Consumer attitudes toward counterfeit luxury products in Thailand

Kasit Phoyomrattanaphaijit

Keywords Consumer attitudes, Counterfeits, Counterfeit luxury products Abstract: Due to the research limitation in attitude toward counterfeit luxury products, this study aims to examine the factors that influence attitudes of users and non-users of counterfeit luxury products (leather goods) in Thailand. This research was established by extending three models related to the purchase of counterfeit products, which are drawn by Ang et al. (2001), Wang et al (1995) and Wee et al. (2005). 30 in-depth interviews of uses and non-users of counterfeit luxury products are conducted in data collection process. This is a pioneer of starting point for success of anti-counterfeits campaign in Thailand by providing the understanding of attitude and the factors influencing their perception. Clearly, the empirically preliminary information for understanding of consumer attitudes and the explicit reasons why they use or use not counterfeit luxury products help brand owners to develop the appropriate countermeasures.

Introduction
Counterfeiting activity is defined as the act of producing or selling a product containing an intentional and calculated reproduction of a genuine trademark. A counterfeit mark is identical to or substantially indistinguishable from a genuine mark (McCarthy, 2004). The global market for counterfeits today is estimated to exceed $600 billion, accounting for approximately 7% of world trade (World Customs Organization, 2004). Interestingly, one significant source of intellectual property crime is the counterfeiting of branded or luxury goods (Pollinger, 2008). Counterfeit luxury products are a major global problem with the value of counterfeit products running into the billions. As proposed by Vida, I. (2007), whereas a wide range of products can be counterfeited, consumers knowingly engage in purchasing fakes particularly in some product categories such as luxury fashion items and computer software. The label luxury products is commonly reserved for products bearing prestigious fashion brands that are targeted at more affluent consumers and will typically include clothing and leather products, jewelry, watches and other similar accessories (Monaiyakul & Jitmongkolthong, 2005). According to the U.S. Bureau of Customs and Border Protection, it is estimated that counterfeiting costs the United States $200 billion annually (The U.S. House of Representatives, 2005). Considering the countries worldwide, the growths of counterfeit products are now estimated to account for 5% to 7% world trade (Business Week, 2005). In 2007, the total value of counterfeit products marketed annually in the world is estimated to be over US$1 Trillion (Trott et al., 2007). However, the counterfeits luxury products problems

affect not only products whose brand name is synonymous with its quality or flavor, but also products which require a high level of research and development, and marketing (Nash, 1989). The serious problem of counterfeit luxury products are besetting an increasing more and more tainted as the level of knock-offs and other counterfeit products. The most of counterfeit products are manufactured in countries where legal sanctions are not as strong as in the US (Grossman & Shapiro, 1988). In addition, rapid industrializations are also contributed to a new batch of improved fakes, and smugglers can now design and order their fake goods in low-wage countries such as Asian countries (Wada, 1996). While both of supply and demand sides are continuously increasing, counterfeiting continues to flourish because multinational marketing has created high worldwide demand for well-known brands (Bush et al., 1989). As a result, the production and sale of counterfeit products is big business in the international economy. In consequence, this study is conducted in Thailand named as the port of counterfeit products. Hence, Thailand is chosen because it is the one of the few Asian countries where the continued presence of a glut of counterfeit products. The manufacturing and selling in Thailand is especially remarkable since it is seen despite the promulgation of one of the most aggressive legislative schemes to facilitate enforcement efforts of any country in Southeast Asia (Kelly et al., 2001). The next section provides a brief background on counterfeit luxury products in Thailand, followed by the literature review on the consumer attitude toward counterfeit products and counterfeit luxury products. Then, the influencing factors of counterfeit luxury products, conceptual framework and methodology are presented in the following section. Last, the contribution and implication of research is described. Counterfeit Luxury Products in Thailand Asian countries are notorious places as the worlds worst violators of intellectual property rights, which a major problem is derived from counterfeit luxury products (Cheung et al., 2006). As proposed by Phau and Prendergast (1998a), a conspicuous consumption may be one of the factors leading Asia to be the capital of counterfeits. Conspicuous consumption is defined as the ostentatious display of wealth whereby consumers are motivated by a desire to impress others with their ability to pay particularly high prices for prestigious products (Mason, 1985). While a counterfeit luxury product is widespread in countries of various geographic, cultural and economic natures, Thailand is one of the countries with the harshest of counterfeit luxury problem. As one of Asias shopping heaven, Thailand has always attracted consumers seeking the luxury brands and most fashionable for counterfeit luxury products (The Straits Times Newspaper, 2001). However, a rapid industrialization has contributed to a new batch of improved fakes, and smugglers can now design and order their fake goods in low-wage countries such as China (Wada 1996). The quality of counterfeits luxury products has improved

