Can counterfeits drive quality in fashion? Study says so

Does counterfeiting in fashion stimulate innovation? Yi Qian, one of the authors of a soon-to-be published study of footwear counterfeiting in China, says, at least in some cases, yes, it does.

What's more, markets like those she studied become "self-regulating." They have little need for the anti- counterfeiting enforcement we might want to see in, say, pharmaceuticals, she says.

Jumping into the waters of a years-long controversy which has been swirling in fashion circles, the authors analysed 31 sports footwear brands produced in China during a 12-year stretch when counterfeit shoes suddenly flooded that market. Qian and her co-authors conclude, according to a news release:

“When counterfeiters start fooling too many customers, authentic brands step up their design game.” As counterfeits spiked, authentic brands began to improve product quality.

"Established companies don’t sit idly by while they get copied shamelessly; they react by improving their products to set themselves apart from their newfound competitors, " says Qian, an associate professor at the University of British Columbia's Sauder School of Business.

When counterfeiting became so widespread that consumers were bound to notice, authentic brands upped the quality of design and materials on the top and sides of the shoes. Where fakes were less in evidence, manufacturers might improve functionality, like performance.

All this is true only for high-end product, the study cautions. Low-end product, confronted with counterfeit competition, often took a major sales hit.

The result, says Qian: some parts of the fashion market become "self-regulating", and do not need much IP protection. They protect themselves, or rather, they benefit from the market's protective "invisible hand."

The latter conclusion seems to stand in contrast to a strong opinion in the industry which advocates for a positive role for IP protection in fashion. Susan Scafidi, President of the Fashion Law Institute, and Professor at Fordham University, remarked to this reporter:

"Just because locks on car doors and other security technologies keep improving, we don't argue in favour of legalizing automobile theft -- and we wouldn't do so even if a study purported to show that more car theft would lead to the development of better locks. Why should fashion be left out in the cold, legally speaking?"

According to the UBC news release, Qian "... doesn’t want to say that counterfeiting is a good thing; rather, she wants to improve how enforcement plays out. She said that policy-makers should take note of how counterfeiters impact industries differently and concentrate their efforts where it matters most."

Its conclusions, she also warns, should not be applied to industries vulnerable to health and safety issues, like pharmaceuticals.

The study, Untangling Searchable and Experiential Quality Responses to Counterfeiting, co-authored by Qiang Gong and Yuxin Chen, is to be published in Marketing Science.