Defensive Strategy

Hong Kong’s Branding Paradox

26 Mar 2010  

The people in Hong Kong have an incredible luxury goods. Every high-end brand, it seems, has an enormous store: Prada, Gucci, Louis Vuitton, Rolex, the list goes on and on. There is no question luxury brands sell exceptionally well.

At the same time, Hong Kong is full of people selling copied products. In one twenty-minute period, for example, eighteen different people offered to sell me knock-off watches. “Copy watch? Copy watch, sir? Rolex? Rolex? Very good quality.” In one market I wandered back to look at some knock-off Louis Vuitton bags, and while I am not an expert in Louis Vuitton bags, they certainly looked fine to me.

This is a bit of a paradox. Why do people buy luxury goods when they can buy knock-off products for a fraction of the price? How can luxury brands flourish in a market where credible copies are readily available?

I suspect the answer is that people feel differently about buying and using a fake product. We know that perception shapes enjoyment; if people think something is special they enjoy it more. The logic follows that people derive more pleasure from a real product than from a copy.

Buying a fake product is not an uplifting experience. I debated buying a fake Louis Vuitton purse for my wife, but decided that I would always feel bad about the product, and she would, too. Who wants to carry around a fake Louis Vuitton purse? A strong brand transforms a product into something very special. A fake doesn’t. This dynamic protects brands even when copies are readily available.

“Copy watch? Copy watch?” Not for me.

11 Responses

  1. Howdy! I know this is kind of off topic but I was wondering
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  2. […] Adrián Segovia describe en El País las trabas al emprendimiento tecnológico en España. – “Hong Kong’s branding paradox“. Tim Calkins, en defensa de las marcas… y de las imitaciones. – “No es la deuda: […]

  3. Thanks W Card, I agree with your responses.

    I would like to jump in with another reason as to why fake and the luxury product are not the same. I read this post mainly because I have visited HK and I am interested what goes on there. Let me approach my argument with an example: a friend and I were approached may times, just like the author, many times to buy fake products. My friend, a vivid luxury-goods user, decided to give it a shot and buy two bags for herself. We negotiated the price as advised by local friends, and in about an hour and touring of hotel rooms full of bad-smelling bags/glasses/accessories we ended with two fake bags in our hands. true, they looked just fine, although when you touch or smell them you can notice the difference.

    In about two days the bags broke.

    This brings me to the history of branding and why it all began: so that the Baker of Louisvilles (and I am making this name up), could put his name on his produce and guarantee a certain standard for quality and manage the expectations of his local customers. To me, buying a fake product, granted it looks just fine and maybe people around would not even notice it is fake so the social constraints and stigma of being a “faker” would not exist, is still a lower experience namely because there is absolutely no guarantee about the life and wearing of the product. So, as a social contract, I as a consumer put my trust in a certain brand that it will meet certain expectations.

    A real LV bag does not brake in two days. If it did, LV would not be LV. If a real LV bag broke in two days, I’d lose trust and gaining it again would be a not easy path.

  4. W Card says:

    First, I’d like to address Joe’s response about perceived value based on pricing. Perhaps, many consumers valuation of a product is based on their price tag, leading them to believe that a higher priced item is better simply because it costs more. There are qualitative differences between premium products and knock-offs. There are numerous differences between a real LV purse and a knock-off LV purse. Namely, in the assembly and materials. I think it is fair to conclude that a real LV is worth more based on materials and manufacturing and a knock-off LV is worth significantly less and is capitalizing on someone else’s brand name.

    I do agree that many luxury items are grossly overpriced, but I can only conclude with that after saying the reason those products are priced the way they are is because we the consumer pay it. We set prices, not the retailer. If consumers refuse to pay the asking price, then the asking price will come down. It’s simple economics. But, as long as consumers asses the value of these product as high as they are priced, then the price will remain high.

