Brett McGuire

Brett McGuire: Reasons We Buy Counterfeit Goods

Last month, Nielsen Vietnam released the results of a year-long survey of Vietnamese attitudes to fake goods. The survey, conducted with the assistance of the Italian Trade Commission, revealed that fake goods account for half of all retail sales in Vietnam’s two main cities, Hanoi and Ho Chi Minh.

These alarming figures reflect the findings of a survey conducted in Indonesia by the University of Indonesia’s Institute for Economics and Social Research (LPEM-UI). The survey showed that consumers are rarely swayed by the desire to own a genuine brand. Only 14 percent consider originality when buying products.

Why, then, do we purchase counterfeit products? The answer is far more complex than you might expect.

The availability of the genuine product is often a key driver, as evidenced by Indonesia’s burgeoning market for pirated DVDs. The majority of pirated movies offered for sale in our shopping malls aren’t legally available in Indonesia. The result? Over 95 percent of movies sold on DVD are pirated copies.

Of course, price is often another important factor. Sticking with the DVD example, of those movies that are legally available, the price of the original is often at least 10 times the price of the copy.

But price isn’t always as influential as you might think. The willingness of consumers to buy counterfeit goods also varies according to the type of product.

It was thought that Indonesia’s large, low-income population played a role in the huge number of counterfeit goods in the country. However, the findings of LPEM-UI’s survey contradict that theory. Income sometimes plays a role, but not as much as you might think. Middle-class consumers are only slightly more inclined to buy originals than those earning less than Rp 1 million ($106) a month — 18 percent to 15 percent.

Disposable income plays a much bigger role when it comes to clothing, where the preference for original products rises with income.

Not surprisingly, consumers are much more reluctant to buy counterfeit versions of products that directly affect their health. For pharmaceutical products, the percentage of people loyal to original goods is very high. Only 18 percent of consumers will knowingly buy fake drugs. This is fairly consistent across all income brackets.

These findings tell us the market for counterfeit products is far more complex in Indonesia, Vietnam and the region than in developed countries, where the primary driver is usually price and the purchase of fake goods is often frowned upon. Therefore, tackling this problem is going to take more than educating consumers about the “evils” of fake goods.

The answer lies with vendors and removing the impetus for selling fakes instead of originals. This can partly be achieved by reducing the price of the genuine item. But reducing prices alone is not enough. The single, simplest way to discourage sales of fake goods is to enforce the law.

This is where brand owners come in. Selling counterfeit goods is a criminal offense, but the police can’t do anything unless the brand owner complains.

The special crimes units of the Jakarta Police scour the city looking for fake goods, but are often unable to convince brand owners to file a complaint. The vendor is therefore free to continue selling fakes, emboldened by the brand owner’s inaction.

What we end up with is a cycle in which consumers, vendors and brand owners all have their role to play. Nothing will change until we break the cycle.

Brett McGuire is a consultant for Rouse. His Web site is HAKItree.com/brettmcguire.

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