On the monetary impact of fashion design piracy

Whether to legally protect original fashion designs against piracy is an ongoing debate among legislators, industry groups, and legal academic circles, which has gained little exposure in the marketing literature. We combine data on the growth of fashion designs, price markups, and industry statistics to develop a formal analysis of the essential questions at the base of the debate. We distinguish between three effects: Acceleration, whereby the presence of a pirated design increases the awareness of the design; Substitution, which represents the loss of sales due to consumers who would have purchased the original design, yet instead buy the knockoff; and loss because of Overexposure of the design resulting from the design's ubiquity. Using data-driven simulation analysis, we find that for the items analyzed (handbags and apparel), overexposure emerged as having a stronger negative effect (on average) on the original's profitability than the positive effect of acceleration. Both effects are considerably larger than that of substitution. This result is of particular interest given that industry groups have consistently focused on the damage caused by substitution. We also show that the effect of a legally mandated postponement on the introduction of a knockoff is non-monotonic for short lag: A short time lag may not affect the original design's NPV, and in fact may even damage it. For the ranges we analyzed, the positive effect of the protection period is observed primarily for time lags of over one year.