    I do not necessarily disagree with what you are saying about the potential negatives of owning these knock-offs, but I would like to expand on the concept you present about self definition and fraudulent appearances. Consumers that purchase knock-off products recognize the social value that these premium products offers them. All benefits evaluated, these consumers do not place as great a price tag on social acceptance as consumers purchasing the authentic products. The knock-off consumers are only trying to overcome the forever present economic dilemma of “getting the most bang for your buck”.

    They value these brands just as highly as a consumer willing to pay the hefty price tag to own them, they just aren’t willing to pay the high mark-ups on them. Now, I am not trying to conclude that I condone piracy or anything of the such, I am simply trying to offer some insight into the knock-off consumers psyche. I don’t believe people dominantly don luxury products as a declaration to themselves, but a statement to the people around them. Therefore, it doesn’t seem that a potential side affect and potential deterrent to piracy is their concern of being discovered as a “faker”.

  5. Ken Chew Tan says:

    I don’t buy fake, copied, pirated products for a very simple reason. Piracy in whatever shape or form is theft. Producers of these fake products typically (though not always) are linked to gangsters in the underground world. Revenue they generate from sales of pirated goods are in turn used to fund their other businesses including child traficking, drug smuggling, etc. There are loads of other reasons why one should not support such industry. Hence, think twice before compromising your values.

  6. Jim Newcomb says:


    I agree with your asessment/share your feelings. I think fakes have two negative affects: 1) you define yourself to yourself via brands (and it’s hard to lie to oneself in this way and hard to justify stealing someone’s property to yourself) and 2) you define yourself to others via brands (and you would know you were lying–and might even worry about being discovered as a “faker”). Who wants to adopt falsity when they value authenticity.

  7. W Card says:

    Obviously there is demand for both original products and knock off products or else they wouldn’t exist. What drives some consumers to afford the large mark-up on premium products and “reduces” other consumers to take the less credible versions at a comparably reduced price.

    It’s as simple as cost over quality. Popculture generates demand in target markets by conditioning people to believe that these products makes a difference in perceived social value. Wether or not the value raising association that goes along with these products is accurate or not is irrelevant, what matters is that it is what drives the demand for these high priced products.

    We come back to the driving factors that make consumers purchase one product over another. It comes down to perceived value. The consumer who purchased an orginal version of the product at full price probably recognizes the prestige that goes along with owning that product. Whereas the consumer who opted for the knock off version also recognizes the prestige the product carries, but does not hold a paralleled perception of value that the consumer who purchased the original product at full price did. Therefore, in an attempt to fullfill their similar urges to flaunt the top of the line product, took the quality reduction and purchased a knock off.

    • Joe says:

      I agree with W Card that this is all about perceived value. I also think that the price tag is a heavy influence on that perception. I saw the below link on about a $13 cup of coffee…

      Seems ridiculous to me, but from the article it seems to be in high demand. I think people’s perceptions of quality get heavily influenced by the price tag someone places on the object.

      I am not convinced that those knock-off purses are different in any way from the “real” Louis Vuitton purses. In fact, it would not surprise me if they came off the exact same assembly line, with the exact same quality standards.

      By pricing the purse at stratospheric levels, people immediately assume it is of high quality. Because there is no tangible and verifiable basis for comparison, consumers must simply take the advice of the retailer on the quality of the product, and the retailers best way of communicating quality is through the price they are asking.

      Isn’t this the essence of a brand? A means to convince a buyer that a product is different when it fundamentally is not different?

      • Dave Borland says:

        Thank you, Joe, for saving me the time of crafting similar thoughts into words. I would even be bolder and say that the far edge of branding is empty crockery.

  8. Dear Tim
    I completely agree that one of the reasons contributing to the success of is the feel attached to it, but along with it, another point I believe is, satisfaction of mind.
    There’s no warranty or any kind of credibility whatsoever associated with a fake product.
    Best regards
    Sambhav Karnawat
    Jewelove (TM)

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