Asia Life

After $1B Valuation, Fake Beats Flood Chinese Wholesale Market

Chinese factories offering huge bulk-buys of the sought-after knock-offs.

Chinese electronics wholesalers have a knack for picking up on trends and flooding the market with cheap “replicas” and shoddy knock-offs of the most popular gadgets. The candy-colored Beats by Dr. Dre headphones and are not necessarily a new addition to the world of Chinese fakes – having been spotted in street markets from Beijing to Bangkok for more than a year – but last month’s $1 billion valuation of Beats Electronics LLC has generated a spike in popularity.

“Looking at the shops in Shenzhen's Huaqiangbei commercial district – a destination for buying electronics, especially fakes – Beats by Dr. Dre are definitely hot, prominently displayed next to iPhones, Samsung gear and Nikon cameras,” reported CNN. “The counterfeit boom is fed, these days, by the rise of high-end headphones that Dr. Dre's audio products helped kickstart with the launch of Beats in 2008.”

Beats Electronics LLC is owned by former N.W.A. rapper and hip-hop producer Andre Young (aka Dr. Dre) and recording industry heavyweight Jimmy Lovine. Carlyle Group, one of the largest private equity firms in the world, invested $500 million in the company in late September, allowing it to buy back a minority stake held by HTC Corp – the smartphone maker that integrates “Beats Audio” into its high-end handsets. HTC had initially bought a 50.1 percent share in Beats Electronics LLC in 2011, but was unable to hold on with a tumbling stock price and increased competition from Apple and Samsung.

Speaking to a CNN reporter, one wholesale company spokesperson in Shenzhen said, “Business is very good. You buy cheap from me, you sell expensive in your home country, we all make a lot of money.” She added that one British businessman, intending to sell the bootleg audio equipment as the real deal, had recently placed a $50,000 order.

Last holiday season, Beats by Dr. Dre accounted for 70 percent of all high-end headphone sales in the U.S. The American headphone market is a $2.4 billion segment of the electronics industry. Beats earbuds range from $100 to $150, with the company’s over-the-ear headphones ranging from $200 to $400. Beats Electronics LLC also designs portable speakers and car audio systems.

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A quick web search for “China Beats by Dre” offered numerous Chinese wholesale sites specializing in the colorful audio equipment. “DIYTrade” yielded five whole pages of counterfeit headphones with the iconic lower-case “b” logo, ranging from about $25 to $75 for copies of the top-selling Solo and Wireless models.

The same search on Alibaba, the world’s largest e-marketplace, yielded a whopping 19 pages of results. Although the Chinese shopping giant recently announced a partnership with Louis Vuitton to crack down on fake handbags, it seems that bootleg headphones are readily available. One seller was offering knock-off Beats for a mere $3.40 each – if the buyer could commit to a minimum purchase of 10,000 units. The same seller claimed to have the ability to ship 100,000 units per month.

The official Beats by Dr. Dre website offers tips on how to spot fakes and what to do if you’re duped. Their list begins with the golden rule of shopping for a premium item: “If the price seems too good to be true, it probably is.”

Last May, the BBC reported that counterfeit Beats by Dr. Dre headphones were one of the most commonly seized items by customs officers, with more than 200,000 pairs confiscated.

Not only are knock-off electronics less durable and of generally poorer quality than the official product – they are potentially dangerous, as well. A fake iPhone charger was attributed to the electrocution death of a Chinese woman last July.