Long Island Professor: "Chinese Counterfeiters Cannot Replicate Services" Yes, They Can

Can people outside Long Island
really pour a sturdy Long Island Iced Tea?

Panos Mourdoukouras, professor of economics of Long Island University, gave some reasons for the existence of counterfeit and knock-off retail outlets in China with which I did not agree, see here.

Now he was interviewed by Canada TV (CTV) and I am afraid I again do not agree with him. Professor Mourdoukouras on branding:
"In the long term the only party that is harmed will be China. China will never learn to innovate. Branding involves two things. One, the right product and the right service. Second: the right word of mouth; the buzz. If you copy Apple, Nike, or replicate Starbucks, you also have to replicate the services. What makes Starbucks so successful is the services. Can China replicate the service? No. People sooner or later will found out it is the wrong Apple, Ikea, Starbucks. The stores will have to close down. Word of mouth will spread. Once they found out it is fake they walk away."

I do not concur. First of all knock-off retail outlets do not necessarily provide inferior service. And for example Ikea knock-off 11 Furniture can build up a brand presence by itself. The uncomfortable truth is that high quality counterfeit products do exist, and so does high quality service, which together can satisfy customers. It is naive to believe that consumers stop shopping at a retail outlet once they find out it is fake. I think that is especially not the case when a counterfeit retail outlet with good service sells genuine products, such as in some of the counterfeit Apple Shops. For products that have a negative price elasticity a lower price lures customers if the product "satisfices" (sufficiently satisfactory). The trademark proprietors will still have to do the heavy lifting of closing down these shops via the judicial, administrative or criminal routes of the Chinese legal system.

Watch the CTV interview here.

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IKEA Drama: Second Tier Cities Cannot Wait For Well Known Brands: Enter The Copycat

When I visited friends in several countries, including China and the special administrative region of Hong Kong, I was overtaken by a sense of déjà vu. Their chairs, tables, book shelves, all breathed a sense of Swedish familiarity. Their interiors were completely Ikeanised. To make for a more furniture diverse roomscape IKEA could use some competition. However, the competition should be fair. In the wake of the fake Kunming Apple Store story, Melanie Lee of Reuters reports about a Kunming copycat IKEA with a name that sounds quite similar in Chinese.  

宜家家居 yi jiā jiā jū = Ikea

十一家具 shí yī jiā jù = 11 Furniture

The first character shares the i vowel sound, the third character is identical, the fourth is the same sound, but only pronounced in a different tone.

Also the logo of 11 Furniture uses the same Swedish yellow and blue colour scheme, which indicates a possible trade mark issue. The whole store has the look and feel of IKEA. If one could not read Chinese characters one is easily led to believe one has the IKEA experience. Even the pencils to write down orders and oversized blue bags are present. One can argue that some of these copyrighted IKEA icons are infringed. 

"At least they do not have the unpronounceable Swedish names" quips Forbes magazines. See their 11 Furniture in 12 pictures here. 

The differences are the products sold, and the fact that IKEA has the goods in stock, although completely dismantled and to be assembled by the customer, 11 Furniture makes the goods on order, so this saves them inventory costs.

What lessons can be drawn from this case?

• Second and third cities in China are underserved. People in Kunming want affordable furniture and a big choice at one location. Kunming might be a second tier city in Yunnan province, but it has still 5.7 million people. If IKEA is not providing some else will. Of course Ikea cannot build their stores everywhere overnight (in fact one per year in China). But until that time, if they are smart, they could provide shuttle buses to their stores.
• The fact that 11 Furniture is copying the service instead of the products, could be an indication that China's companies are starting to build a reputation under their own name, although that name is not quite original, yet.

Read also about Dairy Queen knock-off called Dairy Fairy here.

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