Fake Louis Vuitton bags to imitation Hermès Birkins: how counterfeits are still destroying luxury brand reputations in the e-commerce age

Nov 19 , 2020

Sometimes counterfeit handbags can be such good copies, even sales assistants in luxury stores can’t tell them apart. Photo: Sam Tsang

This article is part of STYLE’s Inside Luxury column.

Fakes are as old as luxury brands themselves. Famously, the more complicated Louis Vuitton monogram was created in 1896 by Georges Vuitton (son of Louis) in an effort to trounce those who were attempting to counterfeit his father’s original bags, which had already acquired cult status.

Tools, at the Louis Vuitton workshop in France. Photo: Handout

Despite many of the in-person “fake markets” having now been eliminated across the world, the fake problem has nevertheless become even more threatening for many luxury brands – and not just because of e-commerce. Many luxury brands have reported falling victim to schemes in which shoppers buy legitimate products, say a handbag, in a brand store, just to return days later with a fake for a refund. Some of these fakes are almost identical to the original, so that even the store staff can’t tell them apart. The result? A legitimate customer buys the seeming original days later, not knowing that they have a fake.

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A rare Hermes handbag, the mat white Birkin Himalaya 35, is held up during an auction preview at Christie's in Paris. Photo: Reuters

With the growth of third-party retailers selling rare used bags – such as the Hermès Birkin – at enormous premiums sometimes even compared to new bags, the risk of highly sophisticated fakes entering the market only compounds. After all, the fakes offer huge profit margins to their illegal and illegitimate sellers.

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Although brands like Louis Vuitton have a strict zero-tolerance policy when it comes to fakes, technologies like blockchain-based authentication services are not yet widely used. Irene Woerner, CEO of EmTruth, a pioneering blockchain solutions company, told me that “the usage of technology-based authentication solutions in the luxury industry is way behind other sectors”. As a result, brands gamble with their brand equity as more and more sales volume is done via e-commerce and resellers.

Victims of an online shopping scam via Instagram hold a press conference in Hong Kong urging law enforcement departments to crack down such scams. Photo: Nora Tam

The extreme in the digital space is entire fake brand stores that use the original imagery and brand descriptions of the real brands. For casual customers, these fake stores are almost indistinguishable from legitimate ones. Often, they offer steep “discounts” for completely fake inferior merchandise.

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Customers later attribute the catastrophic quality to the original brand. Oftentimes this leads to horrible reviews on third party sites like Trustpilot, which then further damages brand equity. Counterfeits can initiate a literal chain reaction of unhappy customers who share their discontent online, unable to know if what they bought was real or not.

Fake handbags and wallets with an estimated market value of over US$11 million. Photo: Sam Tsang

In the recent past, the issue has been addressed more aggressively within the luxury industry. For example, LVMH, parent company of Louis Vuitton, is partnering with start-up Entrupy because it developed an artificial intelligence-based handheld solution that can detect fakes with more than 99 per cent accuracy. However, these efforts will need to go much further and include all aspects of the supply chain, from materials to delivery, to ensure genuine products. The real challenge will remain in the reselling market, which is much harder to control.

While counterfeits will never be completely eliminated, the stakes have never been higher. In a social media-driven world, brand reputation can be destroyed much faster than ever before in history. Creating and maintaining consumer trust will therefore become dramatically more important going forward.

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Fashion

Whether online or offline, a fake Gucci Jackie or a fake LV Pochette, the counterfeit market is still thriving: if LVMH and others don’t find a way to protect themselves, things are going to get much worse