so much and it is also difficult to enforce them in the laws. According to CalTrade Report (2005), Thailand has much to gain from a FTA with the U.S. The U.S. is Thailands largest export market with sales of a variety of goods and commodities climbing sixteen billion dollars last year to almost eighteen billion dollars. In 2006, Ministry of Finance report that Thailand has imported the luxury product in categories of leather bags and belts are 342,479,986 baht from the net total import of luxury product is 4,054,075,336 baht. According to big cities in Asian countries such as Seoul, Shenzhen and Hong Kong, in particular Bangkok is notoriously named as the capitals of fakes (Phau and Prendergast 1998a). In Thailand, the government and police authorities are consistently under heavy pressure from multi-national companies owning registered trademarks because of a perceived lax attitude toward adequate protection of Intellectual Property Rights (IPRs) (Edward J. Kelly et al., 2001). In addition, counterfeiting also damages local industry. Thai governments main economic reform initiatives is to help Thailand develop an indigenous fashion industry with a view to becoming a major player on the international fashion market. Nevertheless, the widespread availability of counterfeit luxury products creates the wrong image for the country and diverts purchasers from genuine products (Monaiyakul & Jitmongkolthong, 2005). A main reason is the demand side of counterfeit luxury products, especially in Thailand. Hence, the consumption behavior and individual attitudes may influence Thai consumers toward counterfeit luxury products. One reason cited for the prevalence of counterfeits in Asia is the difference in perspectives between people in the East and the West (Lai & Zaichowsky, 1999). Lovell (2007), suggest that an intellectual property rights (IPR) is of ten poorly understood by consumers, which goes some way towards explaining the phenomenal increase of intellectual property crime (IPC). Thus, it is needed to change consumers attitude in order to reduce demand for such counterfeit luxury products and reverse this growing trend. In Asian countries, Thailand is one of the most problematic countries of counterfeits luxury problem, which is not only supplying the local market but also being an exporter market (Brussels, 2004; Sujintaya & Pennington, 2005). Moreover, no prior research has examined the consumers attitudes toward counterfeit luxury (leather) products. While previous studies have been conducted in Western country, there is a little known about Asian consumers. Nevertheless, data from Asia Wall Street Journal (1999a) presented that Asian accounts for more than one-third of the losses arise from counterfeiting. Interestingly, the counterfeit luxury products like leather goods have become socially acceptable because of the high quality material and the realness of products. For this reason, attitudes play a significant role in forming consumer perception in the individual level. For this reason, it is necessary for this study to learn and understand Thai users and non-users consumers attitude toward counterfeit luxury products (leather products) and also contribute a

new point of view into the counterfeit literature for further research in studying other related categories. In brief, it is crucial to determine and recognize Thai consumer behaviors toward counterfeit luxury products through consumer attitudes and factors influencing their perception. This is the starting point to eliminate the counterfeit luxury products (leather and accessories goods) in Thailand. The purpose of this research is to examine the factors that influence attitudes of users and non-users of counterfeit luxury products (leather goods) in Thailand. The research problem addressed in this thesis is: How does influencing factors have an effect toward consumer attitudes? Interestingly, the issue of counterfeit luxury (leather) products and its intellectual property rights (IPR) has been drawing attention in mainstream research for years, but its findings are limited and related researches have yet to be established. A review of past literature (Bloch et al., 1993; Cordell et al., 1996; Wee et al., 1995) found that the study of counterfeit products is rather limited in Thailand, especially in a context of the consumers attitudes toward counterfeit luxury (leather) products. Literature Review Counterfeit products Before providing a research overview, a clear category of counterfeits is required. A previous study (Key, 1990; Phau & Prendergast 1998a) divided counterfeits into six categories. First, counterfeiting is a 100 per cent copy to deceive consumers to believe that it is the genuine article (Bamossy & Scammon, 1985; Lai & Zaichkowsky, 1998; McDonald & Roberts, 1994). In this cases, both stores and consumers can be fooled by high-quality fakes, confusing them with parallel imports, which are goods legally imported through routes other than the maker's traditional distribution routes. Second, normally the customer is aware of the faked object and it is usually sold at a fraction of the original price that we called piracy. It is sometimes known as a `non-deceptive fake' (Bamossy & Scammon, 1985; Lai & Zaichkowsky, 1998; McDonald & Roberts, 1994; Wee et al., 1995). Examples of pirated copies of many well-known brands include Calvin Klein, Ralph Lauren, Gucci, Boss and Guess. Third, imitation brands or `knock-offs' (imitators): they are not identical to the original; they are similar in substance, name, form, meaning or intent to an acknowledged and widely known product or service (Lai & Zaichkowsky, 1998). It is suggested that the French leisurewear designer Lacoste confronted lookalike problems with Hong Kong-based leisurewear retail company Crocodile. The other is Bossini in Hong Kong, which borrows ideas heavily from the Italian chain Benetton.

