A Peek Inside the Knock-Off Gadget Market

Financial IQ

We’ve all read about fake iPhones and iPads. Maybe we’ve even seen a few. But the news of fake Apple Stores springing up all over China would be funny — except it isn’t, especially for consumers.

The thing about these fake Apple stores (in August authorities found 22 of them in the Chinese city of Kunming, alone) is that they look a lot like the real ones in the U.S.A. or Europe: White and shiny, filled with products, manned by young people wearing aqua t-shirts even sporting the trademark Apple lanyards. Who knows whether the customers who visited these retailers knew they were being ripped off? Chinese authorities shut the stores down quickly — there are copyright laws in China and trade agreements, after all — but fake Apple stores keep popping up.

The Goods on the Goods

For years, guys with tables full of leather goods that look a lot like the ones in high-end stores — and even sport what seem to be genuine brand stamps — have been selling their knock-off items on busy street corners around the world. Using cheap materials and shoddy workmanship, knock-off factories rake in the bucks from consumers eager to own a bit of luxe. And many of these customers know they’re buying a fake, but they don’t care.

But knock-off electronics are a bit more problematic because you’re dealing with more than a “look.” The product has to work, too. Some of these counterfeit iPhones do work in that they can connect to a network and dial a number or send a text. Manufacturers of these “mirror” devices hire teams of engineers to dissect and replicate the originals. A similar screen? Check. A similar case? Check. Apple’s iOS. Nope. Try going online with one of these fake devices to download an app. Won’t happen.

The China Syndrome

So what about the Chinese consumer who went into the fake Apple store and purchased a fake iPad, only to find that his device didn’t really work and that he had no recourse because his warranties were worthless? You have to feel a bit sorry for him. Apple Stores and Apple products are pretty hard to resist. And if he wasn’t a techie, how was he supposed to know that the iPad2 was not yet for sale in China?

Still, real iPad2s are for sale in China on what is called the “grey market.” Ever see the lines of people waiting outside Apple stores for them to open on the off-chance a new shipment has arrived? Many of the people in those lines are from overseas. They buy up devices at full prices, and then sell them for double the amount in, say, Hong Kong. A little “jail-breaking,” and the device works.

Buyers, Don’t be Fooled

It’s a bit tough to feel sorry for Americans who buy an iPad for a couple hundred bucks off the back of a truck. Most of us should know better by now — real iPads start at $499. At best, you’re buying “hot” goods, which is illegal and for which you can go to jail. So you have to wonder about the woman in North Texas who purchased a box saying it had an iPad in it from some guys in a parking lot, and then nearly got run over by them when she had second thoughts. Police called-in on such cases have been amused that the “sellers” actually go to the trouble of cutting a piece of wood into the approximate size of an iPad, pasting a picture of an iPad on the wood, and putting it in a box.

Apple + Counterfeiter ≠ ♡

Truth be told, it’s unlikely any of this is significantly affecting Apple’s bottom line. They are a hugely successful company. Nevertheless, they put a lot of money and energy toward stamping out counterfeiters. They have a brand -and they don’t want anyone to start chipping away at it. In our society, if you invent something and you keep the rights, you’re entitled to the profits.

And that’s the moral of the story —  if a price on a luxury item looks too low to be true,  it probably is. Sure, keep scouring the Internet for bargains. But in the end, when you make an expensive purchase, you at least hope the manufacturer will back you up should there be any problems. Who’ll back you up when your phony gadget breaks?

Harriette Halepis blogs via Contently.com.

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