Tuesday, September 24, 2019

When Did Brands Become More Important Than Products?

Trademarks once identified the source of goods or services - as Trademark law provides.  Today, brands have a life of their own, and consumers find value in the brands alone, not in the products they are affixed to.

I harped before how Trademark law has become bastardized in this country.  A lot of people think the business of Trademarks is the business of buying and selling words.   Sadly, a lot of those people are Trademark Attorneys, who should know better.

The whole idea behind Trademarks, as the name implies, was to brand your product ("mark" it) in the avenues of commerce ("trade") so that consumers would know which products came from which producers.   If you saw a brand you knew and trusted, you knew you were getting a reliable product.  And in the era before the Pure Food and Drug Act, brands were very important.  If you saw a product from a particular brand, you might feel safer buying that.

Counterfeiting, back then, wasn't as widespread, but the effect was different.   Counterfeiters tried to sell substandard products by passing them off as premium brands.  Trademark law evolved to allow people to register their marks with the government (to avoid confusion between competing or similar brands) and laws were passed to punish counterfeiters, in order to protect the public.

That was the 1800's, today is today.   Today, people sell products that are little more than branded items, with the value being not in the product itself, but in the brand.   I recounted before how Mark bought an "Abercrombie" hat in a garage sale for ten cents (actually a friend bought it for us).   It was just an ordinary hat - like so many others - but with the word "Abercrombie" emblazoned on the front of it.   Once a coveted $20 item (perhaps even more), it languished at a garage sale because people stopped valuing the brand.   Nothing changed in terms of quality of the product, just the popularity of the brand-name.   Suddenly, it was no longer fashionable to sport the "Abercrombie" brand - or at least a lot less fashionable.

(In fact, in terms of quality, it was a pretty shitty hat, being "pre-stressed" at the factory to make it look like you were some old-timer or redneck who can't afford a decent hat.   Of course, we have a lot of hats like that - stressed the old-fashioned way from use.  Usually we throw them out).

Blue Jeans are a case in point.   In the olden days, Levis sold jeans with their familiar logo of two mules trying to pull apart the "copper riveted" jeans.   The Levis brand meant a quality product that would stand up over time.   Today, it is more of a fashion statement, in that some folks would never be caught dead in a pair of Wranglers - which are better made, fit better, cost less, and wear longer - because Levis are more fashionable.

And in terms of Trademark enforcement, going after counterfeiters isn't a matter of punishing people trying to pass off inferior goods by appropriated your brand name, but rather policing the quantity of goods in the market, so as to prop up prices with artificial shortages.   Oddly enough, with regard to many "counterfeit" goods, the quality is as good as, of often better than, the original product.   I recounted before how a major sneaker company has to deal with "counterfeits" made by its own supplier, who merely alters the logo slightly and then sells identical sneakers into the Asian markets, hoping not to be found out by its best customer.

There is nothing in a $5000 handbag that makes it worth $5000 or cost $5000 - it is merely a collection of fine leather pieces, sewn together often in third-world sweatshops.  The counterfeit is, well, fine leather pieces sewn together in a third-world sweatshop.   The delta in sales price is based entirely on the perceived value to having a particular brand of trendy purse, for certain people who have that kind of money to throw away impressing people they don't know.

It is like the short lived "Canada Goose" fad, which seems to have died off already (it was a big thing two years ago, this year, we saw nary a one in Canada).   Chinese people, in particular, coveted the down jackets with the patch, reading (in pidgin English) "Canada Goose Arctic Program" - even though there was no "program" associated with the jacket.  I guess they thought it made them look like intrepid Arctic explorers.  The jackets were not bad, just not worth what people were charging for them.  And once they were viewed as "yesterday's fashion" the "value" of the brand plummeted, even though the jackets remained largely unchanged.

A jacket selling for hundreds - even thousands - of dollars one year, and on closeout the next.  The only difference?  The perceived value of the brand based on fashion and style.

