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Asked October 12, 2010

Any guides on the wholesale fashion topic that no one talks about? (whisper) Knockoffs? Counterfeit brands? Unlicensed sellers?

I hear about counterfeits and knockoffs, mostly in high priced fashion items. accessories handbags trademark jeans etc Any info on this area of the marketplace? Does a fashion reseller have any risks?


Answers

Counterfeits. Knockoffs. Unauthorized Resale. Copycat Clothes. Copyright-Trademark Infringement. Gray Market Goods.

The worldwide marketplace of Gray Market Goods is NOT a secret; we see it in almost every product category. check Rueben's list of knockoff handbag hot spots -- Countries Sourcing Handbags -- to see

> WHERE (Asia, Russia, Italy)
> HOW TRANSPARENT (buyer-friendly Refund & Guarantee Policies) and
> VARIED QUALITY (from well-made knockoffs to fall-apart-at-the-seams fakes)

Are knockoff goods always Bad? Illegal? Too risky to touch? Okay until you get caught by a Brand Manager?

Quick Answers:

--No, some argue loudly that knockoffs are VERY GOOD for increasing fashion consumer choices, for bumping up "closet churn" and increasing sales. They expand the global fashion universe. See debate below.

--No. Believe it or not, selling EXACT copies of unique apparel designs is NOT illegal in the U.S. Yet. (Only the logos are copyright protected, like the Nike "swoosh" mark.) Fashion copyright exists in Europe; Paris has protected designs for more than 100 years. A pending bill, The Innovative Design Protection and Piracy Prevention Act, introduces copyright protection for U.S. designers. More below from the bill's co-author, law professor Scafidi. 

--As for risks of selling gray market goods, or selling knockoffs 'till you get caught' by a protective Brand Manager, it's Yes & No. The risks are in misreading your own markets and whether they want the lowest price or are satisfied with lookalikes. That Brand Manager is more likely to track you down for logo/copyright infringement than knockoffs. And that IS risky.

3 main topics:

1. Going down the wrong path selling designer goods often depends on where a reseller sources their merchandise, in what quantities they resell, and whether they step on legal brands/logos.

2. Seller Beware: Some niche-market buyers sniff out counterfeits better than Brand Managers trying to protect their manufacturers, designers and repuations. Those saavy niche market final buyers won't touch fakes because they have no personal value. (In other words: You'd better know the motives of your targeted end buyers.)

3. There's debate over whether the speed of getting designer knockoffs to market (thanks to the Internet) is, in fact, GOOD or BAD for worldwide apparel sales. Let's look at both sides of the Counterfeit Apparel Debate. You decide which one has the Best/Worst results.

HIGH-PRICED and HIGH-BRAND GOODS ARE WATCHED CLOSELY ...

1. Brand defenders of high-margin leather goods, accessories, designer casual wear -- like Coach, Louis Vuitton, Victoria's Secret PINK, Hollister, Abercrombie & Fitch, Manolo Blahnick -- started taking no prisoners. Even with their registered customers.

To fend off attacks on their licensed distributor networks and brand reputation, high-end suppliers of branded goods began limiting the number of identical items they'd sell to any one customer at one time in Members-Only Designer Sales or Insider Special Sales.

This was pushback against the world of electronic "yard sales" -- limited edition handbags or logo'd designer jewelry that showed up on eBay, Fashion Blog ad listings, and many other online auction sites. (Did you know that there are specialized exchange and auction sites that talk only to New Moms? They offer designer kid's clothes, furniture, toys . . . without ever walking into the store or accessing the web site of the brands hanging from their unseen tags.)

2. Many brand managers became online auction investigators, uncovering the source of unlicensed seller goods. And cutting off supply lines. Some worked with in-house customer records to cross-check multiple "customer" sales of styles and designer labels that showed up at online auctions . . . crowing that they're "Authentic" *Brand Name* Goods.

SUSPICIOUS SALES OF LOWER-PRICE MASS MARKET APPAREL CAN BE SHUT OFF, TOO . . . if a big retailer has its Corporate Reputation at stake.

1. Mass market apparel, like New School Year Boys Polo Shirts, or Holiday Girls Sweater Sets, or Children's Sizes in Sweat Sets, can get caught on Big Brand Retailers' radar.

Children's apparel marketed at lower price points can be a problem for Big Box Retailers (like Target and J.C. Penney) if they have Target or JCP store tags sewn into them. But are being sold "off the store reservation." (See related topic "Reselling & Delabeling Returned Merchandise" below.)

2. This kind of unlicensed clothing resale (not knockoff designer goods, but knockoff retailer-branded goods) was stopped by big retailers. They drastically shortened their RETURNS policy for any customer who bought multiple copies of, say, the same style Boys T-Shirts in dozens of colors and sizes.

Online resellers who were sourcing their inventory from Big Retailer preSales often took advantage of generous 4-to-6 week refund policies . . . to return their unsold, store-branded inventory. Shrinking Refund periods from date of sale removed that dilution of the store's rep.

DISTRIBUTORS & RESELLERS NEED TO KNOW THEIR ULTIMATE CUSTOMERS FOR NICHE-MARKET APPAREL AND ACCESSORIES . . . because certain target groups won't touch counterfeits, even at low low prices.

