If you want to tout that fake Louis Vuitton (LVMUY:US) Le Radieux handbag as the real deal, you had better look the part, according to a Massachusetts Institute of Technology researcher.
People are more likely to identify a designer handbag as authentic if the individual carrying it wears expensive clothes or has a certain aura that says rich person, the research found. The study, by Renee Richardson Gosline, an assistant professor of marketing at MIT's Sloan School of Management, showed that shoppers can more accurately distinguish between real designer bags and fakes if given social cues.
Gosline showed 100 owners of luxury handbags photos of the items alone against blank backdrops and ones worn by people in social settings. She found that the ability to discern an item's authenticity and the amount a shopper would pay for the product declined with the lack of context.
"Counterfeits are really not serving as a substitute for the real thing at all," Gosline, a former brand manager for LVMH Moet Hennessey Louis Vuitton, said yesterday in a telephone interview from Cambridge, Massachusetts-based MIT. "Consumers are a lot smarter than we may give them credit for—just because you've got a nice fake doesn't mean you're going to get away with it."
Annual sales of counterfeit goods total about $600 billion worldwide, almost 7 percent of global trade, Gosline said in an unpublished research paper. That includes industries other than luxury goods, such as automotives, pharmaceuticals, media and consumer items, she said.
Counterfeiting costs U.S. businesses as much as $250 billion a year, according to the Washington-based International AntiCounterfeiting Coalition.
Conspicuous ConsumptionGosline's research also supports the theory of conspicuous consumption—that people will spend lavishly on goods to show off their wealth and social status. The study showed that people will pay twice as much for an item when they think they can use it to send cues about wealth and taste, she said.
Luxury-products sales may rise next year for the first time since 2007, consulting firm Bain & Co. estimated in October. Revenue in the 153 billion-euro ($230 billion) industry is forecast to increase 1 percent in 2010, excluding currency movements, according to Bain's study. Revenue this year is likely to fall 8 percent, the firm said.
Still, fake luxury purses have a place on the social ladder. Many purchasers of knock-off bags move on to buy real ones within a few years, Gosline found in a separate study of 100 consumers.
"The counterfeit actually served as a placebo for brand attachment," she said. "People were becoming increasingly attached to the real brand even though they never possessed it at all."
From Fake to RealForty-six percent of the counterfeit-bag owners bought the authentic products within two and a half years, she said. Shoppers were willing to pay $786 for a real luxury bag, which declined to $403, on average, when they saw the items out of context displayed against a neutral background, Gosline found in the other study.
"People who look authentic to the brand—high status people—are far more able to get away with a fake than people who are not," Gosline said. "A counterfeit is not necessarily going to do the same thing that a real brand will."