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India’s counterfeit luxury market tops US$600 million

India’s lagging luxury market get yet another blow, a recent Assocham report estimating the size of India’s luxury fake luxury market at US$640 million, representing 5-6 per cent of the overall luxury products market in the country. The market for fake goods is driven largely by e-commerce which account for over 25 per cent of the overall market for fake luxury products in India, says the report. Fake products account for 7 per cent of the global luxury products industry worth Rs 19,69,920 crore.

“Fashion brands are among the most counterfeited or pirated products because of the high margins they offer,” says Devangshu Dutta, chief executive, Third Eyesight. A big chunk of the market for fake luxury goods is constituted by accessories such as watches, handbags, sunglasses, perfumes and jewellery. And this market is growing at a rate twice that of the market for genuine luxury goods.

The market for fake luxury goods in India is likely to touch Rs 6,000 crore in 2016. “About 80 per cent of these counterfeit products come from China,” says Nymex Consulting chairman David Abikzir. “Most of the e-retailers buy and re-sell products and don’t control the trademark of the product sold. So, it is no surprise that e-retailers are playing a key role in the market of fakes,” says Abikzir.

“On the supply side, China has become a major manufacturing and sales hub for outright fakes as well as the better quality ‘replicas’, and unfortunately is as much the prime source for counterfeit sales around the world as it is for legitimately manufactured products An obvious advantage that online counterfeit sellers have is that the customer is unable to see or touch the physical product until it is delivered, so there is no sensory filter the customer can apply before buying the product,” he adds.

That is not to say only e-commerce sites are to blame for the rising sales of fake goods. It is common knowledge that many consumers who are not able to afford originals purchase counterfeits on global websites, points the co-founder of an e-commerce portal specialising in electronic goods. “Many websites hawking counterfeits have their domain names registered outside India, and are therefore outside the country’s jurisdiction,” he says.

Brand consultants agree there is an urgent need to educate customers on brand heritage and create awareness about original products. According to the Assocham report, certification of authenticity and quality of products by luxury goods makers, digital serialisation/authentication, multi-channel protection and inclusion of appropriate technologies in product labelling are steps that can be followed by luxury goods manufacturers to combat counterfeits.

While most of the popular e-commerce players screen products before putting them up for display on their websites and also offer consumers a certificate of brand guarantee along with the product, many smaller sites may not have the wherewithal to screen products. Another issue is that the e-commerce space in India is primarily discount-driven. “Some of the websites themselves in a bid to drive their top line and keep their own margins intact may have engaged in loose sourcing practices, unknowingly or knowingly, thus becoming a channel for counterfeit products,” says Dutta.

In a bid to overcome the problem of fakes and to become more accessible to a wider group of customers, many luxury brands have introduced lower priced lines as well as individual products that are more affordable, or smaller pack sizes to drive trials. “A tight economy and a value-for-money seeking consumer pose a significant and constant challenge to genuine brands to prove their worth,” says Dutta.

Arun Chandra Mohan, co-founder of Jabong.com, adds, “E-retailers should work directly with brands and avoid agents and middlemen. This way they can make sure that the fake doesn’t enter their product pipeline.”

CPP Luxury Industry Management Consultants Ltd which has been covering India for the past 4 years, highlights that India’s luxury market is poised for stagnation in 2014, no major entries expected in luxury, across all sectors. The most dynamic luxury sector in India remains the auto market, with internationally luxury branded jewelry, fashion and accessories being among the least developed sectors of India’s luxury market. Luxury hospitality, a sector, which had been booming in the past decade, is also expected to stagnate in 2014.

adapted from Business Standard, India and additional comments by CPP

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