Malaysian Attitudes Towards Counterfeits Of Luxury Brands

Malaysian Attitudes Towards Counterfeits Of Luxury Brands CHAPTER 1 INTRODUCTION The first counterfeiting emerged in more than forty years ago, and it was only happened on highly priced and prestigious products like textiles, jewelry and accessories (Eisend M. Schuchert-Gà ¼ler, P., 2006). This phenomenon considered insignificant and less attention has been paid to eliminate it. Nowadays, this phenomenon has widespread globally and has become a significant economic issue. According to Eisend M. and Schuchert-Gà ¼ler, P. (2006) European Union has reported a 1000% rising of counterfeiting within six years, rising from 10million in year 1998 to 103million in year 2004. Meanwhile, United stated has reported that seizures of counterfeits have doubled since 2001. Many products have been counterfeited, ranging from CDs, VCDs, software, shirts, designer shoes, wallets, purses, handbags, watches, jewelry, perfume, sun glasses, accessories, apparel, books, pain relievers, auto parts, cameras, TV, toys, food and beverages, tobacco and personal care products also being counterfeit. Most all these products could be categorized under luxury goods which most consumers perceived as symbol of status. Among the counterfeit goods, luxury designer brands have become targets of counterfeit producers. Therefore, counterfeit of luxury goods is increasing in a dramatic growth rate. For counterfeit manufacturers, this market is very lucrative as it is low cost products that are easy to manufacture status symbol and easy to sell with no marketing effort required (Gentry et al., 2006). Counterfeiting has caused negative consequences to the economy. As estimated by The International Anti Counterfeiting has caused at least $200 billion per annum in lost job, taxes and sales. This is also an obstacle to the development of intellectual properties. Therefore, there is a need to look into the issue from different perspectives to prevent it from getting worse. 1.1 Problem Statement Counterfeit market is in growing rate although many countries have implemented anti counterfeiting strategies to curb and eliminate this illegal industry. However, studies were mainly focused on supply side, including discouraging counterfeit through trademark registration, regulatory action and protection strategies to reduce the availability of counterfeits (Wee et al, 1995). Unfortunately, all the efforts exerted seem ineffective as it failed to deter the consumers from purchasing counterfeit goods. By referring to previous studies, people from different country or cultural background seem to have different attitudes towards purchase intention of counterfeits. Therefore, to eradicate the problem, the factors that drive consumers in a specific nation favourable to counterfeit luxury products must be identified (Organization for Economic Cooperation and Development, 2007). Therefore, we must find out why consumer purchase counterfeit? but not where they buy (Wee et al, 1995). By far, there is limited research on consumers attitudes toward counterfeits goods in Malaysia has been published. In fact, Malaysia has been listed on the IIPAs Priority Watch List from year 2003 to 2006. In year 2010, IPPA has suggested to remain Malaysia in the watch List as the counterfeits issues getting worse. In order to regain a good reputation to attract more international investors from luxury goods industry, government are urged to curb the counterfeits problem in Malaysia. Therefore, there is necessary to gain an insight into the main causes of the phenomenon of counterfeits in Malaysia. Particularly, we must understand Malaysian attitudes towards purchase of counterfeits. Undoubtable, counterfeits priced at much cheaper than genuine, as lower production cost and lower quality. Consumers who unwillingly to pay high price for genuine products are enticed to purchase counterfeits. Thus financial motives will be neglected in the investigation. Other antecedent motives of consumers attitudes should be examined as the analysis data may facilitate the marketing activities of genuine luxury brands in determining their effective countermeasures against counterfeiting. Meanwhile, there is critical to identify the underlying mechanism of intent to purchase luxury counterfeits. 1.2 Objectives of the Study This study aims to study the motives influence consumers attitudes towards purchase of luxury counterfeits. Theory of planned behavior was used as basis for theoretical framework development. Therefore relationship between three main factors: attitudes, subjective norms and perceived behavioral control towards purchase intention of counterfeit will be investigated as well. Seven motivations that influence consumers attitudes towards purchase of luxury brands counterfeit have been identified through review on previous studies. Motivation selected including status consumption, integrity, value consciousness, personal gratification, novelty seeking, materialism, brand conscious and product appearance. All these motivations will be investigated to identify the relationship between each of the motivation with the consumers attitudes towards counterfeits of luxury brands and the intention to purchase counterfeits of luxury brands. 