Boom in fake goods hits luxury retailers' profits

A boom in counterfeit goods is threatening the revenues of luxury brands, according to new research.

The demand for luxury products is rocketing, driven by a wish to emulate the celebrity lifestyle. Furthermore, the tightening economic environment is also prompting many consumers to turn to designer fakes, as they struggle to come up with the cash to pay for the real McCoy.

Yet consumers carrying counterfeits from abroad could face tough penalties, and fake goods could even pose health risks, experts are warning.

The average spend on designer goods in Europe will be 260 per person over the next two years, according to research from PricewaterhouseCoopers, with some 30 per cent of consumers aged 35 to 44 willing to fork out more than 500.

The trade in counterfeit goods has risen by more than 1,000 per cent in the past decade, and in the UK the market is now worth 14bn a year.

Melanie Butler, leader of European licensing management services at PWC, said the growth of piracy could result in millions of pounds of lost sales for luxury brands. "Whilst it will not surprise luxury goods' companies that a proportion of consumers are prepared to have a fake bag, watch or purse, the findings of the survey demonstrate the tangible threat to the industry of pirated items," she said. "Developments in technology and consumer demand mean that product piracy will continue to tread on the toes of luxury brands, resulting in millions of pounds of lost sales and damage to brand exclusivity."

Counterfeit specialists at Deloitte are warning that the issue is taken seriously by the authorities. In France, travellers can be fined up to twice the value of the genuine article for carrying fakes, while in Italy, fines for a single counterfeit item can reach as much 7,000.

Kristian Park, of Deloitte, said: "Many consumers are not aware of what happens when they hand over money for fake goods, or the implications. Counterfeiting is often run by highly organised criminals. Most luxury brands have extensive anti-counterfeiting programmes in place and use private investigators, lawyers and accountants to work with local authorities and custom agents to combat the manufacture, sale and export of fake products." She added that in the UK alone counterfeiting costs the economy in the region of 4,000 jobs a year.

Most fake goods are made in the Far East and South America, with clothing the most popular item, followed by shoes, watches, leather goods and jewellery.

Meanwhile, fake toys are also flooding the market in time for Christmas. According to the online brand protection specialist NetNames, one in five Transformers Optimus Prime Autobots offered over the internet tipped to be one of this year's top selling gifts are cheaply made fakes made in the Far East, with wide variations in quality. One trader based in Hong Kong was responsible for one in 10 of all products offered, according the NetNames.

Jonathan Robinson, chief operating officer of NetNames, said: "The peak in demand for the latest sold-out toys in the run-up to Christmas presents the perfect opportunity for counterfeiters offering potentially lethal copies. Consumers need to be aware of this to ensure that they get the genuine product from official retailers, and major brands must also be aware of these online auctions to protect the consumers that think they are buying the real McCoy."