“F” for Fake

It wasn’t a story that made the front pages this past week, but it was arguably one of the more significant business stories in some time. A brief article in the Wall Street Journal highlighted the growing demand by Chinese consumers for genuine rather than knock-off fakes.

For all businesses, but certainly for Lean Six Sigma and other performance improvement professionals, this marks an important shift for China. Heretofore, many if not most Chinese consumers were content with products that were cheap and had a convincing imitation of the genuine label: surface appearance was enough.

But now there is both a social status embarrassment to having a fake rather than genuine item as well as a growing standard for quality. This is the important implication for philosophies such as lean six sigma. Once a market segment places importance on product and service quality, consistency of experience, and value for money, then the need and importance of product and service process capability and consistency rises.

The WSJ story went on to say that

even as foreign companies and the White House pressure China to crack down on fake products, consumers like Liu Wenzhong are showing the nation’s growing taste for the real thing. At a North Face sports-apparel store in one of Beijing’s most popular shopping districts, Mr.Liu recently bought a pair of snow boots and a fleece hoodie. At around 700 yuan, or roughly $110(U.S.), each, they are nearly five times the price of counterfeit versions sold down the street. “The difference of buying real and fake products is how you feel after,” says Mr.Liu, a 36-year-old who runs his own fibre-optic-technology sales business and has a steady income of around 15,000 yuan a month. “I can wear a label I’ve paid for and feel proud.

“While knock off versions of real products still are widely available around China, Mr. Liu’s comments indicate a change in shopper attitudes in a country where black-market purchases once were preferred by shoppers. A survey last year by China Market Research found that 95 percent of Chinese women between 28 and 35 said they would be embarrassed to carry counterfeit handbags. And demand for fakes has declined, with 15 percent of consumers willing to buy fake clothing and leather goods in 2010, down from 31 percent in 2008, according to a survey by consulting firm McKinsey & Co.

The shift has fuelled the expansion plans of foreign companies in China. Such retailers as Nike Inc., Columbia Sportswear Co., cosmetics maker Shiseido Co. and North Face parent VF Corp are opening stores in farther-flung Chinese cities. Many retailers are offering special events and other enticements to get shoppers in their stores. And some have adopted measures, such as special packaging, to differentiate their products from fakes. “Consumers in China are even more discerning than their counterparts in the Western world,” says Aidan O’Meara, president of VF’s Pacific division. “They don’t want to be caught dead with a fake product.”