Fourth, a grey product that factories contracted by the brand manufacturers produce more quantity than required and sell them as overruns illegally (McDonald & Roberts, 1994; Wada, 1996). Fifth, custom-made copies or super fake product brands; in last categories super fake product brands are replicas of trademark designs of branded products made by legitimate craftsmen. In addition, raw materials are usually of good quality. The only item missing from the original is the emblem, or brand name (Phau & Prendergast, 1998b). Sixth, counterfeits are also defined as the production of goods that are identically packaged, with the trademarks and labeling included so as seeming to a consumer the genuine article (Key, 1990). Many terms are used to describe the fact that counterfeit products are brand piracy, near brands or logos, intellectual property, as well as other forms of product theft like bootlegging, reverse engineering, trade mark extortion, look-alikes, or unconvincing imitations (Jacobs, Coskun & Jedlik, 2001; McDonald & Roberts, 1994). However, the definitions of counterfeit products by western researchers are generally associated with the infringement of trademarks, copyright, brand, labeling, and features, all of these concerning the appearance of the product (Bosworth and Yang, 1996). As suggested by Yang (2002), there are generally two kinds of counterfeits, the counterfeiting of commodities and the counterfeiting of symbols attached to products. Normally, the former types of counterfeit gives rise to problems in the physical product itself, such as poisonous rice, false medicine and harmful cigarettes; whereas, the latter involves problems concerning brands, trademarks, copyright and labeling of a products (Samaun et al., 2005). According to the consumers perspective, counterfeits can be either deceptive or non-deceptive. As defined by Grossman and Shapiro (1988), deceptive counterfeiting involves purchases where consumers are not aware that the product they are buying is a counterfeit, as is often the case in categories such as automotive parts, consumer electronics and pharmaceuticals. In other cases, however, consumers are typically aware that they are purchasing counterfeits, which is non-deceptive form of counterfeiting. It is particularly prevalent in luxury brands (Nia & Zaichkowsky, 2000) where consumers are often able to distinguish counterfeits from genuine brands based on differences in price, the distribution channels, and the inferior quality of the product itself. Previous studies of consumers attitude literature found that consumers in various countries differ in their attitudes toward counterfeits product, and that factor such as social influence, personality characteristics, and products attribute for instance, may help to explain such differences (Ang et al., 2001; Wang et al., 2005; Wee et al., 1995). They have also shown that consumer attitude toward counterfeit products are positive influences. However, the existing knowledge is mainly based on studies of variety of products category such as CDs, VCDs, software, shirts, watches, jewelry, perfume, sun glasses, accessories, apparel, books, pain

