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29 July 2014TrademarksStuart Fuller

The benefits of counterfeit goods

In 2012, the major professional sports leagues in the US lost more than $13 billion in revenue due to sales of counterfeit shirts and merchandise, including a whopping $3 billion alone by the 32 teams in the National Football League (NFL). Some top-end ‘authentic elite’ team shirts, which should retail for $250, could be found online with an 80 percent discount. These numbers, while staggering on their own, are just a drop in the ocean when we look at the total black economy, which runs annually into trillions of dollars.

In Europe, football means something very different from the American version. While the biggest NFL sides can expect to sell tens of thousands of shirts (neither official shirt supplier Nike nor the NFL will actually reveal numbers), unit sales for the best-selling franchise, 2014 Super Bowl champions Seattle Seahawks, pale into insignificance compared with the sales of current European Champions League winners Real Madrid, with more than 1.4 million shirts per annum, the vast majority now bearing the names of superstars Cristiano Ronaldo or Gareth Bale.

Hot on their heels are Manchester United and Barcelona, each selling more than a million shirts per annum. The top ten football clubs sell more than 7.5 million shirts across the globe every year, significantly more than the top ten clubs of any other sport.

Obviously, these numbers only reflect official sales. Browsing the new Adidas store at Bluewater near London last week I picked up a Real Madrid shirt, complete with an official Champions League badge on the sleeve. The price tag? £60 ($103). In June, Nike and the UK Football Association found themselves the talk of the town for the wrong reasons, with questions even being raised in parliament over the price of the new England shirt, with those ‘authentic elite’ versions again costing upwards of £90 ($154).

Lifestyle shopping

Football shirts are not luxury items, yet their official pricetags put them in the same category as similar types of clothes sold by the likes of Armani, Gucci and Versace. £60 for what is essentially a T-shirt is simply crazy, irrespective of the new-fangled material used to differentiate the latest version from the almost identical one released the previous year. They are a lifestyle purchase. While a very small number of sales will be based on fashion sense, the vast majority are based on the blind loyalty that football fans have for their teams.

In the last few years, manufacturers and clubs alike have been criticised for the number of new kits they bring out. While nobody is forced to buy the new, upgraded version of the shirt when it is released, that same blind loyalty has some people queuing up to buy the shirt on the first day of sale.

It is the rule rather than the exception that a club brings out a new football shirt every year. Not just one shirt, but in some instances six different versions if you count the special European campaign and goalkeeper ones. Chelsea, for instance, has released 14 different kits, excluding the goalkeeper ones, in just five seasons.

With the retail cost increasing every year, it is no wonder that the market for counterfeit goods is also swelling every year. In June a huge haul of fake football shirts was discovered on its way into the US. More than $1 million worth of Chelsea, Barcelona and other major European football team shirts were found at Savannah Port in Georgia in a container that had arrived from China. The US Customs and Border Protection force will readily admit it got lucky in finding the counterfeit items.

The majority of counterfeit football shirts are made in Asia, where raw-material costs and workers’ wages are very low. Over the course of the last few years I’ve been to the Grand Bazaar in Istanbul, the Night Market in Marrakech, the Ladies Market in Hong Kong and even the Sunday Boot Fairs of Sidcup. Vast ranges of every major football shirt can be bought for just a few pounds.

"While the airline may be deeply unhappy that its logo is being used on counterfeit items, the counterfeits are essentially increasing its return on investment through free advertising."

The quality of the counterfeits varies per seller, with some offering ‘special edition’ shirts. In Morocco two years ago, one stall was selling Manchester United 2012 Premier League Champions shirts, made specifically for the Reds’ title success. The problem? Rivals Manchester City won the title with virtually the last kick of the season.

It is fairly obvious that you are not buying the real thing at the price it is being sold for, although production techniques now mean that fakes come in a variety of grades of quality. At the low end, the wrong material and non-exact match colours will be used and often there will be spelling mistakes (Liecester City anyone?) while the higher-grade ones will often have all the bells and whistles of the real thing, including holograms and inside printing.

Brand awareness

There is another side to counterfeit football shirts that you may not have considered, and that is the conundrum of brand awareness.

Consider this situation. Every counterfeit shirt carries the branding of not only the football club, but also its main commercial partner(s). The whole reason why major brands invest millions into putting their logos on the front of football shirts is to increase awareness of their brands, in both existing and new markets.

The hundreds of millions invested by airline Emirates in its sponsorship of Arsenal, Olympiakos, Paris Saint-Germain, Hamburger SV, AC Milan and now the European Champions, Real Madrid, mean they have huge global exposure from the sales of official shirts. But their logo appears on counterfeit items as well, increasing their global reach—albeit through illegitimate channels.

Consumers simply associate Emirates with these shirts, irrespective of the legitimacy of the items. While the airline may be deeply unhappy that its logo is being used on counterfeit items, the counterfeits are essentially increasing its return on investment through free advertising. I have no doubt that the sales of fake shirts are taken into commercial consideration when the deals are negotiated and it is a by-product that the brand owners inadvertently benefit from.

And what of the clubs themselves? Football is now a global game. The elite clubs no longer consider the summer break as a chance to rest and relax. They travel far afield to play exhibition games in front of sell-out crowds in new markets. The forthcoming Guinness International Champions Cup in the US is an example of this: some of the world’s biggest clubs including three Emirates-sponsored teams, Olympiakos, AC Milan and Real Madrid, will play a series of games around the US to boost interest in the game. Last year, Chelsea travelled to Singapore and Malaysia, while Manchester United played in Hong Kong as part of its strategy to increase its global fan base.

Many of these fans, in the Far East especially, have significantly less disposal income than their core fans have in England. They cannot afford the real-deal, Climacool, multi-weave new shirt at £60. But they can afford the counterfeit at £5.

By buying a counterfeit shirt, one that they can afford, they are still buying into the brand, happy to market the club by wearing the badge, albeit one that may not be official. Does this make them less of a fan? By spending 90 percent less on a shirt, they can then afford to buy a ticket or subscribe to the club’s online streaming content. What is more important to the club? New fans who will engage with the club on a regular basis or ones who will contribute a small amount of money once a season through an official shirt purchase?

The whole sports apparel and merchandise market is unique. Someone who buys a counterfeit Gucci shirt or a fake iPhone charger is doing so for very different reasons than someone who buys a fake replica Barcelona shirt. While football clubs need to have a brand protection strategy in place, are counterfeit shirts a major concern for global sporting brands? It’s an interesting debate; one where the answer will certainly differ depending on whether you have the emotional engagement of a fan or the commercial view of a sponsor, or the club itself.

Stuart Fuller is director of commercial operations at NetNames. He can be contacted at: stuart.fuller@netnames.com

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