More Money = Less Fakes?

I usually enjoy Tim Johnson and his writing, but his recent entry on counterfeits had me scratching my head, namely the quote below:

Chinese with new money want the real thing. They don’t want bogus. This is a really positive sign. In five years, the discussions about piracy in China will be very different. As standards of living improve, and as Chinese companies develop their own labels and brands, the Chinese will become better at self-policing.

Okay, first we need to define what kind of piracy we're talking about here, because I'm convinced nothing other than major lawsuits and/or the downfall of the CCP will stop pirated DVDs/CDs/computer software. The nouveau riche, along with everyone else, will continue happily buying pirated versions and the discussion in 5 years or 50 years on that subject will not change. Secondly, this really only comes from an observation, in passing, after time spent in the Tiffany & Co. store at Oriental Plaza.

That said, I don't think its a new thing that the nouveau riche are dropping mad loot at the big-name label shops in Guomao, Oriental Plaza, and now in the Financial District. At Wangfujing you have a choice, if you have the cash you buy real Tiffany at Oriental Plaza, if you don't, like most teens and 20 somethings, you choose to hit the subway tunnel sellers of fake Tiffany. Johnson's argument seems pretty tired, its nothing new, we were hearing it 5 years ago and though standards have continued, the talk is all still the same.

When will the fakes stop? They won't, but it really doesn't matter. In the past, white collar females (as the fakes are typically focused on jewelry and handbags) would be annoyed after having spent big bucks on an LV or Burberry bag on Saturday, only to be greeted on Monday by an entire office of secretaries and staff using what appeared to be the exact same bag.

However, in recent years, while counterfeiters have come out with more new brands (the Coach craze started a few years back) as well as some that target men (Tumi and Swiss Army/Victorinix have started appearing recently), they haven't been very adroit at brand extension. Therefore, the majority of Burberry/Gucci/LV bags (which make up the majority of fakes you see at the markets) are all the same designs that they were selling 10 years ago, despite these brands releasing numerous new styles and designs. There's also the fact that Tiffany isn't really a good example, because while they are still expensive, they are far from an ultra-luxury brand, with offerings that are borderline "affordable." This has been particularly hurtful to the brand's image in the US, where it no longer defines luxury like it once did.

Yes, those who can conspicuously consume are choosing the real deal over fakes in greater number and yes, Asians, including Chinese to some extent, are driving the luxury market. However, my own anecdotal experience working and meeting lawyers at top law firms seems to show that these decidedly middle class 20 and 30 somethings aren't the ones purchasing designer bags. If they aren't really doing that, we're far from a situation like in Japan where even the lowliest of office workers will save up to make one (or more) large luxury purchase a year.

Johnson's line that the Tiffany customers he encountered "look like they are internet entrepreneurs in their 20s or the very young girlfriends of factory owners" struck me as it reminded me of something Nehls Frye said in an interview, namely that "Northeastern factory owners and Shanxi coal barons will presumably still chase brands that scream luxury and wealth." Many who buy luxury goods want the brand name to jump out at anyone who sees the item, while a majority of white collar shoppers are stepping up from "domestic brands" like Baleno and G2000, but only moving so far as Zara and Sisley, they've yet to make the leap to designer labels.

When will they start making that jump, perhaps in the next 5 years, but its still just guess work. The focus is still less on small-item consumption and more focused on apartments and cars. Perhaps as my generation of Chinese young people continue their climb up the economic ladder and start obtaining those things, luxury will be what comes next, though spending on kids often seems to get in the way of that.

In any case, I don't see 5 years as being enough to change the discussion of piracy. I've heard that song before and while we're getting closer to the time when one can truthfully say that in 5 years the debate will be different, we still ain't there yet.

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