relievers, auto parts, cameras, and TVs which mostly call low-cost products that are easy to manufacture status symbols and sell quickly (Shultz & Saporito., 1996). However, price is not the sole determinant in consumers decisions to purchase counterfeit goods (Wee at al., 1995; Tom et al., 1998). Other reasons that influence consumers behavior include demographic factors, consumers perception toward counterfeit products, brand and legal factors (Wee at al., 1995; Tom et al., 1998; Nancy, 1999; Kenneth et al., 2003). Given the importance of demographic factors, Solomon and OBrien (1991) suggested that gender, age, educational background, and family incomes are also become a significant for influencing to consumers attitude to consumers decisions and their behavior. In addition, people who have the higher educated also usually buy less counterfeits product, thus education level has an inverse relationship with the quantity of counterfeit purchase (Wee et al., 1995). In turn, Kenneth et al. (2003) and Cheung and Prendergast (2004) also reported that these two factors have a little effect on the purchase such as highly educated people are also found with more attended to buy pirated CDs and software. Prendergast et al. (2003) observed similar scenario that most of the counterfeit buyers had higher education and income. In dissimilarity, the personal and psychological factors that have significance on consumer behavior toward counterfeit products are value consciousness, attitude, and novelty seeking (Wang et al., 2005; Wee et al., 2000). Counterfeit luxury products To extent the consumers attitude toward counterfeit products, Vida (2007) concluded that a consumers attitude toward counterfeit luxury products refers to the degree people are able to rationalize counterfeiting practice with respect to the costs, pricing and quality of genuine with counterfeit products. As argued by Gellerman (1986), one-way people tend to rationalize their behavior is by deciding that it is not really illegal or immoral. For example, people viewing counterfeiting simply as a result of original trade mark holders ripping off consumers by overpricing their products, would be more likely to purchase fakes. Additionally, Wee et al. (1995) noted that the attitudes effect could divide into two specific issues on consumer attitudes: attitude towards counterfeiting and attitude towards market practices. If a persons attitude towards counterfeiting is favorable, it is likely that he or she would consider the purchase of counterfeit products. For instance, a recent survey shows that Singaporeans, who are less supportive of software copyright law, are more inclined to make pirated copies of software than their US counterparts (Swinyard et al., 1990). Next, the attitude towards market practices as a persons beliefs and feelings towards the operations of the business institutions. If a person holds an unfavorable attitude towards the high-profile operations of branded goods manufacturers and the snob appeal of their products, he or she is less likely to purchase the branded originals. Rather, these people are more likely to

purchase the counterfeit version of branded goods. Certainly, it has been suggested that most people who buy counterfeit products think of themselves as penny-wise shoppers who have not succumbed to the snobbery and exorbitance of which businesses selling branded originals are guilty. The term of counterfeit luxury products are reproductions of a trademarked brand (Cordell, Wongtada & Kieschnick, 1996), which are closely similar or identical to genuine articles, including packaging, labeling and trademarks intentionally to pass off as the original product (Ang et al., 2001; Chow, 2002; Kay, 1990). Remarkably, however, situational characteristics such as the product category, brand positioning, promotional cues and the social context can play an important role as well (Shavitt, Lowry & Han 1992). Interestingly, however, Bosworth (2006) suggested that considering a spectrum of deception that runs from super-deceptive (branded and counterfeit goods appear identical and impossible to tell apart) to completely nondeceptive (all buyers are able to distinguish the counterfeit from the genuine article). Gentry et al. (2006) also supported that the quality of counterfeit luxury products has improved over the years thus it is hard to differentiate the quality type of counterfeit luxury products with the genuine luxury brands. Moreover, the counterfeit-genuine distinction in the case of many luxury brands is evolving from a dichotomy to more of a continuum (GBLAAC 2005). Consequently, counterfeit goods in this research means illegal, low-priced and often lower quality replicas of products that typically possess high brand value (Lai & Zaichkowsky, 1999). Attitude toward counterfeits and counterfeit luxury products An attitude is defined here as a subjective evaluation of a behavior, which disposes a person to behave in a certain way towards it (Eagly & Chaiken, 1993; Grling et al., 1998). Many research (DeBono 1987; Shavitt 1989) points to the individual consumer as the primary driver of the functions served by attitudes in a specific consumption context. The term attitude is generally used to define as a feeling, emotion, or mental position with regard to a fact or state. These feeling positions are adopted in response to what persons think or believe, and affect how people behave. Therefore, attitude is a persons predisposition to think, feel or behave in certain ways towards certain defined targets. According to Bagozzi et al. (2002), the most widely accepted dentition of attitude conceives of it as an evaluation, which is a psychological tendency expressed by evaluating a particular entity with some degree of favor or disfavor. In other words, attitude is a learned predisposition to behave in a consistently favorable or unfavorable manner with respect to a given object (Garling et al., 1998; Schiffman & Kanuk, 1997). Petty et al (1994) agreed and suggested that attitude is commonly viewed as summary evaluations of objects along a dimension ranging from positive to negative. However, attitudes cannot be observed directly, they are mental positions that marketers must try to infer through research measures (Wilkie,