1.3 Significance of the Study A review of previous research has indicated a need for further investigation on the determinants of counterfeits purchase intention. As according to Eisend M. and Schuchert-Gà ¼ler, P.(2006), previous studies have failed so far to integrate their results consistently into a more general framework because of lack of profound theory. The study also stated that culture has been seen significantly influence the purchase intention and behavior. Malaysia that consists of three main ethnic groups is expected to give a different result. 1.4 Scope of the Study In this study, definition of counterfeiting is adopted from Eisend M. and Schuchert-Gà ¼ler, P. (2006): Counterfeiting is mean that an original product with a remarkable brand value worth copying already exists on the market. Its characteristics are copied into another product, which is indistinguishable from the original, and is sold at a lower price as if it were the original. Nevertheless consumers are well aware of the difference between the two products. Meanwhile, luxury goods defined as products from four main categories: fashion, perfumes and cosmetics, wines and spirits, watches and jewellery (Jackson, 2000). CHAPTER 2 COUNTERFEIT MARKET Counterfeits were first found in luxury brands because of the high profit margin that provide attractive incentive to the manufacturing of counterfeit luxury brands. According to OECD (2008), a noticeable shift from luxury goods to common consumer goods was reported. Everything could be counterfeited, including household products, food and drinks, electronic devices, tobacco, books, toys, automobile parts, pesticides, cosmetics, tools, clothes and handbags to software and prescription drugs. Despite that other product categories are on the rise, the OECD (2008) has reported that luxury fashion items like accessories, clothing, jewellery and footwear still account for the largest part of counterfeit trade, which is up to 66,2% of all interventions by European Customs. 2.1 Luxury Goods Market As stated by Preiholt, H. Ha ¨gg, C. (2006) development of luxury goods market was believed contributed by three main factors: globalisation that helps more international designers to build up their worldwide reputation; the increase number of luxury conglomerates that are striving towards jewellery, accessories, wine, perfumes and cosmetics as complements to clothing. Last is the relational exchange was believed based on confidence and trust. Luxury goods market is in a dramatic growth rate. Luxury Institute had reported that luxury goods market has grown at a compounded two-digit rate in its 2008 luxury market report in past decade. According to the report, the phenomenon was attributed to three possibilities: wealthy are purchasing more luxuries, there are greater number of wealthy people and the middle and lower classes are purchasing luxury brands. Koehn (2002) stated more people aspiring to own luxuries will purchase luxuries more regularly than those economically affordable. This is due to consumers perceptions that luxury goods are symbol of status regardless of their economic situation (Vickers Renand, 2003). Some buyers are seems to be willing to pay a high price for a high-profile brand. 2.2 Counterfeit luxury brands Counterfeits are goods that similar or identical to genuine brands which like reproduction of trademarked brands (Cordell et al, 1996) but without the authorities of genuine brands owner. Staake et al (2009) defined counterfeit trade as trade in goods that, be it due to their design, trademark, logo, or company name, bear without authorization a reference to a brand, a manufacturer, or any organization that warrants for the quality or standard conformity of the goods in such a way that the counterfeit merchandise could, potentially, be confused with goods that rightfully use this reference. Staake et al (2009) also proposed to make a distinction with regard to consumers perception on counterfeits luxury brands. Research has identified two types of consumption of counterfeits. The first type is consumer that acquired without aware of the intellectual property infringement (deceptive counterfeiting) or unknowingly and unintentionally purchases the counterfeit that closely imitated the genuine brands (Staake et al 2009; Tom et al, 1998). Meanwhile another type is non-deceptive counterfeit, where consumer willingly to purchase the counterfeits (Prendergast et al, 2002; Staake et al 2009). It can also been defined as consumers recognises that the product is not authentic according to specific information cues such as price, purchase location or material used (Gentry et al, 2006). Consumers behaviour is different in these different cases. 