According to manufacturingnews.com: "Knockoffs account for 7 percent of world trade", and while it is difficult to really know for sure how big the knock-off business is, it is fair to say that in any major metropolis there are many areas within that metropolis to which those that want to buy knockoffs can do so, no matter how well policed the area is. There are many reasons for why knock-offs do major business, but it all starts at the very basic understanding that where there is a need, there will be somebody that will fill that need, and far too many people, have a need to wear or have the latest high-end design product but are woefully short of being able to afford the real thing or are woefully ignorant that those that sell high-end products in an underhanded way or at insane discounts, are at best selling a stolen product, and in all probability selling a knock-off of the product or both.
While there are and always will be different degrees of knock-offs, the most impressive knock-offs are ones that readily fool those that the product is being sold to and for these knock-offs to work, one must have created the entire gamut from the buying of the raw supplies, labor, manufacturing, distribution, and the ultimately the selling of the product all put together seamlessly in order to garner the best sales and to have an overall business model that is sustainable.
One of the great things that helps knock-off manufacturers is the fact that names like Louis Vuitton, Coach, Hermes, and so on, have created over time and through careful marketing a certain prestige and clique for their respective products to begin with, so that the selling price of these luxury goods has little or nothing to do with the underlying cost of the materials and its labor themselves. It then follows from the above that this means that these high-end luxury goods have a very fat gross margin which allows those that have that corrupt entrepreneurial spirit to piggy-back onto these business names in order to profit from their goodwill.
The thing about handbags, for instance, is that the overall technology and insight to produce one is something that is fairly easy to reverse engineer and it is well worth it to a top counterfeiter to take their time to do so in such a manner so as to be able to replicate a given handbag so that the replica of it is good enough to almost pass for the real thing. All of this is possible, because while the handbag might retail for $750 or more, the actual materials and labor of it, are probably no higher than 10-15% of that retail price, if that. This means that a top notch knock-off manufacturer can undercut significantly a real high-end handbag, especially considering that all the advertising, marketing, taxes, pricey brick and mortar stores, and so forth, aren't part of their business model, so in actuality, despite the counterfeiter having to pay off or dealing with certain policing elements, port authorities, organized crime, and suffering with thievery, violence, betrayal, and shrinkage, all often without legal recourse, and so forth, the counterfeiter's gross margin will still be quite lucrative.
The bottom line is that counterfeiters could not exist without successfully exploiting the large gross margin of these high-end luxury good companies to begin with, in addition to the important fact that so many people want or need what they really can't afford and thereby take that enticing shortcut in order to get theirs.