The impacts of gray products and counterfeits in the luxury industry

Abstract

With the rapid development of e-commerce, both gray products and counterfeit products are particularly serious in the luxury industry. This paper develops an analytical framework to investigate the interaction among the gray market, the counterfeit market and the authorised market, and examines how luxury manufacturers should manage unfair competition from gray products and/or counterfeit products. First, regardless of the existence of counterfeit products, the manufacturer can benefit from gray products when the status utility is moderate. Second, counterfeit products may benefit the manufacturer, depending on the availability of gray products and the physical resemblance of counterfeit products. Third, gray product may benefit the counterfeiter while counterfeit product always harms the gray marketer. Finally, we reveal that gray products can help luxury manufacturers fight against counterfeit products. In particular, gray products can reduce the demand for counterfeit products and even drive counterfeit products out of the market when the physical resemblance of counterfeit products is sufficiently low. Our findings provide several new managerial insights for luxury manufacturers and gray marketers.

KEYWORDS:

• SDG 12: responsible consumption and production
• supply chain management
• gray market
• counterfeits
• luxury goods

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

Data sharing is not applicable to this article as no new data were created or analysed in this study.

Additional information

Funding

This work was supported by the National Key R&D Program of China [grant number 018YFB1601401] and National Natural Science Foundation of China [grant numbers 71991464/71991460, 71921001, 72201263 and 72001066].

Notes on contributors

Fengmei Xu

Fengmei Xu is a doctoral student majoring in management science and engineering in the School of Management, University of Science and Technology of China. Her research interests mainly focus on supply chain management and electronic commerce. Her works have been in the International Journal of Production Economics, Asia Pacific Journal of Marketing and Logistics, etc.

Feifei Shan

Feifei Shan received her PhD from the University of Science and Technology China in 2020. She is currently a postdoctoral researcher at the School of Management, University of Science and Technology China. Her research interests mainly focus on Sustainable Operations, Supply Chain Management and Platform Competition. She has published in the International Journal of Production Economics, Computers & Industrial Engineering, Asia Pacific Journal of Marketing and Logistics, RAIRO-Operations Research, etc.

Feng Yang

Feng Yang received his PhD from the University of Science and Technology China in 2006. He is currently a professor at the School of Management, University of Science and Technology China. His research interests mainly focus on operations management (i.e. DEA, Multi-attribute decision making, performance management) and supply chain management (supply chain finance and green supply chain). He has published in European Journal of Operational Research, Transportation Research Part E: Logistics and Transportation Review, Omega, International Journal of Production Economics, International Journal of Production Research, etc.

Ting Chen

Ting Chen received her PhD from the University of Science and Technology China in 2019. She is currently an associate professor at the School of Foreign Language, Hefei Normal University. Her research interests mainly focus on tourism supply chain and operation management. She has published in the International Journal of Production Research, Journal of the Operational Research Society, International Journal of Production Economics, Asia Pacific Journal of Marketing and Logistics, etc.