1994). Notably, attitude considered to be highly correlated with ones intentions, which in turn is a reasonable predictor of behavior (Ajzen & Fishbein, 1980). Intention is the representation of a persons readiness to perform a given behavior, which is formed by the attitudes and subjective norms. Supporting from Theory of Reasoned Action (TRA) by Ajzen and Fishbein (1980), a persons behavior is determined by his/her intentions to perform a behavior, and that this intention is, in turn, a function of his/her attitude toward the behavior and his/her subjective norm (Taylor, 2001). In term of attitudes formation, Zajonc (1968) proposed that attitudes could be formed towards some issued, event, person, or thing. These four ways can be formed by mere exposure, by associative learning, by self-perception, and for functional reasons. To give more details, mere exposure is defined by Zajonc (1968) as the tendency to develop more positive feeling toward objects and individuals the more we are exposed to them. No action or interaction with the object is required, and we do not need to possess or even develop any explicit beliefs about the object. According to Zajondcs studies, the finding presented that a positive linear correlation between exposure frequency and liking. Thats mean, the mere symbol had been presented to participants; the more positive feeling is occurred. On the contrary, it also appears that the more participants see something, the more participants like it. Therefore, Zajonc (1968) proposed that the mere exposure had a significant impact on attitudes. In addition, recent study by Mita et al (1977) also supported that the mere exposure effect appears to be an important way in which attitudes can form. For this research, the more counterfeit luxury products are exposure to them, the more positive attitude is increase. Second, associative learning divided into two basic processes of learning by association, either implicitly through classical conditioning, or explicitly through operant conditioning. For classical conditioning, Zajonc (1968) defined to a learning process that occurs when a neutral stimulus is paired with a stimulus that naturally evokes an emotional response. Moreover, a stimulus that results in an emotional response is respected alongside another stimulus, which does not causes an emotional response, eventually, the second stimulus will result in the same emotional response. Therefore, classical conditioning is learning by association. It does not work in all circumstances. In particular it is more effective where the conditioning may be of evolutionary benefit. Next, for operant conditioning is a method of learning that occurs through rewards and punishments for behavior. Through operant conditioning, an association is made between a behavior and a consequence for that behavior. The removal of an undesirable outcome or the use of punishment can be used to decrease or prevent undesirable behavior. Third, attitudes are formed from observing our own behaviors and then attributing them to

either internal or external causes, with internal attribution more likely when the behavior was freely chosen (Bem, 1965). Importantly, inference of ones attitudes from behavior is more likely to occur when someone has little or no existing knowledge about the issue at hand, or does not hold a strong prior attitude towards it. Last, functional approach attitudes are sometimes formed based on the degree to which they satisfy different psychological needs, so this is an active rather than passive attitude. Normally, there are four basic psychological needs that adopting different attitudes can address: utilitarian, knowledge, ego-defensive and value-expression (Katz, 1960; Smith, 1956).

The influencing factors of counterfeit luxury products Social Influence Social influence refers to the effect that others have on an individuals consumer behavior (Ang et al., 2001). In this study, normative susceptibility concerns purchase decisions that conform to the expectations of what would impress others (Ang et al., 2001; Lord, Lee & Choong, 2001; Penz & Stttinger, 2005; Wang et al., 2005). Normative influence is found to have positive effects on consumers, which suggests that the norm accepts and encourages the purchase of counterfeits (Ang et al., 2001; Wang et al., 2005). Consumers may purchase counterfeits as a means of fitting into a group. It might be due to exorbitant price tags of authentic items that drive consumers who want to appear affluent to purchase counterfeits as an alternative to the authentic articles. If the consumer is discovered to own counterfeits instead of original Advertising to show embarrassment, articles can exemplify the negative consequences of purchasing counterfeits of luxury brands. Personality Influence Value consciousness is defined as a concern for paying lower prices, subject to some quality constraint (Lichtenstein et al., 1990). It has been observed that consumers engage in illicit purchase behaviors when there are price pressures. Dodge et al. (1996) reported that economic consequences influence the tolerance of questionable behavior by consumers. As counterfeits provide tremendous cost savings to consumers, although with some compromise in quality, its perceived value is high. Personal gratication concerns the need for a sense of accomplishment and social recognition (Ang et al., 2001). Product-Attribute Influence Similarly to past research findings (Eisend & Schuchert-Gler, 2006), this study show that attitude towards counterfeiting is the driving force that influences purchase intention. Perceptions of counterfeits is found to have a positive influence on purchase intentions. This

