related to the procurement of counterfeit products. Such advertisements were directed to help fight the social cause behind the manufacture and sale of counterfeit products. All such activities concerning detention, fighting legal cases and conducting raid along with large scale advertisements to make the people aware of not buying counterfeit products required the company to scale up its marketing and promotion expenditure (Chernatony, McDonald and Wallace, 2010, p.396-397; Hieke, 2010, p.165). Managerial Implications in Louis Vuitton The management body of Louis Vuitton works on setting some implications in progress that would help in the ceasing of the rise of counterfeit products in the global market. Such implications outlined by the management body of Louis Vuitton can be outlined as follows. Firstly, Louis Vuitton in regards to the marketing activities related to product makes every endeavour to reduce the level of counterfeit activities through the generation of potential workshops in regards to enhancing the acknowledgement of the use of intellectual property rights. Secondly the company also works in rendering of warnings to several internet marketers to not to take any attempt in regards to faking or forging of the designs and styles produced by the company. Thirdly the store management of the Louis Vuitton store is equipped with such power as to judge or evaluate the authenticity of the products before allowing them to be displayed or traded in the store. Fourthly the management body of Louis Vuitton works on the generation of limited edition products or small number of quantities are rendered for each product edition to reduce the enhancement of counterfeit activities. Fifthly the management body of Louis Vuitton works in making the product accessible to populations that would be able to significantly spend in availing such high value products (Nagasawa, 2009, p.21-26). Thus the marketing team of the company focuses on creating a niche market for the branded products rather than focusing to liquidate the products in unpopular markets. Again in the sixth case the management of the company largely focuses on the production of high value goods whose design concepts would be backed by legislations pertaining to intellectual property thereby restricting the growth of counterfeit products. Seventhly the managerial body also restricts the licensing ventures related to production of such high value luxury products to be outsourced to other parties. This strategy also helps the growth of counterfeit products. In the eighth case the management sets guidelines for the alignment of the product logo that should be placed in the front centre in regards to the different products. Thus any type of other alignment is held by the company as production of counterfeit products. Finally in the ninth case the production and designer managers of Louis Vuitton work in rendering names to the different products manufactured. This rendering of names to the products are felt by the company management in helping in enhancing the association of the product to the effective consumer groups thereby helping to curb the growth of counterfeiting (Han, Nunes and Dreze, 2010, p.17). References Bloomberg Businessweek, 2007. Louis Vuitton's Life of Luxury. [online]. Available at: http://www.businessweek.com/magazine/content/07_32/b4045419.htm [Accessed April 24, 2012]. Catry, B., 2003. The great pretenders: the magic of luxury goods. Business Strategy Review. 14(3), 10-17. Chernatony, L., McDonald, M., and Wallace, E., 2010. Creating Powerful Brands. United Kingdom: Routledge. Haig, M., 2011. Brand Success: How the World's Top 100 Brands Thrive and Survive. United Kingdom: Kogan Page Publishers. Han, Y., Nunes, J., and Dreze, X., 2010. Signaling Status with Luxury Goods: The Role of Brand Prominence. Journal of Marketing, 74, 15-30. Hieke, S., 2010. Effects of counterfeits on the image of luxury brands: An empirical study from the customer perspective. Journal of Brand Management. 18(2), 159 – 173. Juggessur, J., and Cohen, G., 2008. Is fashion promoting counterfeit brands? Brand Management. 16(5/6), 383-394. Nagasawa, N., 2009. Luxury Brand Strategy of Louis Vuitton: Details of Marketing Principles. Waseda Business & Economic Studies. 45. [Pdf]. Available at: http://dspace.wul.waseda.ac.jp/dspace/bitstream/2065/33717/1/WasedaBusiness%26EconomicStudies_45_Nagasawa1.pdf. [Accessed April 24, 2012]. Narayanan, V., 2001. Managing Technology and Innovation for Competitive Advantage. New Delhi: Pearson Education India. Okonkwo, U., 2009. The luxury brand strategy challenge. Journal of Brand Management. 16, 287 – 289. Phau, I., Teah, M., and Lee, A., 2008. Targeting buyers of counterfeits of luxury brands: A study on attitudes of Singaporean consumers. Journal of Targeting, Measurement and Analysis for Marketing. 17(1), 3–15. Safa, M.S., and Jessica, W. J., 2005. Influential Decision Factors of Counterfeit Consumers in Shijiazhuang City of China: A Logit Analysis. International Journal of Management and Entrepreneurship, 1(2), 160-178. Wilcox, K., Kim, H., and Sen, S., 2008. Why Do Consumers Buy Counterfeit Luxury Brands? Journal of Marketing Research. 45. [Pdf]. Available at: http://www.iccwbo.net/uploadedFiles/BASCAP/Pages/Why%20Do%20Consumers%20Buy%20Counterfeit%20Luxury%20Brands.pdf. [Accessed April 24, 2012]. Yoo, B., and Lee, S., 2009. Buy Genuine Luxury Fashion Products or Counterfeits? 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