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Why Luxury’s Counterfeit Problem Is Getting Worse

It’s easier than ever for consumers to buy fakes online. But the spike in counterfeit sales may also have something to do with how brands themselves are pricing and marketing their products.
Man with fake Goyard bags.
In BoF’s latest Insights report about Gen Z consumer habits, 54 percent of survey respondents said they think it’s morally acceptable for other people to buy and use fake luxury goods. (Shutterstock)

Key insights

  • A growing number of consumers are shopping for counterfeit luxury goods online, driving the value of the fake and pirated goods market up to $3 trillion this year, triple the amount in 2013.
  • In addition to easy access to fakes, consumers say the ubiquity of luxury products and their increasingly high prices are fueling their demand for dupes.
  • Brands and resellers are investing in authentication technology, but so far, none has stemmed the tide of fakes.

At their cheapest, a pair of rubber Gucci slides cost $450 on the brand’s online store. On DHgate, a Chinese website that connects shoppers to a vast network of wholesale manufacturers, strikingly similar-looking “designer slippers” can be purchased at one-tenth the price.

The $450 pair, of course, is real, and the $45 pair is fake. But to Monica, a 30-something Miami resident who asked to be identified by her first name, it’s impossible to tell the difference. She already owned the real slides and bought the DHgate version, knowing they were counterfeits, to see how they measured up. Once satisfied, she became a regular shopper on the marketplace, purchasing replicas of Golden Goose sneakers and Ferragamo belts among other items.

Monica is among a growing number of consumers shopping for counterfeit luxury goods online. In a June survey conducted by the European Union Intellectual Property Office, more than 50 percent of consumers between the ages of 15 and 24 said they had purchased at least one counterfeit product online in the last 12 months. The total value of counterfeit and pirated goods will hit $3 trillion this year, triple the amount in 2013, according to the Organisation for Economic Co-operation and Development.

One reason for the explosion in counterfeiting is easy access to these goods online. Websites like DHgate and AliExpress — a Chinese website similar to DHgate that also sells cheap, unbranded fast fashion — offer Western consumers direct access to counterfeit manufacturers, mostly based in China. While users typically can’t search by brand, the right keywords pull up dupes of thousands of products that will arrive on their doorsteps a couple of weeks later.

But recent moves by luxury brands themselves have sent some consumers looking for dupes. Top-tier labels dramatically raised prices in the past two years, effectively icing out middle-class customers who might previously have considered the occasional splurge on a real Chanel or Louis Vuitton bag. Meanwhile, on social media, brands play into a culture where consumers are conditioned to covet must-have pieces season after season.

“Luxury has been leaning toward a fast-fashion tendency where they’re pushing on a lot of trends,” said Monica. “Where I’m willing to buy counterfeit are these things where I know I wouldn’t be wearing years down the line.”

Luxury brands and retailers are adjusting their tactics to deal with the growing, and increasingly online, counterfeit threat. Resale platforms, to which counterfeits are an especially big threat, have invested millions of dollars in tightening their authentication methods (though some give users the option to bypass the process entirely). High-end labels embed bar codes, radio-frequency identification and other scannable tags into their products, allowing customers to verify an item’s authenticity in-store even if they purchased it elsewhere. Some are experimenting with blockchain technology to add an extra layer of traceability.

None of these measures has done much to stem the tide of fakes; counterfeiters can mimic authentication tags and stamp products with RFID codes too. Customers don’t bother to verify they’re real anymore than they do the shoes and bags themselves. Meanwhile, brands themselves are certainly not losing sales, despite the deluge of fakes out in the world. Most recently, LVMH saw its third-quarter revenue rise 20 percent compared to last year.

“People have been throwing a lot of spaghetti on the wall to see what sticks,” said Graham Wetzbarger, a luxury authentication expert who is working on a blockchain traceability technology called MyMarkit that would enable any consumer or reseller to access a product’s ownership history.

Normalising Fakes

Stephanie, a 30-something luxury and counterfeit shopper based in Chicago, remembered her mother attending dupe designer parties with her friends. The women would get together, drink wine and peruse a trunk-show worth of counterfeit goods.

