If the latest report on counterfeit luxury goods by law firm Davenport Lyons is to be believed, my old boss is in for many more difficult flights this year. It seems the prevalence and popularity of fake luxury products continues to grow. Two-thirds of respondents were happy to own fake items. Equally concerning was the changing profile of consumers for fake luxury goods; 20% of the 3m Britons who bought these goods had household incomes in excess of £50,000 a year.
The luxury goods market is tipped to grow to £1trillion in global sales by 2010. With the top luxury brands enjoying operating margins of 60%-70%, it's not hard to see why many marketers view counterfeit products as the biggest threat to these brands.
In reality, they are no such thing. The first flawed assumption is that a consumer who buys a fake would have otherwise purchased the genuine article - this is hogwash. A woman does not buy a Herm?s Birkin bag for £10,000 because she needs a handbag. She wants the brand and for all the utilitarian verisimilitude of a £200 copy from Shanghai, this is something even the best fakes cannot offer.
It's true that millions of fake luxury handbags are sold each year. But very few of them, if any, cannibalise the sales of the real thing. Davenport Lyons reports that in 2006 only 20% of purchasers of fake brands would have bought the genuine article. I suspect even this figure is an exaggeration.
The second flawed argument against fakes is that they harm the brand equity of the luxury brand. Perhaps, but I would argue that for every negative incident in which a fake damages a brand's reputation, there is an equal number of occasions on which it helps protect the genuine brand.
Let's say you are walking down Bond Street and a young man of apparently meagre income and untidy countenance barges past you with a Gucci bag (the same one you own) slung over his shoulder. You curse him under your breath, but just before you reappraise the great house of Gucci and its fine clientele, you pause and sneer 'Must be fake'. It is probably not, but sometimes it helps to have genuine brands mistaken for forgeries when brand equity is at stake.
Indeed, counterfeit products may be good for luxury brands. Because they are usually manufactured by lean, market-driven entrepreneurs, they are often the first signal of a luxury brand's renaissance (when copies appear) or of the final nail in the coffin (when they don't). As a result, more than one great luxury house uses counterfeit sales to predict demand for its own brand and gauge its overall health.
Fakes are also often the first place where consumers develop an awareness and aspiration for genuine luxury. After all, Davenport Lyons found a third of consumers for fake luxury said they would be more likely to buy the real thing in the future as a result.
30 seconds on... counterfeit luxury goods
The value of the counterfeit goods market in the UK is predicted to be £14bn this year, up 10% on 2006, according to the report by law firm Davenport Lyons, which conducted a survey of 2000 consumers.
The global worth of the market is understood to be about £200bn.
The most popular market is clothing, followed by shoes, watches, leather goods and jewellery. The most popular brand is Louis Vuitton, followed by Gucci, Burberry, Tiffany, Prada, Herm?s, Chanel, Dior, Yves St Laurent and Cartier.
Most fake products are manufactured in China, South Korea, Taiwan and South America.
Nearly 75% of those surveyed said they would be deterred from buying fakes if doing so could result in a jail sentence.
Auction sites are a major source of such goods for UK buyers, with almost a third of consumers saying they had bought fake items on eBay.
Most fakes are bought in the UK, but purchases in India and the Far East are on the rise.