China Counterfeit Explodes

There are more and more knock-offs (Shanzhai 山寨 in Chinese) coming out of China, the authenticity of these products are getting better and better. Of course I’m only referring to the esthetic appearance and not the quality or workmanship. The latter is the reason why counterfeit goods are worth while business for those involved.

In most cases counterfeit sellers are trying to scam people looking to buy the real thing. In the past clothing was the most popular counterfeited products, but as more and more authentic clothing brands begin to manufacture their products in China, counterfeiters no longer have the advantage of cheaply made goods. These factories begin to produce extra pieces to sell in the gray-market or they start to sell rejected items as factory-outlet items.

The counterfeiters in the late 1980’s began going into imitating brand name handbags. Selling counterfeit versions in mainland China shops at 10% of the authentic brand’s retail price. For the keen eyed buyers they can tell the difference between the real and counterfeit items. Some of these counterfeit models don’t even exist with the authentic brands; in most cases the pattern, colour or their combinations are the difference.

In recent years these differences between counterfeit and authentic handbags draw smaller and smaller. In many mainland China handbag shops selling counterfeit versions, will display real retail catalogues from the brands for customers to choose. This serves to demonstrate to the customers that the model/colour/pattern and combinations do indeed exist from the respective authentic brands, it also help them avoid carrying too many counterfeit items at the store premises.

So far these counterfeit consumer items from mainland China have not hurt anyone other than the original brand/copyright holders. But ever since Hong Kong’s SARS outbreak, mainland Chinese counterfeiters have started to produce fake food products. These items actually hurt people who consume these fake food; in many cases causing deaths.

In 2008 the biggest scandal was the contaminated powder milk, as a result creating a gray-market for authentic powder milk from Japan sold in Hong Kong. Many stores in Hong Kong, who never sold powder milk began to sell imported Japan manufactured powder milk. With the events on March 11th, it causes all Japanese manufactured powder milk to be sold out in Hong Kong mostly due to the mass purchasing by mainland Chinese gray-marketers.

In the past several years counterfeit products in another industries have also matured. Mainland Chinese counterfeiters begin making fake Apple products and other hot selling electronic items from various manufactures. These fake products are so real from their appearances that it is often hard to tell the difference until one begins to use them.

Using the fake Apple iPad 1, fake Apple iPhone 4, fake Apple MacBook Air or fake Apple Smart Cover, you will immediately realize they are counterfeits. Of course their retail prices will often give them away. These fake Apple products are usually sold at 50% of the authentic items’ retail prices; except in the case of the Apple Smart Covers.

So how can the brands fight back? Is lawsuit the answer? Can foreign government treaties stop the counterfeiting? Not likely.

The tactic most brands take is to open their own stores in mainland China, making their respective products easier to acquire by Chinese consumers. This is an effect stop gap for counterfeit products, because in most cases Chinese consumers do want to purchase authentic items. But by the time these items are imported into China and local retailers add their markups, the retail prices are just too high.

Recently Abercrombie & Fitch lost a lawsuit against a mainland China retailer, in which A&F claims the retailer of selling counterfeit A&F products. You would think since there are no authorized resellers for A&F products in Asia, A&F’s claims should be easy to proof and win. That was not the case, because during the hearing the A&F expert could not tell the difference between the counterfeit and the authentic A&F products.

Did this failed lawsuit deterred A&F? No, A&F will open their first Asia retail store in Hong Kong 2012, taking over the space previously occupied by Shanghai Tang at one of Hong Kong’s most historic building, Pedder Building, and paying HKD7 million per month in rent for the privilege. Gap will also do the same; although not Asia’s first, and opens around the corner in the vicinity at the heart of Hong Kong’s business and high end retail district. I hope A&F will take this opportunity to bring their other sister brands: Gilly Hicks Sydney and Hollister California to Hong Kong.

The 12,700 square foot Pedder Building retail space will be smaller than the 15,000 square foot space soon to be occupy by Apple for their first Apple Store at IFC Mall Q4 2011 and their second Apple Store of 20,000 square foot at Hysan Place for 2012.

Will these actions by the major brands finally stop the counterfeiting? Only time will tell.