1. Closed Social Group Clothing Swaps and Second-Hand Exchanges targeted to Teen-Tween-Aged Fashionistas have become popular during tight economic times. These resale venues offer used but authentic designer and name brand clothing/accessories to buyers who are very label & brand conscious. They can turn over their entire closets with "new" used designs at almost no cost.

The only value these niche buyers have to trade is authentic goods; and they're very good at detecting lower-value counterfeits. I watched my 14-year old fashionista niece tic off the stitching, leather quality, color scheme and minute details of an authentic Coach wrist bag . . . before she ever bothered to check an inside seam for the logo. (Knockoff manufacturers have been known to sew in fake labels, as well. But the fake label would not have passed my eagle-eye fashionista niece! She already knows what to look for.)

Those niche market targets are not going for lowest price; they want the best swap-resale value to swap out everything in their closet that's soooo old and boring to them. For their neighbors' or coworkers' or BFFs' name brand stuff.

2. Not so for Street Fairs, Permanent Flea Markets & Swap Sites, Festivals and Regional Arts/Crafts/Ag Fairs, which have a very different end-buyer profile. Lowest price for look-alike bags, hats, sunglasses and dresses is the primary buyer motivation. Those "temp" sales venues are where counterfeit gray market goods thrive.

LAST, DO KNOCKOFFS AND COUNTERFEIT DESIGNER CLOTHING HAVE ANY IMPACT BEYOND THE REVENUES OF WHOLESALERS AND RETAILERS? Is it positive or negative? And do we need to protect or copyright unique fashion designs?

A debate on The Economics of Fashion Copycats and Copyrights aired on "On The Media" (National Public Radio) from fashion center New York City:

"A Copyright Law for Fashionistas"
"The fashion industry in the United States operates without copyright protection. Which means that although designers own trademarks on their logos, there’s no law that prohibits copying the cut of a garment. Fashion law expert Susan Scafidi talks about a new bill, the Innovative Design Protection and Piracy Prevention Act, that could change that."

EXAMPLE: Chelsea Clinton's unique Vera Wang designer bridal gown was rumored to cost $10,000 to $20,000. While some new brides will gladly pay $1,200 to David's Bridal for a licensed copy of Chelsea's dress, fewer will wait until Spring 2011 for it to arrive in store.

More brides-to-be who want the Chelsea wedding gown are likely to purchase a David Schwartz knockoff, rushed out of seamstress shops in China, that will probably hit bridal stores by the 2010 end-year holidays. For an estimated $400.

Blame It On the Internet.
In ancient pre-Internet days, knockoffs of a celebrity wedding gown or street clothes or trendy casual wear would not show up in stores for months. Those gray market copycats succeeded only with old-fashioned industrial espionage: Someone had to get drawings or patterns of a design house's new lines before the designs were unveiled at international fashion shows. Someone had to deliver the secret sketches to NYC. Then someone else had to thrash out wholesale fabric orders and manufacturing production. All without automation, computer-generated templates and ordering or world wide web sourcing.

One question debated in "On the Media" -- Does today's accelerated knockoff schedule, for everything from celeb wedding gowns to trendy over-the-knee boots, help manufacturers, wholesalers, distributors and retailers meet instant new market demands? Is is good or bad for the bottom line? For the bigger universe of global fashion sales?

YES, said Bob Garfield: The whole rapid fashion development phenomena -- including designer lookalikes and counterfeits -- expands the whole universe of fashion choices. It responds much faster to quick-change buyer demands. It promotes more frequent buys (what Garfield called "closet churn") by encouraging fashionistas to update their wardrobes more often.

NO, said Fordham Law Professor Susan Scafidi, who also directs the Fashion Law Institute. This rapid development copycatting -- especially with gray market designs -- drains the fashion world over the long term of its energy, originality and talented younger designers ... all the factors that turbo-charge the global fashion engine. (Those are the unique designs long protected by fashion houses of Europe.)

Her reference to independent young designers brings to mind Cuban-born NYC designer Isabel Toledo and Taiwan-born L.A. designer Jason Wu. Bothy zoomed from Unknowns to Rising Stars after they were tapped to design a Swearing-In Ceremony Coat-Suit and Inauguration Ball Gown for Michelle Obama in January 2009. See Romance Is Back In Fashion .

Designer lookalike copies were rushed to market by Fabiano and others. Were it not for the high-profile boost they got for First Family designs, neither young fashion talent would have survived being beaten to market with knockoff copies of their own designs.

That's why Professor Scafidi's basic argument is that big design houses -- the Vera Wang's of the world -- won't feel theft of their original designs on their custom client cash flows. But young apparel designers can not survive theft of their intellectual property. This new Fashion Ecosystem destroys its next generation, finally REDUCING (not expanding) fashion choices, raising original apparel designs out of price reach for most fashion buyers.

Protecting original fashion designs the way we currently copyright protect commercial logos and brand names is the reason law professor Scafidi helped write the proposed, 3-year U.S. fashion copyright law.

See Also:
Sellers Turnover Returned Inventory: Tips to Resell, De-Label, Re-Label

Fordham University Institute of Fashion Law  .
Supported by Council of Fashion Designers of America (President Diane von Furstenberg)

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Answered 130 days ago

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