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Fake luxury goods have sinister tag
By Luo Man (China Daily)
Updated: 2005-05-21 06:55
SHANGHAI: The making and selling of counterfeit luxury goods is big business
in emerging markets such as China and India.
But buying a fake Gucci loafer or Louis Vuiton purse could be financing the
next suicide bombing.
That was the chilling warning from experts at the Business of Luxury Summit
in Shanghai last week.
While some luxury brand companies tend to look at counterfeiting as a
compliment, publicity or simply another challenge, Hambro said it is an
often-underestimated problem.
Rupert Hambro, chairman of British research firm Walpole, said that while in
emerging markets, luxury goods are a growing business, the fastest growing
segment of the industry is counterfeiting. And that may be a more dangerous
proposition than spending a monthly pay cheque on a new top.
Since 1993, production of fakes worldwide has jumped by 1,700 per cent,
according to some estimates. And proceeds from some sales of fake goods around
the world have been tracked by intelligence agencies in Britain and the United
States to terrorist organizations such as al-Qaida.
"Profits benefit organized crime rather than the local community," said
Hambro.
Counterfeiting may also undermine the brand value of luxury goods, for which
everything is in a name.
Ultimately, despite the myriad opportunities created by emerging markets like
China, India and Russia, luxury brands are fighting battles on multiple fronts.
Though luxury manufacturers believe China is in vogue, the potential for the
likes of Gucci, Prada and Police is more smoke and mirrors than dollars in the
bank.
Taxes in the mainland mean prices are higher and the percentage of people who
can afford luxury goods is relatively microscopic, between 5 and 10 million.
More to the point, counterfeiting is rampant and there is no end in sight to the
blatant rip-off, copy culture.
But such angst and long-term problems have not kept hundreds of industry
representatives in Shanghai from salivating at the potential of the market,
small as it may be at present.
"Basically, we need to create a market here," said Patrizio Bertellio,
Chairman and CEO of Prada during the summit held on Thursday and Friday.
The summit brought a dazzling collection of the world's most prestigious and
expensive names to Shanghai, a city according to Grosvenor Asia Pacific Managing
Director Nicholas Loup "poised to become a capital of the luxury business."
Shanghainese lead mainland pack of affluent Chinese, gobbling up luxury goods
like Louis Vuitton purses, Bulgari diamonds, Rolex watches or Prada dresses.
According to a Merril Lynch study last year, Chinese were the third largest
buyers of luxury Italian goods - buying up 11 per cent of the total.
They trail only religious shoppers the Japanese at 26 per cent, and retail
hungry America at 25 per cent or US$107 billion. By 2014, Chinese buyers may
account for 30 per cent of the luxury goods market.
"It is a promising market to say the least," said Melanie Flouquet of JP
Morgan, but "probably the biggest challenge for the luxury sector is that the
market is changing extremely fast."
Luxury brands are fighting to hold on to their identity. For them, branding
is everything; a given item sells an image more than they sell a product.
"We have become a guarantee for quality in the eyes of the consumers," said
Prada's Bertellio.
(China Daily 05/21/2005 page2)
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