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Counterfeit Goods: Who’s Buying Them And The Hidden Environmental And Socioeconomic Impacts Consumers Need To Know About

Counterfeit Goods: Who’s Buying Them And The Hidden Environmental And Socioeconomic Impacts Consumers Need To Know About

Romana Hai
Counterfeit Goods: The Hidden Environmental And Social Impacts Consumers Need To Know About

Whether one is buying a knockoff Chanel classic flap bag or a pair of Nike Jordan’s, what’s the likelihood of that person considering the child who stitched that product together in a sweatshop before it made its way to the hidden stock shelves on Canal Street in New York City? It’s pretty unlikely.

Sound grime? Of course, it does. But is it dramatic? Unfortunately, it is not.

The socioeconomic and environmental ramifications that come with purchasing replicas is not something that remains top of mind for consumers. For the most part, it is an unlikely pairing of thoughts.

But while we all know counterfeits can have extreme and damaging effects, do we all actually know what they are? And is it an issue that truly resonates? Moreover, what must luxury brands do to truly address the issue?

Environmental Impact

Typically, counterfeit products, ranging from designer goods to sportswear merchandise, are produced under unregulated circumstances using machinery and materials that are often more hazardous and dangerous to the environment. What does that mean? The carbon footprint behind counterfeit goods is ginormous.

Moreover, if these counterfeit products are seized by law enforcement, they are typically destroyed by incineration, which further leads to air pollution. This makes buying counterfeit products unethical on many levels, especially in the eyes of the sustainability-conscious consumers and for the brands and retailers who have created sustainable missions in recent years or have been founded on the mission to reduce their carbon footprint.

Counterfeit products not only allow for profiteering off others but it severely undermines the company’s sustainability efforts as well as the consumers.

Lack of IP Protection

Weak intellectual property (IP) laws not only impact a country’s likelihood to attract foreign direct investment but it also impacts their ability to protect the rights of businesses both big and small — a problem that makes it easier for illicit businesses to copy designs and produce counterfeit products.

When countries have stronger intellectual property protection laws, according to the International Chamber of Commerce (ICC), research, development and innovations as a whole are more likely to flourish.

The ICC estimates that the global economic value of counterfeiting and piracy could reach a whopping $4.2 trillion by 2022, putting roughly 5.4 million legitimate jobs at risk during that time period.

Socioeconomic Impacts

Research conducted by World Trademark Review on the global economic and social impacts of counterfeiting reveals a strong link between counterfeiting and illicit activity. One way of confirming this finding is when a shift from legitimate to criminal-based activities occurs, a reduction in government tax revenues is observed.

Digging deeper, when consumers purchase fake goods of any kind, the quality of the goods and safety of the consumer cannot be guaranteed. For example, in 2019, a spike in illnesses and deaths related to counterfeit THC vaping products occurred. This was a direct result of fake products in the market that have the luxury of forgoing any mandated health and safety regulations. Additionally, they are more likely to be made of lower quality components, materials and/or dangerous chemicals.

But the safety of the production worker is also typically at stake as knockoff goods are generally produced in hazardous conditions. Furthermore, counterfeit goods are often produced in developing regions of the world where laws are hardly (if at all) enforced, often resulting in child labor and exploitation of the underprivileged.

Who’s Buying Counterfeit Goods?

The first knockoff goods persona is the type who has sizable purchasing power and is able to shop casually. These types of consumers are tuned into fast-fashion concepts, but they also dabble in luxury goods. This person is willing to spend money on classic, timeless pieces that are likely to retain value.

Then there are consumers who have minimal purchasing power, but they are well versed in major brands. Most of the consumers in this particular persona group are young, college students and those that are new to the workforce.

And then, there are consumers who have no idea that they have purchased a fake product. This type typically has no intention of buying a counterfeit and believes they are buying something authentic.

Why Buy Fake?

Among the three personas, there are two reasons that explain why the first two persona groups purchase knockoff products.

  • Spending full price for a particular authentic item isn’t justifiable
  • The desired product is simply out of their budget

To confirm these rationals, I took it to my own personal Instagram account to poll my followers. It turns out that 74 percent of the 478 people who responded to the poll resort to purchasing fake goods when authentic ones are out of budget, while 26 percent are not interested in paying the full price for authentic goods.

What Needs To Change?

This past month, we saw countless brands and retailers publicize their sustainable mission statements and their goals to reduce their carbon footprint. Lululemon, for one, announced an initiative dubbed lululemon Like New – a trade-in and resale program that not only is enabling the brand to take control of its resale market but is also aiming to extend the life of its products by encouraging consumers to trade in gently used lululemon clothing in-store or by mail in exchange for a lululemon e-gift card.

Buy now, pay later (BNPL) provider Klarna also announced the launch of a new free feature to democratize access to unbiased climate impact information for consumers making purchases using the company’s flexible payments offering.

Nike is taking the reduce, reuse and recycle mantra to a whole new level by announcing its plans to start selling refurbished sneakers, which shoppers have returned.

Meanwhile, European luxury powerhouses LVMH, Prada and Richemont, are taking it a step further by joining forces with the launch of a blockchain-powered digital registry called the Aura Blockchain Consortium that can track and authenticate products.

These are just some of the moves that players across the fashion and retail industry have announced recently to further amplify their sustainability efforts and crack down on counterfeit luxury products.

While these initiatives are undoubtedly a step in the right direction, more needs to be done to solve the $1.2 trillion counterfeit problem. Perhaps a good place to start would be for brands and retailers to educate their customers, and rethink their approach to managing inventory, stop the destruction of unsold items, and find ways to, directly and indirectly, address the use of child labor and worker abuse.

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