explains that consumers are attracted to counterfeits if counterfeits have qualities closely similar to authentic articles. Admittedly, counterfeits of luxury brands in China are of unexpectedly high quality, whereby there are even Grade systems attached to them to segregate the better quality counterfeits from the less superior ones (Gentry, Putrevu and Shultz II, 2006). Therefore, it is a bigger incentive for consumers to purchase a counterfeit (Wee, Tan & Cheok, 1995). This would require brand companies to form stronger differentiation tactics by being continuously innovative. Conceptual framework Previous research on counterfeits identified product variables and price, vendor characteristics, social and cultural context variables, demographics, and psychographic variables as determinants and moderating variables for consumers intention to purchase counterfeit products. In present study, the integrated and extended model from Ang et al. (2001), Wang et al. (2005) and Wee et al. (1995) in order to explain the consumer attitudes responds to factor influences of counterfeit luxury products. Moreover, this study also applied the product-attribute variable in order to explain and identify the effects from the counterfeit luxury (leather) products.
Informative Susceptibility

Figure 2.4 a model of factors influences toward consumer attitudes in counterfeit

Value Consciousness

luxury products

Personal Gratification

Physical Influences

Attitude Toward Piracy

Beneficial Influences

Image Influences

Method

The research was conducted in Thai Airway shopping area, Bangkok. It is a well known as a high quality of counterfeit luxury market in Thailand. Thai Airway shopping area was selected because the consumption market is very active; residents have obtained a relatively strong purchase power. Besides, more than 400 shops in 112,000 square meters provide counterfeit luxury products: handbags, watches, clothes and accessories. Most products in this market replicate luxury brands, but their prices are very low comparing with the genuine brands. Interestingly, there was more than 1,000 customers visited this market every working day. To explain the factors influencing attitudes of users and non-users of counterfeit luxury products (leathers and accessories goods) in Thailand, this research employed the qualitative method by using in-depth interviews. Before interviewing the participants, pilot test was conducted by observing location for data collection and measuring the potential participants. Then, snowball sampling method is used to recruit the potential participants both of users and non-users of counterfeit luxury products. This research conducts 30 interviews by dividing into two groups equally, which are 15 users and 15 non-users of counterfeit luxury products. To identify users of counterfeit luxury products, shop owner in Thai Airway shopping area is a person recruiting the potential participants who buy the counterfeit luxury products (leathers and accessories goods) in her shop. In non-users groups, this research also used the snowball methods in term of network relationship among non-users group who do not use the counterfeit luxury products (leathers and accessories goods). Contribution and implication Although there are many studies in the area of supply side of pirates or counterfeit products, there have a few studies on the demand side for counterfeit products. A review of past literature (Bloch et al., 1993; Cordell et al., 1996; Wee et al., 1995) found that the study of pirates or counterfeit products is rather limited in Thailand, especially for the consumer purchase intention. As defined by Wee et al., 1995, preceding discussion suggests that counterfeiting is a serious problem. While the literatures focuses abundantly on the supply side of the problem, such as regulatory actions and studies of illegitimate distributors, empirical work on the demand for pirated brands is still deficient. The study aims to contribute to the knowledge of the consumer behavior literature by providing empirical findings about the attitude toward counterfeit luxury products of Thai users and non-users and the factors influencing their attitudes. Understanding the attitudes of users and non-users toward the influencing factors of counterfeits luxury products (leather goods) in Thailand is an initial step to build a foundation for future in-depth studies. For the implication of this research, understanding of attitude and the factors influencing their perception is a pioneer of starting point for success of anticounterfeits campaign in Thailand. References Ajzen, I. and Fishbein, M. (1980), Understanding Attitudes and Predicting Social Behavior,

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