Ethics and Consumer Behavior in Counterfeit Luxury Goods

Introduction

Counterfeiting expensive merchandise and making it available at significantly lower prices — without regard for the legal or ethical implications of this practice — costs the apparel, accessory, and merchandise industry nearly $200 billion a year in lost jobs, taxes, and sales (Phau, Sequeira, & Dix, 2009). There is also damage to brand equity and brand image, as counterfeiters often cut corners and deliver shoddy merchandise that deteriorates far faster than the genuine article (Phau & Teah, 2009). The intent of this analysis is to evaluate four different peer-reviewed, empirical studies that seek to define the influence of ethics on the decision-making processes of consumers of both legitimate and counterfeit luxury items. From online-only sales (Radon, 2012) to sales made through malls throughout Asia (Phau & Teah, 2009), the majority of sales channels used by both counterfeiters and legitimate luxury goods manufacturers are represented across these studies.

Ralph Lauren Polo Study: Lawfulness and Legality

The foundational elements of this study included a methodology centered on showing respondents a real Ralph Lauren shirt and a counterfeit one, then asking whether they would knowingly purchase the fake. The results showed that women have higher ethical standards than men, and that men, while seeking the prestige of this and other branded items, fear being found out when they purchase a counterfeit (Phau, Sequeira, & Dix, 2009).

The study methodology was based on a convenience sampling approach at a large Australian university business school. The stimulus was a Ralph Lauren Polo shirt. The data collection instrument was a three-page survey: the first page displayed a picture and brief description of the shirt; the second page used a seven-point Likert scale asking respondents to rate the probability of their purchasing the shirt. Next, a counterfeit version of the shirt was shown, and respondents were asked to rate their probability of purchasing that item. They were also informed that it was of inferior quality. The second page further included screening questions to determine whether the respondent had ever purchased counterfeit products before. This was followed by scales measuring the respondent's attitude toward the lawfulness of counterfeits (Phau, Sequeira, & Dix, 2009).

The sample demographics included 48.5% male and 51.5% female respondents. The majority (65.6%) were between the ages of 18 and 21; approximately 25% were between 22 and 25 years of age, and 9.1% were above 25. Given that the majority were students, their annual incomes were AUD $20,000 or less (77.7%). Eight in ten respondents (80%) had purchased counterfeit goods, with males comprising the majority of purchasers. The 40% of counterfeit buyers were in the 19-to-21-year-old segment, with males again representing the majority.

The study findings underscore what previous studies have found — specifically, how pervasive counterfeit purchasing is among lower-income, younger male groups (Phau, Sequeira, & Dix, 2009). The results also corroborate the findings of prior studies showing that women are more ethical in their purchasing behavior. These findings led the researchers to conclude that integrity is a very strong influence on the willingness to forgo counterfeit purchases (Phau, Sequeira, & Dix, 2009). The findings also underscore that the more rapid the product lifecycle of a given item, the more likely counterfeiters are to exploit small, fast-moving windows of opportunity with badly produced merchandise at low prices. Consumers, in these scenarios, quite literally get what they pay for.

The study's limitations include the convenience sampling approach and the limited statistical validity of the research design. This study has restricted applicability across the broader Australian market, as it concentrates on only a very small segment — business students at a single major Australian university. As a result, the findings are of limited value on a global basis and cannot be extrapolated across global demographic and socioeconomic groups.

Ethics and Materialism Study

The greater the value a given shopper places on ethics, the less likely they are to consider purchasing counterfeit products. This is one of the most significant findings from the study Examining Ethics and Materialism with Purchase of Counterfeits (Kozar & Marcketti, 2011). The study methodology was based on an online survey of 741 respondents recruited through advertisements in university newspapers at two four-year universities in the Midwestern United States. The advertisements included the promise of a $150 cash prize incentive to be awarded at the end of the semester. The researchers conducted several pretests of the survey with academic advisors before implementing the full study.

The data collection instrument was an online survey designed to capitalize on the Muncy–Vitell consumer ethics scale (Kozar & Marcketti, 2011). This scale combines the validation structure of a five-point Likert design with the testing of ethical trade-offs. The researchers designed this portion of the survey to reflect the value judgments and trade-offs of actively benefiting from a counterfeit product, passively benefiting from one, and the degree to which respondents approved or disapproved of these dimensions of ethical consumption. The scale also included 18 attribute descriptions that measured the trade-offs respondents made between ethical and unethical outcomes when acquiring materialistic products (Kozar & Marcketti, 2011).

The study demographics included 741 students: 50% were between 18 and 20 years of age, 35% between 21 and 23, and 15% over the age of 24. Women comprised 76% of respondents and men 24%. Approximately 86.5% of the sample was Caucasian, with the remainder identifying as African American, Asian American, or Hispanic. By educational level, 22.7% were first-year students, 21.3% second-year, 22.7% third-year, and 26.5% fourth-year; 6.8% were graduate students. In total, 68% had knowingly purchased counterfeit products in the past.

The study findings showed a strong relationship between ethics and materialism in the respondent population. Consumers who reported higher ethical values were less materialistic and were also less likely to have purchased counterfeit products in the past. This pattern characterized the 20% of respondents who had never purchased a counterfeit product and whose philosophies reflected a non-materialistic worldview. The limitations of this study include the narrow sample frame of Midwestern U.S. universities, which is not representative of the broader U.S. population. Additionally, the study lacked validity across respondents from different socioeconomic strata, and it did not include a clear definition of how price sensitivity would affect overall ethical judgments.

References

Kozar, J. M., & Marcketti, S. B. (2011). Examining ethics and materialism with purchase of counterfeits. Social Responsibility Journal, 7(3), 393–404.

Phau, I., Sequeira, M., & Dix, S. (2009). To buy or not to buy a "counterfeit" Ralph Lauren polo shirt: The role of lawfulness and legality toward purchasing counterfeits. Asia-Pacific Journal of Business Administration, 1(1), 68–80.

Phau, I., & Teah, M. (2009). Devil wears (counterfeit) Prada: A study of antecedents and outcomes of attitudes towards counterfeits of luxury brands. Journal of Consumer Marketing, 26(1), 15–27.

Radon, A. (2012). Counterfeit luxury goods online: An investigation of consumer perceptions. International Journal of Marketing Studies, 4(2), 74–79.