I’m sitting down with a creative force in fashion and a venture capitalist — more specifically, we’re in a conference room in Midtown Manhattan at the offices of an investment bank, talking with one of their dealmakers and an up-and-coming fashion designer who has a “hot” brand but no backing. The conversation turns to brand equity and protecting that equity. It’s a hot topic. But since Birkenstock’s decision to pull its products from Amazon because of the ubiquity of counterfeit products on the platform, more than ever, it’s an object lesson.
How is an up-and-coming brand valued? Of course there’s an element of uniqueness, and perhaps novelty and breaking through boundaries. The concept of what’s “hot” is incredibly subjective. It could be something loved by the press or the fashion industry; or something that’s gained significant traction on social media; or one that’s being worn by the right people at the right time. Fashion and style are very personal things — what’s hot for some will leave others cold. But these days social media is the channel to market, and a brand can generate “coolness” even before a designer launches any product, by clever manipulation of influencers.
And there has to be a demand, or a market need that the brand is filling. But in order for a brand to maintain peak value it has to have a consistent, differentiated, unique and otherwise high-value set of offerings. And that’s just the beginning.
To that end, creative companies — start-ups as well as established brands — can’t afford to have their breakthrough, original designs copied. So as well as being ahead of the curve on the design and development side, they also have to watch for copycats on their tails. And this problem is nearly universal in the high-end fashion industry: In 2015, Salvatore Ferragamo blocked 91,000 online ads for fake goods, and recovered or canceled out 140 domain names and illegal web sites. It’s incredibly important to watch out for copycats from the outset — particularly online — as reputation, revenues and ultimately customers can be diverted away from the main brand. Once a customer has been lost, it is incredibly difficult to win her back, especially where price is seen as the only differentiator.
After establishing the brand — enough for a venture capital firm to be interested in funding their enterprise — a start-up needs to put its products out to market in such a way that they can’t be replicated. Some of this has to do with unique labeling and tagging, and one of the best methods of defense is to educate customers and turn them into advocates for the brand. Using an approach taken by companies such as Ugg, Canon and J. Barbour and Sons Ltd., they have dedicated pages online that educate their clients on what a fake product looks like and how they can spot it, and give them the ability to check whether a particular retailer is authorized to be selling these goods in the first place. Combining this with an online monitoring approach that scans the farthest reaches of the web in search of certain keywords being used within listings is a fairly powerful approach to brand security.
But as technology and design race ahead, so do counterfeiters and other copycatting criminals who aim to make a buck on a hot brand’s rising star. They are, unfortunately, just as creative in their own way as the fashion designer. Somehow they get wind of what’s being thought about, what’s new, what’s considered hot…and they are instantly breathing right down the back of your neck with knockoff versions of your designs. Just one example of how this can work: when Apple launched the iPhone 5, there were 11 different copies of the phone for sale online for as little as $15, within hours. It wasn’t only the technophiles who were pawing over every detail of the new product announcement — counterfeiters around the world were instantly copying every aspect of the new product.
Fashion companies, and particularly fast fashion, are all about getting ahead of the trends and turning around product before anyone else can. But the copycats will always be lurking in the shadows. We know that clothing factories in Asia often have little regard for NDAs and IP. Fashion companies need to think about protecting their brand even as products are being developed and manufactured. One way is through monitoring online marketplace web sites such as Taobao, which may be advertising branded products, often with images of samples. Leakage in the production process is a common issue for many brands — in theory, genuine goods are being made, but through illegitimate channels.
So maintaining brand value, or brand equity, has got to include this component of watching your back, both up to and at the launch of your company or line of products, and well afterward, as the new line establishes a retail presence online or in stores. And while on-the-street knockoffs are a significant presence in most major cities — just think fake branded Louis Vuitton bags in any Chinatown — the online threat is far more significant. Consumers have been retrained to price-compare online.
Back to the conference room, with our young designer and the venture capitalist. Any deal that’s made here today should include a brand-protection plan. Online brand protection is one critical aspect of keeping counterfeiters — and their attractively priced fakes — out of the public eye. For the venture capital backer, the key theme is the protection of their digital assets and investment, which would mean overseeing the intellectual property registration, especially online. Everyone on this deal wants to protect and nurture the new brand’s equity and value. It’s just good business.