2.3 Counterfeit in Malaysia In Malaysia, counterfeits market is active since decade ago. As reported by IIPA in 2006, counterfeiting of fashion, pharmaceuticals, batteries, computer accessories, tobacco, mobile phone batteries, food, electronics, petroleum products and toys was problematic in Malaysia. Among all products, entertainment software has constituted to 91% of the counterfeit trade in year 2004, resulting in a loss of US$74 million for local records and music industry (IIPA, 2005). The research has even reported that Malaysia was appeared as the most infamous optical disc entertainment software producer/ exporter in the world. Therefore Malaysia has remained on the Priority Watch List from year 2003 to 2006. In year 2008 and 2009, Malaysia has been removed from Watch-List but was suggested remain on Watch List in year 2010 as the issue remained problematic. Enforcement action was in declining since the removal of Malaysia from Watch-List. As a consequence, piracy goods like CD and DVD was re-emerged. Again, counterfeits were openly available in night markets that operating in different locations every night. Besides, counterfeits also available in fixed premises locations in Klang Valley, particularly in Bangsar, Sg Wang, Petaling Jaya, and Shah Alam; Perangin Mall in Penang; and Holiday Plaza in Johor Bahru (IIPA, 2010). Malaysian Government has collaborated with original vendor and local media in organising awareness campaign in attempt to make public aware of the severity of purchasing counterfeits. Unfortunately, all these efforts seem ineffective in deter consumers from purchase of counterfeits. Therefore, in order to develop an effective policy, there is a must to look into the problem from different perspective, especially demand side of counterfeit. CHAPTER 3 LITERATURE REVIEW Numbers of study has been conducted to examine the emergence of counterfeit trade, from both supply and demand side. However focus was on the supply dimension; in order to develop appropriate policy to restrain this illegal activity the factors that drive consumer demand for counterfeits should be identified (Kim, H Karpova, E., 2010). 3.1 Counterfeits Demand The dramatic increase of counterfeiting trade is driven by the high demand from consumers. Many consumers knowingly purchase counterfeits. OECD (2007) has grouped the factors that drive consumers towards knowingly demand for counterfeit and pirated goods into three principal categories: first, is the characteristic of product; second the individual consumer, and lastly the institutional environment in which the individual consumer operates. All these factors as listed in Table 1 influencing consumers behaviour towards counterfeit. Among these three categories, consumer characteristics, including consumer financial status and attitudes towards counterfeits, will be the main concern in this study. Besides, many studies have been conducting to evaluate consumers intention and willingness to purchase counterfeit products. Numbers of variables and determinants have been identified in previous research but results were differing for various products and brands, and also in different nation, as per listed in Table 2 which adopted and adapted from Eisend M. and Schuchert-Gà ¼ler, P.(2006) ; Stake, T. et al. (2009). Description Albers-Miller 1999 Survey among 92 US students: selling price enhances willingness to buy a counterfeit above all for those who prefer counterfeits over stolen products; presence of friends who also buy an illicit good enhance willingness to buy, buying alone decreases the willingness to buy; perceived criminal risk has higher influence on buying stolen vs. counterfeit or genuine products. Ang et al. 2001 Survey on 3251 Singaporean consumers: positive correlation between attitude/ purchase intention; negative influence of normative susceptibility, integrity and personal income on attitude towards piracy; positive influence of value consciousness on attitude towards piracy. Bian and Veloutson 2007 Comparison of British and Chinese consumers who admit to have knowingly purchased counterfeit products. Demographic variables have not been found to significantly influence counterfeit demand. In both countries, consumers show a very low opinion on counterfeit products in general, but perceived their average quality as similar compared to non-logo products Bloch et al. 1993 A survey on 200 US adults at mall and flea market: demographic variables did not distinguish between the choice groups; less reliance on durability and brand image has a positive influence on the stated choice to purchase a counterfeit compared to purchasing a designer label or no logo; apart form good value, all evaluation items scored higher for the designer label compared to the counterfeit; self-image is partially significant, indicating that counterfeit consumers are less confident, successful, of lower status and less wealthy. Chang 1998 Comparison of the validity of the theory of reasoned action (TRA) and the theory of planned behavior (TPB) as applied to illegal copying of software. The results suggest that perceived behavioral control is a better predictor of behavioral intention than attitude Cheung and Prendergast 2006 Survey on 1152 adult consumers in Hong Kong, Shanghai Wuhan: middle and high income families, males, white collar workers, people with tertiary education, younger consumers