Will Leasing Luxury Erode Exclusivity?


James Lawson | July 16, 2012

James Lawson, director of Ledbury Research, believes renting luxury products could become a substitute for counterfeits, by providing a selective entry point to the brand

Luxury brands have had a string of recent victories against counterfeiters recently, with the number of fake online luxury products seized by French customs officials increasing 20-fold within five years (Financial Times). Following the court successes of Hermés and Rolex, Burberry was awarded $100m against a group of online Chinese counterfeiters earlier this month (Vogue).

The French luxury industry is also trying to increase the stigma of owning fakes, with an advertising campaign in French airports and six other European countries. Cartier, Chanel, Christian Dior, Lacoste, Longchamp, Louis Vuitton, and Van Cleef & Arpels created visuals for the campaign, which is backed by the French luxury goods association Comitè Colbert and the French National Anti-Counterfeiting Committee (Fashionologie).

The ads will be installed at 18 of France’s busiest airports to warn tourists of the dangers of buying replica luxury goods. “Buy a fake Cartier, get a genuine criminal record” warns one of the campaigns to be launched this summer.

Anti-counterfeiting campaign by Comitè Colbert and the French National Anti-Counterfeiting Committee

However, the relationship with prestige brands and counterfeits is a complex one. This was alluded to by the CEO of Prada, who announced last month that “We don’t want to be a brand that nobody wants to copy”.

In many cases, fakes act as the entry point for consumers who will go on to buy the genuine brand: MIT Sloan researched the relationship between luxury brands and counterfeit items and found that as many as two in five who purchase ’knock-off‛ imitation goods, subsequently buy the genuine product.

Consumers become frustrated with the fake for a number of reasons, for example its lower quality, or the fact that they feel compelled to admit to peers it is a counterfeit; then they go on to buy the real thing. This finding is further substantiated by separate research showing that buyers of fake luxury items frequently own genuine luxury items as well; in total this group owns more genuine luxury items than those who buy real luxury products only (Ledbury Research).

“ Whilst there are many other issues with fakes, they may not be as damaging to luxury brands as is typically assumed ”

Such research suggests that whilst there are many other issues with fakes, not least the ethics in the production process, they may not be as damaging to the brands as is typically assumed. Purchasers of fake luxury goods form an important entry-level market segment that ultimately become buyers of true luxury goods, and the disappearance of said segment due to increased counterfeiting scrutiny, could result in a disappearance of revenue.

Meanwhile, renting luxury products seems to have continued to rise in popularity. By way of example, Rent The Runway, which carries 12,000 dresses and 2,500 accessories from over 100 high-end designers, has approximately 800,000 members and has seen a steady increase in traffic to its site since its inception in November 2009.

Could rentals be the answer that luxury goods brands are looking for as a substitute for the entry level products that fakes currently represent?

Rent the Runway

The implications for brands are positive. Rentals serve as a controllable consumer acquisition channel, introducing an accessible way for consumers to experiment with new brands and for them to aspire to in the future. Brands recognize this and as such, all designers featured on Rent The Runway have agreed to have their products available for rental on the website.

The disadvantages are that renting, like buying fakes, erodes two elements of exclusivity: the scarcity of the product, which can now be ‘owned’ by many more people, and the high price point of the product. That said, we believe brands should actively explore this avenue, as both a substitute for counterfeits and a selective entry point to the brand.

To further investigate counterfeiting and distribution models on Luxury Society, we invite your to explore the related materials as follows:

- Luxury Conglomerates Have Their Day in Court
- 10 Online Private Sale and Discount Sites, Europe
- Luxury Retail: From Expansion to Consolidation