The LA Times has a nice piece out titled Counterfeit Gap joins the counterfeit Gucci. Here’s the lede:
Mirabelle Vargas, 29, winds her way through the open-air stalls in downtown Los Angeles’ bustling Santee Alley, hunting for Victoria’s Secret underwear.
Or at least undies with a tag that says Victoria’s Secret.
An authentic pair from the lingerie maker can cost $7.50 and up. But Vargas, a retail sales clerk, managed to find a table brimming with pink-and-white unmentionables. Price: two bucks a pop.
“Of course they’re not real, not at this price,” said Vargas, decked out in a chocolate brown Victoria’s Secret tracksuit, also counterfeit. “But the quality isn’t bad, and buying fakes saves a few bucks. You can find fake everything here.”
Not that long ago, counterfeiters focused almost exclusively on upscale brands like Prada and Gucci. But five years of a weak economy has knockoff artists churning out goods for people with more modest tastes and budgets.
The scene described above reminds me of the casbah scene from Casablanca in which the merchant keeps cutting prices to get Ingrid Bergman to buy something- anything- at almost any price. There’s the bid, and there’s the asked…
I am not condoning or advocating that anyone violate trademark law or do anything illegal. Just pointing out that if Limited Brands, which markets the Victoria’s Secret line, and other retailers start to lose more market share than they can accept to do to the knockoffs, they can help whip inflation now either by lowering their prices or making better products for the same price.
Most people have no idea of the gross profits that are inherent in retailing. I used to think that branded pharmaceuticals, with list prices allowing typically a 98% gross margin, were unique along with enterprises such as software manufacturers and the Federal Reserve in its production of new money. I subsequently learned from a senior advertising executive that 95% gross margins were standard throughout industry. (That also means that the mildly-discounted store brands that goliaths such as Walgreens and CVS push on people are immensely profitable.)
It is widely reported that labor’s share of national income is at a multi-decade low and that corporate profits as a share of the same is at or near a record high. This article is relevant to this issue. Does the Fed really need to “fight deflation”? Perhaps it instead should be happy to see a thousand price cuts bloom.