and singles are more likely to be heavy buyers of pirated clothing and accessories. Cordell Wongtada and Kieschnick 1996 An experiment study on 221 business students in an Eastern metropolitan area: attitude towards lawfulness negatively related to willingness to purchase a known counterfeit only for knit shirts; expected performance positive related to willingness to purchase known counterfeit for knit shirts and 35-mm camera; branding and price concession positive related to willingness to purchase a known counterfeit for low investment-at-risk (knit shirts); retailer prestige positive related to willingness to purchase a known counterfeit for high investment-at-risk (camera). Gentry et al. 2001 Qualitative study on 102 international students, predominantly Chinese subculture from Singapore, Malaysia and Indonesia: counterfeits are purchase because of the brands; a a low-grade version with the intent to purchase the authentic product if trial is successful; counterfeits are an acceptable compromise and offer lesser value for lesser cost; counterfeits are purchased because they represent a brand (brand decision), not as a product decision; counterfeits provide novelty and symbolize ones travel experiences for tourist consumers. Hoe et al. 2003 Qualitative study on 20 UK consumes aged under 30: consumers use counterfeits as substitute for desired high value designer brands that help them to create their identities, to transfer the associated cultural meaning, and impress others but only as long as they can deceive the onlooker Jenner and Artun 2005 A survey on 202 German consumers in Turkey: the perceived quality difference between counterfeits and genuine brand reduces purchase intention for all product categories (textiles, leather accessories, CDs, sofrware, watches, perfume) Kwong et al. 2003 A survey on 306 consumers from Hong Kong: attitude towards piracy influence purchase intentions; female have lower purchase intentions, age is negatively related and past experience is positively related to intentions to buy pirated CDs. Parthasarathy and Mittelstaedt 1995 Survey among 205 US students: The willingness to engage in piracy to be strongly affected by the attitudes towards piracy, subjective norms, perceived utility of the software, and the willingness to seek help from others to reduce non-monetary cost. The opinion that the high prices of software are not justified did not appear to affect piracy behavior. Peace et al. 2003 Extension of the theory of reasoned action by a factor of perceived behavioral control as posited by the theory of reasoned action, and punishment certainty/severity. In a survey among 203 students, the model was able to explain 65% of variance in software piracy intention. Penz and Stà ¶ttinger 2005 A survey on 1040 Austrian consumers: attitude towards counterfeiting and self-identity have a positive effect on purchase intentions, particularly at low price levels; normative pressure and perceived behavioral control have a positive impact on purchase intentions at low and high price levels; personality traits influence attitude towards counterfeiting and subjective norm price consciousness has no impact, access to counterfeits has a positive impact on purchase intentions; purchase intentions predict purchase behavior Phau et al. 2001 Survey among 100 consumers in Hong Kong. Those who less often purchase counterfeit clothing are younger, have a lower disposable income, and are less well educated Prendergast et al. 2002 A survey on 200 consumers from Hong Kong: quality and large supply enhances purchase intentions for high spenders compared to low spenders in case of VCDs; quality, material and friends/ family opinion enhance purchase intentions for low spenders compared to high spenders in case of t-shirts; for t-shirts, quality, popularity, ethical and legal issues are more important than for VCDs; overall the importance of criteria do not differ for low and high spenders with price being the most important criteria. Swee et al. 2001 Survey among 3600 Asian consumers who buy counterfeit goods. Counterfeit consumers regard the purchase of fakes as less risky and less unethical, are more value conscious, and have a lower average income compared to those who do not purchase counterfeit articles. Tom et al. 1998 A survey on 435 US consumers: importance of style has a negative influence, importance of price a positive influence on the preference for the counterfeit version of software; importance of brand, function, durability has a negative influence, importance of price a positive influence on the preference for the counterfeit version of t-shirt; importance of durability has a negative influence on the preference counterfeit purses; age and income is negatively related, as is education with the preference for counterfeit versions of a product preference for counterfeit product leads to more positive attitudes towards counterfeiting and greater satisfaction with the price, but less satisfaction with durability and quality. Wang 2005 A survey on 456 students from Taiwan: cost benefit enhance the intention to purchase a pirated DVD/VCD while