“It was always very hush-hush,” Stephanie said.

Today, not so much. In BoF’s latest Insights report about Gen Z consumer habits, 54 percent of survey respondents said they think it’s morally acceptable for other people to buy and use fake luxury goods; 37 percent said they would personally wear a fake luxury item, compared to 42 percent who said they would not.

“Now, you go on TikTok and type in ‘DHgate,’ you’ll find so much content,” she said (#DHgate has over 3 billion views on the platform). The most popular type of video shows young women unboxing their purchases, exclaiming in delight over the quality and attention to detail of their new fake Gucci bag or Jordan sneakers.

Those TikTok influencers are undermining the assumption that consumers must pay thousands of dollars for authentic goods. As more luxury brands move manufacturing from Europe to Asia, it’s helped fuel the belief among some consumers that the “dupes” they’re buying are in fact made by the same factories that create products for top brands, according to Robert Handfield, executive director of North Carolina State University’s Supply Chain Resource Cooperative and counterfeit expert.

“It could be your own manufacturer in China that’s selling the real product through an unauthorised distribution channel,” Handfield said.

For some, there’s a sense of rebellion against the notion that whether an item is real or fake reflects on the buyer’s integrity.

“The shame in counterfeiting has decreased and I think it’s just because in this day and age, it’s like, ‘Yeah, we’re gonna scam,’” said Danielle, another 30-something counterfeit shopper who prefers AliExpress. “People can’t afford rent. There’s no health insurance. I’m going to buy something in the moment that makes me happy and I’m going to be proud of it.”

Brands Fight Back

Brands are introducing new ways to weed out fakes. For instance, in 2021, LVMH, Prada and Richemont-owner Cartier partnered on the Aura Blockchain Consortium, a blockchain solution that offers shoppers tamper-proof access to information about the product’s supply chain and proof of ownership.

Resale platforms have a different problem: it’s their reputation on the line when customers find a counterfeit on a site like Rebag, The RealReal and Vestiaire Collective.

Most legitimate resellers will fully refund the purchase if it was discovered to have been fake. To mitigate their liability, some have invested heavily in anti-counterfeit technologies. Fashionphile deploys x-rays, metal alloy detectors and, most recently, an RFID-isolating box to scope out the replicas.

Fashionphile authenticators know that Cartier bracelets, for example, have a specific mix of metals: “18-karat gold, a little bit of nickel and some others,” said founder Sarah Davis. “If it’s not that particular mix, then we know it’s fake.”

The reseller, which received an investment from Neiman Marcus in 2019, has also been developing a machine learning-driven image-recognition tool using hundreds of thousands of its own images of popular handbags. The so-called “fingerprint” for luxury textiles can verify whether the typeface in a logo is real or fake based on existing authentic products.

The RealReal, too, operates a machine learning-based image recognition programme called Vision that allows its authentication process to be more automated, said Rachel Vaisman, vice president of merchandising operations at the company. Another proprietary tool, called Shield, assesses the risk level of each seller and the item they’re selling to inform what level of authentication is necessary. Together, the two methods make the overall authentication process faster and cheaper for the company.

Still, no tool is infallible. Brands don’t publicise their anti-counterfeiting identification systems, so resellers must play catchup each time new technology is introduced, said Wetzbarger,

Counterfeiters are constantly adapting their methods too. One common scheme entails buying an authentic product at a department store and returning a duped version.

Last year, there was a break-in at one of the New York stores of luxury consignment retailer What Goes Around Comes Around. Days later, the stolen products showed up on another resale marketplace with their original photos from the What Goes Around Comes Around listings, according to founder and chief executive Seth Weisser.

“The secondary market allows for organised crime,” he said.

Ultimately, as long as there is demand for fake luxury goods, counterfeiters will find a way to supply it. With top labels continuing to raise prices and pump out more and more seasonal collections, hyped collaborations and variations on their most desirable products, all signs point to that demand going up.

“There’s such a gross, disproportionate equation between prices and aspirational desire,” said Monika Arora, handbag connoisseur and author of the PurseBop blog. “That’s the breaking point that brands need to be cognisant of, and I don’t know if they are.”

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