Can Counterfeiting be beneficial for Brands?

Counterfeited merchandise looks much similar to the original product, but is sold for a much lesser price, while generating huge profits. Counterfeiting is considered as a preferred option for licit trade as it reduces manufacturing costs, and other expenses involved in design, marketing etc. Additionally, profits are increased by avoiding taxes, import duties are shunned through customs fraud, or outright smuggling and sales tax are avoided through informal retailing.

A European Commission report (2008) states that 57% of the counterfeit seizures are clothing accessories, and shoes. Almost 80% of the confiscated pirated goods owe their origin from the Asian countries. International countries out-source their operations to companies in Asia with a view to take advantage of the cheap labor, and inexpensive manufacturing operations. In Asian countries, counterfeiting laws are not generally strong, and big companies from US and EU outsource their operations here.

A local label is added to the counterfeited merchandise to make it look like the original. Manufacturers have to bear the result of these masquerades, as they are very inferior in quality, and do not live up to the standards of the originals. Brands are easily pirated here, and even if they face legal issues, the penalties are not severe.