Long gone are the days of easily spotted, plasticky fake bags perched atop folding tables on New York City's Canal Street. Instead, the modern counterfeit bag is a near-perfect replica, or "reps," to use the more cloak and dagger term you'll see in the underground market. And Gen Z's shift to replicas could pressure luxury margins long-term, The Wall Street Journal reported recently, detailing the shadowy market of "superfake" handbags.
Market Data Shows Gen Z's Reticence to Buy Luxury
The luxury sector may be seeing its first revenue pressures as Gen Z pulls back: According to the Journal, data from consulting firm Bain & Co. shows younger consumers spent $5 billion less on luxury in 2023 than the previous year.
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While the data can't definitively identify the cause, the decline suggests one or both factors: budget constraints, or a growing preference for high-quality counterfeits, according to the Journal's analysis.
"People are starting to realize how good these fakes are getting"
Online communities of replica handbag enthusiasts have been reacting to the article, including lurkers and buyers from the "Repladiesdesigner" subreddit, which was specifically called out by the Journal: "It’s crazy how far ‘super fakes’ have come and they really are just as good as the original in many cases. The difference in price makes it an easy choice for many," one user writes. "I also bought Hermes authentics in [the] past but now I’m buying high tier reps."
"It’s true that some people are just starting to realize how good these fakes are getting," writes another Repladiesdesigner member. "Honestly, with [the] right seller and the right eye, you can snag a bag that looks better than [the] original."
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Customers use resources like the subreddit to find sellers, who then move their business off Reddit and onto encrypted apps like WhatsApp and Telegram. According to the Journal, this direct-to-consumer sales model floods shipping ports with untraceable single packages, making it much easier to evade the traditional method of bulk interception of counterfeit goods at customs.
Resellers Going High-Tech to Spot Superfakes
Indeed, superfake handbags are so indiscernible from their luxury counterparts that designer goods resellers like The RealReal (NASDAQ:REAL) have adopted forensic-level authentication methods: According to the Journal report, the company is implementing XRF technology to analyze the metal composition of bag hardware and X-ray machines to inspect internal structures. The RealReal Director of Authentication Hunter Thompson tells the Journal that counterfeiters may flawlessly replicate a bag's exterior but often overlook subtle interior details, like the way a nail head is hammered in.
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But what of the brands themselves? How are they fighting back? According to the Journal, in the case of the largest luxury brand, the answer is: meekly. LVMH Moët Hennessy Louis Vuitton, the world's largest luxury conglomerate, spent $11 billion on advertising in 2023 but just $45 million on anti-counterfeiting efforts. It may be that fakes are viewed as a foot-in-the-door toward genuine purchases, but the industry should probably wise up to the reality that superfakes are becoming legitimate competitors — and luxury's pricing power may be at risk.
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