Knockoffs Hold Hidden Payoff for Brand Sales

February 25, 2011  |  

(Globe and Mail) — Is imitation the sincerest form of flattery? Maybe. But that’s cold comfort to firms that spend fortunes designing the next big running shoe or handbag only to see it knocked off in a matter of weeks.  Lookalike consumer goods, while often amusing in a kitschy way (BlockBerry or HiPhone anyone?) drive corporations to spend millions on legal bills and staffing, all in the name of “brand protection.” Despite this, the multibillion dollar counterfeit industry continues to thrive.

Some solace: a new working paper from the National Bureau of Economics finds an upside to counterfeiting. Knockoffs may steal business, for sure, but they also act as a “potential advertising mechanism,” writes Yi Qian, a marketing professor at Northwestern University.  Prof. Qian analyzed data from 31 domestic and multinational shoe companies operating in China. The data included sales figures from 1993 to 2004, a key period when China shifted the focus of its intellectual property enforcement from fake fashion and footwear to hazardous materials. In the wake of a series of accidents caused by counterfeit agricultural products and gas tanks, Chinese resources dedicated to sniffing out counterfeit footwear plummeted from 12 per cent to 2 per cent.

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