performance risk, ethical concerns, and social norms decrease it. Wang et al. 2005 A survey on 314 Chinese students: positive influences of attitude towards piracy on purchase intention; negative influence of normative susceptibility, positive influence of value consciousness, novelty seeking and collectivism on attitude towards piracy; buyers have more positive attitudes towards piracy than non-buyers. Wee at al. 1995 A survey on 949 students and working adults in South-East Asia: attitude towards piracy is related to purchase intention for all counterfeit products; brand status, materialism, novelty seeking, and risk-taking have no influence; purpose is related to purchase intentions for counterfeit literature and software; quality is related to purchase intention for all counterfeit products; perceived fashion content is related to purchase intention for counterfeit watches; physical appearance is related to purchase intention for leather wallets/ purses and watches; image and durability have no influence; education is negatively related to purchase intention for all counterfeit products; household income is negatively related to purchase intention for counterfeit leather wallets/ purses. Woolley and Veloutsou 2006 Analysis of purchasing frequencies and underlying antecedents of software piracy among US students. Results indicate that students understanding and knowledge of copyright laws have increased since 1991, but this knowledge has not influenced software piracy rates Source: Adopted and adapted from Eisend M. and Schuchert-Gà ¼ler, P.(2006) ; Stake, T. et al. (2009) 3.2 Theory of Planned behaviour According to the Theory of planned behaviour (Azjen, 1985), an individual behaviour is guided by three kinds of considerations: attitudes toward behaviour, subjective norm and perceive behavioural control. In combination, these three considerations lead to the formation of a behavioural intention. Generally, a person who favourable towards the attitude and subjective norm, and with high level of perceived control, the stronger of his/her intention towards the behaviour. When opportunity arises, people are expected to carry out their intention, thus intention is assumes as the immediate antecedent of behaviour. 3.2.1 Attitude toward purchase intention of Counterfeits As per explained in Theory of Planned Behavior, consumers attitudes will direct influence their purchase intention and finally drive them toward purchase behavior. Past research has examined various motivations that influence the consumer purchase intention of counterfeit, including economic, quality, personality, social and ethical factors (Amatulli, C. Guido, G., 2011; Kim, H. Karpova, E., 2011; Kim, J. E. et al., 2009; Norum, P. S. Cuno, A., 2010; Perez, M. E. et. al, 2010; Phau, I et al., 2010; Phau, I. Teah, M., 2009). a. Status consumption Consumers perceived luxury brands as symbol of status, where they purchase, use and consumed a goods which will display their distinctive status (Eastman et al., 1997). Status consumption has been investigated in many studies in different countries but showing different result (Amatulli, C. Guido, G., 2011; Kim, H. Karpova, E., 2009; Phau, I et al., 2010; Wee C. H. et. al., 1995). Status seeking consumers those with low affordability tend to purchase counterfeits of luxury brands to satisfy their status seeking needs (Phau, I. Teah, M., 2009; Kim, H. Karpova, E., 2009; OECD, 2007). Luxury brands are used to project socioeconomic status, even though it is a counterfeit, consumer are hoping to convey their high society status that associated with genuine brand. Thus, the following hypothesis developed: H1a: Status consumption has a positive influence on consumer attitudes towards counterfeits of luxury brands. b. Integrity Integrity represents individual ethical consideration, self-control, responsibility and honesty that related to lawfulness (Wang et al., 2005). Research has found that consumers that are more lawful-minded possess negative attitudes towards counterfeits and less willing toward purchase of counterfeits (Cordell et al., 1996, Phau, I et al., 2009). This lead to the developed of hypothesis that: H1b: Integrity has a negative influence on consumer attitudes towards counterfeits of luxury brands. c. Value consciousness Consumers would like to purchase a luxury brands that associated with value, prestige and benefits but they might not willing to pay a high price for it (Cordell et al, 1996). Consumers who are value conscious are different from consumers that are price consciousness that only concern for products price. They tend to maximize perceived utility or benefits to be acquired for their money. Consumers perceived that counterfeits have similar quality and function to genuine brands, thus they are more positive towards counterfeits which is much cheaper than genuine brands (Kim, H. Karpova, E., 2011; Phau, I. Teah, M., 2009). Therefore, this study propose that: H1c: Value consciousness has a positive influence on consumers attitudes towards counterfeits of luxury brands. d. Personal Gratification Personal gratification could be defined