Fake or Facsimile: Part 1: The Myth of the Yuandan

Alibaba accounts for 2/3s of all China’s consumer online shopping; however not every item on the site should be judged as an irresistible bargain.  There is lots of concern, both among consumers and “brand name” manufacturers, that Alibaba has tenaciously been selling quite inferior “knock-offs”, and falsely branded “luxury” items.  I suppose the first lesson we need to absorb is that it does not matter how shoddy the goods are, or how poor the service, loads of money has been, and will continue to be, amassed online.  Alibaba’s founder and executive Chair, Jack Ma, is reportedly now worth nearly $30 Billion USD, and somebody is still counting.

Supposedly, Alibaba has now dedicated 5% (= 2,000 employees) of its global workforce to the issues surrounding “counterfeit protection”, but there is every reason to assume that the basic business model will handily survive all the scrutiny.  If you are adept at using a computer, presumably you are also a sophisticated enough consumer to recognize that what is being offered at rock bottom prices (perhaps at even less than 1% of the Manhattan sticker price) is both counterfeit and perhaps (to use a woefully inadequate word) “substandard”.  Sorry about the misspelt and crooked logo; and don’t worry: your fellow commuters will have trouble spotting the “wonky stitching”;[i] fortunately, the lighting in the subway is pretty poor.

I am assuming that if you buy a Rolex watch from a street vendor you will have already reconciled yourself to the reality that the timepiece will have no replacement value, and that there is no lifetime guarantee attached to the workmanship or, indeed, a guarantee that the “Rolex” will continue to work effectively at all.  So, in order to be a bit more precise: i) I want to restrict my remarks to the world of the knock-off fashion handbag; and ii) I want to make a distinction between a Louis Vuitton canvas number and the full Hermès Birkin leather item (complete with a serial number and not a scrap of canvas in sight).  In the market stall arena the LV can support the consumer need for brand recognition, but does not require an attendant descent into fake leather, which might be more easily detected.

I understand that having the venerable House of Chanel logo glued onto the side of a cheap counterfeit could be very galling, but it does not really in the end damage the brand (or as we now like to claim: the intellectual property) with its ubiquity.  How badly is the Harvard “brand” (and its intellectual property) being damaged by the fact that thousands (perhaps hundreds of thousands) of us are wearing Harvard sweatshirts, that is to say all of us are aspiring students and graduates — who cannot even identify the names of the “Ivy League” universities?

The real issue underlying all of this was, of course, identified by Jack Ma himself, and he should know!  A year ago, on June 14th, 2016, Jack Ma apparently gave a speech to Alibaba’s investors at company headquarters in Hangzhou which included the founder’s following comments and insights:

The problem is that the fake products today, they have better quality, a better price than the real product, than the real names. [ii]

To do an assessment of the above remark, I studied the Forbes article:[iii] “How to buy your first Hermès Birkin”, from which I learned that a knock-off, a counterfeit Hermès, is not, by definition, necessarily a piece of junk; as when you are trying to distinguish a diamond from its artificial imposter (cubic zirconia), “eyeballing” may not be enough.  There is some real diligence, effort and work involved.  The Forbes article recommends that the purchaser receive a certificate of authenticity, especially if purchasing a “pre-owned” handbag —  even used, a “Birkin” easily runs into many thousands of dollars; the certificate is a tremendous asset (not just with respect to legal recourse): its real worth is in both guaranteeing re-sale value, and in making it clear to the cherished recipient that this gift is vintage champagne, and not something produced only méthode champenoise, or more worryingly even some less expensive mass-produced cava

But then Jack Ma added his real zinger; he claimed of these truly successful imitations that they can’t really be called fakes or knock-offs, since they don’t kit themselves out with false labelling.  Whatever you want to call them, they have reputable sources:

They’re the same exact factories, the same exact raw materials, but they do not use that (brand) name.

Apparently, by this one stroke. Jack Ma confirmed the existence of a parallel universe of UFOs (Unidentified Factory Originals), that is, he fuelled the speculation that great branded names are, in fact, releasing (Yuandan) “factory extras” — presumably either cobbled together from the same high-quality leftover materials, or else they are indeed completed (actual) luxury items, which fail to pass inspection because of tiny and hard-to-detect flaws.  Obviously these “factory extras” (not “imposters”, but “also rans”) would be available to a discriminating public (and online) — at a fraction of the branded price and at 90% +++ of the guaranteed quality. 

Ma’s apparent confirmation of the urban legend of the Yuandan did elicit a more robust (and hostile) business reaction.  While the street vendor’s collection of every style of LV, Hermès and Chanel handbags is not in any competition for those consumers who are seeking “Certificates of Authenticity”, high quality counterfeit leather knock-offs are obviously a much more serious threat.

