Intangible Assets and Counterfeit High-End Apparel

Michael D. Moberly    July 8, 2012

This post represents a pessimistic, but, what I believe is a very relevant analogy contrasting the global preference for – expectation of authenticity in sporting contests to consumer receptivity to buying and wearing counterfeit high-end apparel and accessories.  This post was inspired by a Frank DeFord commentary on NPR and Dan Ariely’s newly published book, ‘The Honest Truth About Dishonesty: How We Lie To Everyone, Especially Ourselves’.

Presumably, DeFord says, most sports fans (consumers) care about player – contest authenticity. I believe though, there is one notable exception, the followers of so-called ‘professional wrestling’.  DeFord believes, and I certainly agree, sports fans prefer, presume, and expect contest authenticity.  That is, fans want sporting contests to be genuine battles’ of player – coach tactics, wit, skills, preparation, training, and physical and mental ability and stamina, which not-so-incidentally I say, are incalculably valuable, influential intangible assets embedded in our psyche.   

On the other hand, growing percentages of consumers, a percentage of which no doubt, are sports fans, who do not consistently convey the comparable sense of concern for legitimacy and authenticity with respect to buying – wearing counterfeit high-end apparel and accessories.  Evidence points to growing numbers of consumers who willingly and knowingly seek, purchase, and wear counterfeit products, referred to in previous posts as ‘indifference’.

Interestingly, Ariely’s book/research describes multiple social-psychological principles (theories) that influence consumer receptivity and/or inclination to use high-end apparel and accessories which they know to be counterfeit.

The implication is that for otherwise law abiding citizens, growing numbers are variously receptive to purchasing (high end) counterfeit apparel which Airely brings-to-life through various and carefully conducted (human) experiments that focus on two sociological – psychological forces that are at work, i.e.,

  • External signaling – the way we broadcast to others who we are by what we wear.
  • Self-signaling – despite what we tend to think, we don’t have a clear notion of who we are but, generally hold a privileged view of our preferences and character.

The reality, Ariely suggests, is that we don’t know ourselves nearly as well as we think we do. The inference is that when we knowingly purchase and wear counterfeit high-end apparel and accessories, most of us feel less legitimate and will act differently than consumers who pay full retail for the opportunity to wear authentic products.  

In other words, wearing fake apparel influences us to hold a less honorable self image which manifests as tainted self-concept which in turn, influences the way that we observe and judge the actions of others.  This begs the question, which is more powerful – influential, the negative self-signaling emanating from wearing counterfeit apparel, or the positive self-signaling that comes with wearing genuine – authentic apparel? 

Not surprisingly, Ariely’s findings indicate that wearing authentic (non-counterfeit) apparel and/or accessories may not necessarily increase our honesty.  However, our conventional moral constraints are likely to loosen a bit in circumstances in which we knowingly purchase and wear and/or accessorize with counterfeit goods.  And, once our moral constraints loosen, Ariely’s research indicates, it becomes easier, that is, we become more receptive to taking further steps down a path of dishonesty which is what Ariely appropriately describes as the ‘oh, what the hell’ effect!

Such receptivity also breeds various rationalizations for consumers. One such, often touted rationalization is that the purchase of counterfeit high-end apparel and accessories does not produce any adverse (economic, competitive advantage) consequences to the high-end fashion designing – manufacturing industry because only the wealthy would pay full retail value anyway, therefore there are no lost sales!  Of course, what is noticeably and perhaps conveniently left out this particular ‘rationalization equation’ are weighing both the positive and negative economic sides to external signaling.

Also revealed in Ariely’s research, is that the potency and value of external signaling is diluted and diminishes in a similar manner described in previous posts regarding the ‘pollution of legitimate supply chains’. Too, my experience – research indicates the value of external signaling, as an intangible assets, becomes even more diluted and diminished as the ‘quality’ of counterfeit apparel and accessories elevates to the point, as it already has in many instances, counterfeits are increasingly difficult to distinguish from authentic branded products.

Again, self-signaling and external signaling are pretty clear examples, in my view, of  intangible assets whose value is connected to consumer preference via the proprietary intellectual capital and trademarked logos, etc., embedded in high-end apparel.  I believe, unfortunately, there are irreversible economic – competitive advantage consequences to all of this.  Presumed consumer preference for authenticity which delivers positive (intangible asset) economics to high-end apparel designers and manufacturers through self-signaling and external signaling are evaporating to the point that concern (care) whether apparel or accessories are ‘fake’ is secondary to their cost.  Of course, readers recognize there are other factors in play here, but these are particularly evident and troublesome. 

So, as this sociological, psychological, and intangible asset phenomenon continues, and I see nothing specific on the horizon that suggests otherwise, it will adversely affect company’s value and sustainability.  But, the cause won’t necessarily be attributable to conventional risks or threats.  Instead it will be a reflection (consequence) of changes in consumer attitudes about external signaling and self-signaling. 

Having devoted a significant percentage of my professional career to safeguarding intangible assets, I fully expect that the increasingly efficient global product counterfeiting industry has already ‘geared up’ to accommodate consumers whose inclinations change for the worse.

Ultimately, high-end apparel designers and manufacturers must come to fully recognize that the positive effects derived from external and self-signaling effects represent the  ‘intangible asset glue’  that holds company value, revenue, and its ‘building blocks’ for growth together!


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