as the desire for self-accomplishment, social recognition and to enjoy finer things in life (Wang et al., 2005). Hence, consumers possess high personal gratification are conscious on products quality, appearance and trendiness. According to Bloch et al. (1993) counterfeits buyers perceived themselves to be less successful, less confident and low perceived status. Thus those with high personal gratification might have low tendency towards goods of inferior quality (Amatulli, C. Guido, G., 2011; Phau, I. Teah, M., 2009). Thus, this study proposed that: H1d: Personal gratification has a negative influence on consumer attitudes towards counterfeits of luxury brands. e. Novelty Seeking Novelty seeking consumers tend to try new and different brands to satisfy their curiosity (Wang et al, 2005). Counterfeits those in lower price may become their choices (Phau, I. Teah, M., 2009; Wee C. H. et. al., 1995). H1e: Novelty seeking has a positive influence on consumer attitudes towards counterfeits of luxury brands. f. Materialism For consumers with high level of materialism or materialist, they view that happiness come from acquisition of possessions. They consume prefer consume status products than general products (Wong, 1997). As similar to status consumption, for those who would like to gain a special identity from others but without the financial capacity, counterfeits that perceived as lower-priced branded goods will become an alternative (Kim, H. Karpova, E., 2011; Phau, I et al., 2010; Wee C. H. et. al., 1995). Therefore, H1f: Materialism has a positive influence on consumer attitudes towards counterfeits of luxury brands. g. Product Appearance Luxury brands always associate with fashion component thus product attributes play an important role in influencing consumer purchase intention. Consumers are willing to pay for physical attributes without paying for the associate quality (Cordell et al., 2006; Kim, H. Karpova, E., 2009). Physical will be one of the main concerns when consumers purchase a counterfeit (Wee C. H. et. al., 1995). Thus, H1g: Product appearance has positive influence towards purchase intention of counterfeit luxury brands. Most of the previous research has suggest that attitudes toward behavior are more accurate in predicting intention to purchase behaviour. Thus we hypothesize H2: Attitude towards counterfeit is positively influence the purchase intention of counterfeit luxury brands. 3.2.2 Subjective norms towards purchase intention of Counterfeits Subjective norms play an important role in influencing a behavior as people will share information, knowledge and experience with others. Consumer who has friends and family members who favourable in purchased counterfeits may influence them to have a tendency towards counterfeits. Thus, H3: Subjective norm is positively influence the purchase intention of counterfeit luxury brands. 3.3.3 Perceived Behavioural Control Perceived behavioral control reflects past experience, knowledge about products and expected obstacles. Consumers those think that their friends or family do not approve the possession of counterfeit goods may not carry out the behavior. Therefore, H4: Perceived behavioral control is positively influence the purchase intention of counterfeit luxury brands. CHAPTER 4 RESEARCH METHODOLOGY 4.1 Research Design Integration methodology will be utilized to investigate the research topics. Qualitative and quantitative survey will be conducted in two phases. First phase, in depth interview will be conducted as complementarity research to confirm the context for theoretical model. Second stage will be getting the conclusive data through quantitative survey. By far, most of the studies conducted are by quantitative research, limited qualitative research has been identified. Qualitative research is useful in exploring new elements and develops an initial understanding towards studied market (Amatulli, C Guido, G., 2010). 4.2 Phase One: In-depth Interview Integration methodology was used in many research with purpose of exploring viewpoints in early stage of research (McCracken, 1998) or to enhance the descendant quantitative research to be conducted (Greene et al, 1989: 259). Since there is limited research conducted in Malaysia, the main purpose is to gain initial understanding about consumers conceptualization of counterfeit luxury brands and to learn the language they used to describe it. Meanwhile, this research to be conducted to confirm the context for theoretical model developed based on previous studies. All finding hoped to support the motivations and factors that influencing purchase behaviour identified from literature review. 4.2.1 Target Group: In order to obtain the data to cover the whole population, 30 respondents from different age and sex categories will be selected. Selection criteria will be as listed in Table 4. 4.2.2 Questions Design: Research Question Interview Question Question 1: To what extend are the relationship between Malaysian consumers motivation and attitudes toward counterfeits brand? What brands do you consider as luxury brands? Have you ever purchase a counterfeit o