This trend was mocked in the animated movie "Wall-E" where it was posited that in the future, our planet would become so toxic that we would all live on intergalactic cruise liners, and become fat as houses and loll about all day in hover-chairs (it sounds too real to be funny anymore, though).   The masses are told on a daily basis what the new styles and trends are - from what fashionable drink to order, to what clothes to wear.  "Blue is the new Red!" they are told, and everyone switches their outfits from Red to Blue.   You don't want to be seen in yesterday's color, do you?

Something is being lost here - the original point of Trademarks.   When you bought a product with a particular "Mark" on it, you were assured of a certain level of quality.  Today, you are buying a pig-in-a-poke, as "Marks" are often bought and sold, particularly after a company goes bankrupt.  Sears sold off the "Craftsman" name, and today those tools are sold at Lowes.   Are they the same tools as in years gone by with the "lifetime guarantee"?   Not really, it is just the same crap Lowes was selling last year, under their house "Kobalt" brand - all made in China for cheap.   But for some reason, we are suppose to covet this failed brand of a failed department store as being of better "quality" or something.

And we fall for it, consciously or subconsciously.  My Dad briefly worked for an outfit called Bell & Howell.  Actually, he had quite a career in imaging, in retrospect.  He used to work for ITEK in Rochester, which made high-resolution cameras for spy planes.  Bell & Howell was famous for making home movie cameras and projectors (oddly enough, my parents owned a Kodak camera and projector, which they bought when he worked for Bell & Howell).

Both Kodak and Bell & Howell went out of business.  The brands survive today, being bought out in bankruptcy or sold to successors in interest, along with the associated "goodwill" of the business.  I've seen some products sold under the Bell& Howell name - mostly stuff made in China.  The brand no longer indicates the source of goods and services (from the Bell&Howell factory in Illinois) but rather seems to be just a brand attached to a random assortment of Chinese goods.

And maybe China is to blame for this.  The Chinese are very brand-conscious, buying the aforementioned "Canada Goose" jackets and Buick motorcars (the latter apparently because Chiang Kai-sheck and Mao rode in them).  Buick just has to hope they are not the next Canada Goose, whose popularity might have declined as a result of some high profile diplomatic disputes between the two countries.

Trademarks have seen a decline in real value to consumers while at the same time are more valuable than ever to producers.   As an indicator of the "source of goods and services" Trademarks are now next-to-worthless.  A "Mark" may be slapped onto whatever product the Mark owner decides to sell under that brand this week.   There is no assurance of quality or durability or purity or safety associated with any mark anymore.  Your "Baseball, Apple Pie, and Chevrolet" is assembled in Mexico with Chinese-made parts.

Meanwhile, though, if a producer can come up with a hit mark that appeals to consumer sentiment, they can sell product for ten times production cost, only because it is adorned with that mark.   And product management becomes less about quality control and consumer demands, and more about controlling the mark, so it doesn't become worn out too soon and end up in the bargain bins.   So long as there is perceived scarcity for a branded product, the plebes will pay top dollar.

The net effect, however, is corrosive to the Trademark business.  Consumers are starting to realize that Trademarks mean nothing, other than a style statement.  A Trademark no longer is an assurance that company stands for something or that their products meet a certain standard.   Today, there is little point in shopping based on brand, as the "brand name" product may in fact be identical to the no-name or store brand (often made in the same facilities) and in many instances, the no-name is not only cheaper, but better.

Today, all a Trademark is, is an ornament applied to a product as decoration, much as hood ornaments were once applied to cars (and in the case of Mercedes, still are, I guess).  At best, a Trademark today telegraphs your status to other consumers, whether it is the tri-star Mercedes ornament, or the snake-like logo of the King Ranch pickup truck.   Neither stands for any sort of underlying quality, only the price paid.

The problem doesn't lie in trademark laws - they largely haven't changed over the years - but rather in how companies use Marks and buy and sell them and hope we don't notice the difference in product quality.   In addition, there is also a sea change in how consumers perceive Marks.   For me, a status "Mark" is often a turn-off, telling me only that I am paying extra for the branded product, and that some less-brand or unbranded alternative might actually be a better deal.

The risk for Mark owners is that, if people perceive Marks as worthless, the "underlying goodwill" associated with the Mark may evaporate, and any premium associated with the brand evaporates as well.   Ask the folks at Abercrombie how that plays out.