Online counterfeit sales worry luxury brands

While surfing a popular Korean news website, Anna Lee, a 36-year-old office worker, noticed a small ad with flashing images of luxury handbags. One click later, and she was looking at a website filled with authentic-looking designer bags being sold for a fraction of the original price.

A counterfeit Chanel handbag is on sale on a website for 280,000 won, a fraction of the cost of the genuine article. / Korea Times

By Cathy Rose A. Garcia

While surfing a popular Korean news website, Anna Lee, a 36-year-old office worker, noticed a small ad with flashing images of luxury handbags. One click later, and she was looking at a website filled with authentic-looking designer bags being sold for a fraction of the original price.

``The bags looked new and real. I saw a Chanel bag for only 280,000 won, but after looking at the price, I guessed it was a fake. A real bag wouldn’t be that cheap,’’ she said, noting that the Chanel purse would normally cost more than 3 million won.

Lee is still thinking about whether to order the ``real-looking’’ Chanel purse from the website, noting that online shopping offers convenience and privacy. ``No one will know if I bought the bag online,’’ she laughed.

It used to be that one had to go to Itaewon to purchase those infamous Louis Vuitton or Chanel ``super-fake’’ handbags. These days, there are dozens, if not hundreds, of websites selling counterfeit luxury branded bags, shoes, accessories and clothes.

Visit any Korean search engine, type in the words Louis Vuitton and it will come back with results not just for the official website, but with sponsored links to dubious-looking sites selling the latest ``it’’ handbags.

These sponsored links and websites represent a new headache for luxury brand companies and Korean authorities, who already have to contend with the steady stream of counterfeit bags for sale on the streets of Seoul.

``You have these advertising links flashing up on legitimate websites, and it will take you to other websites, whose servers are often based outside of Korea. That causes problems for taking enforcement action against them. It’s difficult to close a website, but when it’s outside Korea, it’s an even bigger challenge for brand owners and Korean authorities,’’ Tom Duke, director of the European Chamber of Commerce in Korea (EUCCK) IP Centre, told The Korea Times, Wednesday. The IP Centre works with EUCCK member companies, especially on trademark and design protection.

The websites are usually in Korean, obviously targeting Korean consumers, but the servers are based in Hong Kong and China, making it hard for authorities to track them down and force their closure.

A few years ago, fake designer goods were popping up in legitimate online marketplaces like Gmarket, Auction and 11st Street. The websites have been working with luxury brands on a system where they can report suspected sellers of fake luxury items. After an investigation, the sellers’ accounts can be deleted from the website.

It has worked well, but counterfeiters have found ways to circumvent the system by posting links to off-shore websites.

``A lot of these activities are being driven off the main sites. But the problem is you have the hard core on the sites, the people who can keep coming back and re-registering on the same site with different IDs, which technically should not happen, but it does,’’ Duke said.

The Korea Times still found a few sellers offering suspicious-looking Chanel, Gucci and Louis Vuitton bags on Gmarket, with links to external websites.

Globalized counterfeiting chain

Last December, Korean customs authorities in Incheon intercepted a U.S.-bound shipment of counterfeit goods of European luxury brands, manufactured in a Korean-owned factory in China. This example serves to highlight the growing globalization of the counterfeit supply chain.

In the past, there were many Korean factories manufacturing counterfeit goods at all levels, but most of it has been transferred to China or Southeast Asia. Counterfeit goods are now being imported to Korea, either as finished goods or semi-manufactured materials.

``Before they might ship the whole bag, but now they might just ship the canvas or the leather or the logos separately, and then assemble it here. It’s still illegal and the customs does track it down, but it represents more of a challenge,’’ Duke added.

Local demand for counterfeit goods is still there, and helped by foreign tourists, particularly Japanese visitors. Korea is well known for its ``super fakes’’ or class A-counterfeits, whose quality is barely indistinguishable from the original luxury goods.

Just take a walk along the main street of Itaewon and one can easily find someone willing to sell these ``super fakes’’ in broad daylight. Sellers do not seem worried about being arrested, perhaps knowing that Korea has a relatively lenient punishment for counterfeiters: a maximum of one year in prison, and rarely do those kinds of cases prosper in court.

Some tour guides even bring Japanese tourists to ``secret’’ storerooms for these ``super fakes,’’ where they can sit comfortably, sipping tea while picking through a thick catalog of popular luxury goods.

Because of the ``high quality’’ of these ``super fakes,’’ it does not come cheap. A ``super fake’’ Hermes Birkin bag, depending on the leather, can be priced between 500,000 won to 1 million won, compared to the original that goes for more than $5,000.

``It is quite serious from the brand perspective. The luxury industry is obviously very focused on brand positioning and it’s important they don’t lose brand equity,’’ Duke said.

Many famous brands have successfully engaged their customers with effective marketing campaigns and after-sales service. Perhaps this is why demand for luxury goods is still strong in Korea. Sales of luxury goods at the top three leading department stores in Korea have soared 21 percent in October.

``Korea is a very important market for luxury brands. There is quite a high per capita consumption relative to income for the purchase of luxury goods in Korea... Within the Asia Pacific region, it is definitely a priority for anti-counterfeiting activity for luxury brands, along with China and Japan. Koreans have a high brand awareness and it’s important to keep the brand image in the right area,’’ Duke said.

More public awareness needed

Kim, a 30-year-old office worker from northern Seoul, recently bought Chanel and Louis Vuitton handbags in Paris, where the prices are almost 40 percent lower than in Korea.

She does not usually buy luxury bags, but understands the impulse to buy a counterfeit one. ``It’s true that we have to respect the design and originality of the designers by buying real ones. But if the real ones are too expensive for me, then maybe I would buy a fake,’’ she admitted.

This kind of casual attitude towards counterfeit goods can be a challenge. There is a consensus that there is a need to educate Korean consumers about certain ``myths’’ about counterfeit goods, such as: ``it is free advertising for the brand’’ and ``it is a sign of the brand’s success.’’

``Some say that (counterfeiting) is good for brands because it’s free advertising and that it is a victim-less crime... It’s not true, there are certainly victims. Counterfeiting heavily contributes to organized crime networks. It's a huge financial boom for organized crime not just in Korea but across the world,’’ Duke said.

Together with its members, the EUCCK IP Centre is still working on a public awareness campaign, as a way to reduce end demand for these counterfeit products. There are plans to put up posters with anti-counterfeiting messages, in different languages, at various ports of entry to warn visitors and residents.

``There’s a lot of time and resources being allocated for counterfeiting, which should be deployed for other creative and innovative areas, which could help the Korean economy,’’ Duke said.