August 20, 2012

What price brand? No pretence about "fakes"


One of the most fascinating things that emerged from my immersion in the informal trade of China made consumer electronics in Kenya last month was the role played by "fakes".

We assume that cheaper copies of well known brands attempt to fool the customers. Packaging and brand names echo the look and feel of the original as far as they are able and the entire exercise is one of "bait and switch". In fact, this is not the case at all. Nobody is fooled and people know exactly what they are buying.

What is interesting, however, is how these "fakes" are sold.

Shopkeepers - whether the upcountry retailers catering to their local, rural customer base or the wholesalers back in the Central Business District dealing with rural stockists - offer you a choice. They display both the original brand, a genuine product of quality with warranties and whatnot, and the "fake" version, whose only guarantee is caveat emptor, and leave it up to you to assess your willingness to take a risk.

Their words often follow along the lines of "Here is the original Nokia, costing so much and doing this, this and this, while here is the China made product closely resembling the above but has these additional features and costs only so much". Everyone is completely aware of the lifetime value of either product and the risk involved in ending up with a dud.

It is upto the customer to decide if they want to spend for durability and reliability and quality or make the tradeoff for a short term gain in features, upfront cost and the caveat of a short lifespan.

This approach seems to fit within the constraints of the informal economy's cash flow volatility as well as the customer demographic's mindset around brand value and product performance. No one that I spoke to, either at the wholesaler, the shopkeeper or the customer level, seemed to feel that the "fakes" were an attempt to defraud them in anyway.

Its a pragmatic approach to affordability and aspirational ownership.


4 comments:

  1. You see the same thing with auto spare parts? There can be about three versions of a spare part and the options are indicated to the customers e.g 8,000 shillings for an original genuine part and maybe 5,000 and 2,000 (won't last too long) for imitations. Buyers then make a choice based on their budget or the importance of the part

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  2. Yes and its not just China made stuff, is it? You can also see it with the jua kali alternates and substitutes. Which makes me think that in the informal economy, the emphasis in Porter's 5 forces is on substitutes (acting as competition) rather than direct head on competition as assumed in other more developed brand markets.

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  3. Well, while you may have encountered some "honest" counterfeit dealers, I have not been that lucky in the past. Downtown Nairobi is a big haven of fakes which will be passed off as genuine to the unsuspecting seller. Sometimes, even the sellers have no idea that they are selling a fake.

    I even had an encounter with fake alcohol which I was sold as genuine.I later came to know a small-time wholesaler who deals with both genuine and counterfeit alcohol, though he will be quite honest and point out the fake, since it comes at a lower price.

    At the shops, they pass off the counterfeit as the real deal so that they can cash up on the huge profit margins.

    See my experience here http://blog.denniskioko.com/2012/02/counterfeit-alcohol-hits-nairobi.html

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  4. In the spare parts biz, there's a bit of reputational stuff to protect - and the parts will be (vetted &) installed by 'experts' (mechanics) unlike with booze which is immediately consumed by an unsuspecting (or already drunk) person

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