But even worse, it seems, is the suggestion that the great houses of handbags are undermining the stability of their brands by selling off “factory seconds” — now, however, without deception, since the handbag is not plastered with the coveted label, and, because of the trusted source, quality is assured.  Would you rather own some fake-leather counterfeit knock-off proudly bearing the Chanel label for the fortnight of its fragile lifespan, or a real-leather “off-brand” factory product which could be carried around successfully for years?

Nobody seems to know (apart from Jack Ma, this is) whether these off-brand Yuandan are actually the siblings and step-sisters to the great, aristocratic Handbag Dynasties (their “natural” offspring so to speak).  The world of haute-couturewe are informed, on the contrary, would rather “pulp” bags with virtually imperceptible flaws, than do anything to undermine high-class consumer confidence in their accessories. 

But we consumers do need to be aware of the profound distinctions between the cheap knock-off, and the high-quality counterfeit, and the unauthorized, but not duplicitous, luxury replica.  Both the latter options could be real threats to the stability of the coveted brands and reputation of the world-famous trademarks.

Not all consumers are created equal: from the street vendor, we get the bag and the logo, but no quality — which the bargain basement price fully reflects.  From the factory second, we might get a far higher quality bag — but we sacrifice the brand recognition and the attendant “celebrity” status, and probably have no recourse in the event of poor workmanship or inferior materials.  (The principle is again very simply: you get what you paid for.)  However, from the “true” counterfeit, somebody, somewhere is making a lot of money; now the consumer is paying exorbitantly for something constructed from the start for systematic, and organized deception, with brand, quality, and status all supposedly guaranteed.  This last is a true counterfeit, which might even come complete with its own “official” authentication … but here we have moved a long way from the market stall knock-off, because we have now landed in the world of the criminal rip-off.  We might have a lovely bag, but its producers will not be open to owner complaints, and any re-sale value can only be achieved by passing along the deception to the next unwary consumer.  This is not lower quality at a lower price; this is actual consumer exploitation.

The issues here begin the same way as the life of counterfeit currency; a cheap photocopy (knock-off) version of the currency may pass muster once, but it is not going to be in circulation for very long; a flood of well-produced and difficult to distinguish counterfeit bills are a significant threat to consumer confidence and economic stability.  One cannot say that the difference between an authenticated handbag and an off-brand factory second is the same as that between two currencies, say the distinction between American and Canadian dollars; both are, of course, real (national) currencies, with, perhaps, however, wildly fluctuating buying power.

Yet, there remains a real distinction between an authentic Hermès bag, and either an off-brand extra, or an attentively constructed true leather knock-off — expertly manufactured with care — possibly even with a rigorous inspection protocol!  The scandal with the “quality-control” knock-off is that all that disciplined care is undertaken for no other purpose than specifically to deceive.  And the consumer then is treated with profound contempt and reduced to status of a “patsy”.

It is a judgment call whether you want to cart your possessions around in a durable, well-designed and executed leather product, or if all those same features need to be supported by a recognizable and famous logo and brand.  But whatever your decision, when you choose (knowingly) to purchase either counterfeit or off-brand, the real distinction is the lack of any re-sale value for either option — unless, of course, you want to hand on your pain to the next victim, by finding some way “to authenticate” your fake.

This is just the first instalment of a whole web of issues surrounding replicas and knock-offs, which, in my opinion, raise huge issues about the relative merits of authenticity and imitations, which concern all of us.

I might, for instance, consider purchasing for a female relative or companion (as a special memento) a high-quality off-brand or Yuandan factory second.  And there are lots of places to look online.  In my researches for this blog, I came upon my absolute favourite handbag (and without even a hint of deception).

So: on the Alibaba Taobao Website,[iv] it is possible to purchase “a Birkin-style handbag from a brand called House of Hello: Bag of Parody”, truly a snip at just $121 USD.  Now there’s a handbag – with attitude – that really wants to make a statement!  Who knows?  It might even have some (industrial-chic) resale value!

[i] Sunday Telegraph (London), 6th November 2016 (Ashley Armstrong).

[ii] The Star Online (Tech News), 17th June 2016: “French hit out at Alibaba founder over counterfeit comments”.

[iii] Forbes, 19th September, 2013 (Deborah L. Jacobs): “How to buy your first Hermès Birkin”.

[iv] Jing Daily, June 19th, 2016: “Jack Ma’s Counterfeit Comments Shed Light on Taobao’s ‘Legal’ Fakes”.

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