Authenticity in consumer goods is a problem for all of us, not just the original manufacturer missing out on potential revenue, but also the end consumer who may be unwittingly buying a fake item. We aren’t just talking about a random handbag or pair of athletic shoes, increasingly counterfeits are showing up in food, beauty, and autoparts. The result: the cost of counterfeits has moved beyond the loss of trillions of dollars per annum to now also include the loss of lives. These counterfeiters or grey marketeers are not Robin Hood types but organised criminals with little to no care for you or me.
And unfortunately this is a growing problem. Over the course of the past year we have seen a dramatic shift to eCommerce driven by the pandemic. Worldwide retail eCommerce sales grew by 27.6%, to a total of $4.280 trillion (eMarketer). In turn this explosion of eCommerce activity has opened up new avenues of distribution for counterfeiters, since creating a fake online merchant or signing up to supply one of the many marketplaces (such as eBay or Amazon) is much easier than accessing inventory at bricks-and-mortar outlets.
It isn’t that consumers aren’t aware of this problem, they are actually becoming more aware and concerned about the issue. A report published by Red Points indicated 68% of U.S. consumers are worried that there might be more counterfeit or poor-quality products sold online as a result of the pandemic. As a result, consumer brands find themselves dealing with two critical issues:
- how to prove authenticity to fight counterfeits and protect consumers, and
- how to give consumers confidence in authenticity at the point of purchase.
So how do we combat this very real problem?
Traditional solutions rely on physical tags or special identification markings that can only be read by inspectors trained in identifying and removing non-authentic items from the supply chain. Unfortunately, this approach is expensive, requiring a massive amount of human capital. This combined with the past year’s growth in eCommerce, has made authenticating products a complex and challenging task.
Along with the growth in eCommerce, comes the increased sophistication of consumers. Solutions to date haven’t addressed consumers’ demand for authenticity, transparency and personalized experiences. For instance, outside of the ‘assurance’ a consumer may get from seeing a branded hologram on their product item, there is no way for a consumer to even know if it is a genuine hologram.
A new approach is needed: one that is suitable for the new digital world and one that can satisfy both the brand’s and the consumer’s need for demonstrable authenticity.
One such approach is data-driven authentication that platforms like the EVRYTHNG Product CloudⓇ support. By giving every product a unique digital identity at the time of production, brands now have a real-time view of the entire product lifecycle, enabling unprecedented tracking and authentication of every single item from factory source to the consumer to recycling/reuse — and including consumer engagement as an integral part of the solution.
Starting at the point of manufacture, each product item is associated with a specific production order run so that the system only activates items that are a part of that order and at quantities associated with that order. This prevents issues like overruns and backdoor goods at the factory while the ability to trace finished items from the factory to the point of sale addresses product diversion. At any point in a product’s lifecycle, any engagement with the product (accepting a shipment into a Distribution Centre for example) will kick start the authentication process to ensure it is compliant with expectations — and raise warnings if anything unexpected is observed. By using data gathered throughout each product’s lifecycle journey, linking the item to its expected location (or valid locations), and using data gathered on similar items in the same run, brands can now dynamically (and in real time) authenticate each and every item at each and every supply chain interaction.
To bring the issue to life, let’s focus on the apparel industry for a moment. According to Fashion Law, revenues lost to counterfeit across this market amounts to $450 billion per annum, the lion’s share of what OECD estimate is an almost $2 trillion problem. With EVRYTHNG, brands gain the supply chain visibility needed to fight counterfeits and parallel trade at scale — quickly and easily identifying and controlling fraud and brand integrity problems.
Crowdsourcing Product Data to Solve a Global Problem
Data-driven authentication is not only a rich and efficient way to authenticate items but it also addresses one of the other big challenges in product authentication: how do you ensure that your breadth of coverage is sufficiently representative of the market as a whole? For traditional solutions, only 1% of the tags applied to products are ever scanned! The breakthrough in a data-driven approach is that no special equipment or expert knowledge is required, anyone can authenticate products. This way, brands get an exponential increase in data capture and unprecedented insights into brand integrity.
Specifically, any interaction with a digitized product adds evidence to the individual item’s history, contributes to the global data pool for use in patterns assessment, and facilitates crowdsourcing. With regard to the latter, crowdsourcing has become a powerful tool for brands, allowing data to be sourced and captured directly from the consumers purchasing the products. As a result, issues that may have previously gone undiscovered by brands are coming to the forefront through direct consumer engagement. Consumers are able to confirm authenticity and benefit from complete transparency, whilst brands receive unprecedented amounts of data to inform business strategies.
And engaging the consumer through your products can be a virtuous exchange of value. For instance, I was reading The Guardian a few months ago and a statistic I read hit me in the gut. I love fish. My family loves fish. We consider our family meals to be relatively healthy. And then The Guardian published an article stating that an analysis of 44 studies (44!) found 40% of 9,000 products from fish markets and restaurants were mislabelled. I don’t know about you, but I don’t want to have to worry about the freshness or authenticity of the food I put in my body — especially fish!
One brand that has taken a proactive stance on this growing issue is the world’s largest producer of Atlantic salmon, Mowi. MOWI turned to EVRYTHNG for an end-to-end food traceability platform to deliver full visibility into the provenance of their salmon directly to their consumers via QR codes on every pack. In a world where trust is a defining commodity, the level of transparency MOWI has achieved will fast become the new normal for every consumer product.
Outsmarting the Counterfeiters
The power of data-driven authentication is that it pushes the authentication ‘intelligence’ off the physical item/tag and into the cloud where the full record of the Active Digital Identity™ can be used to compare against business rules, machine learning models and not just looked at in isolation, but against similar records of related items.
But what if you want to retain copy protection on your item? Our CTO Dom Guinard recently published an article on the benefits of choosing the right tagging solution for any situation. One of the benefits of the EVRYTHNG Product CloudⓇ is its ability to not only support multiple tagging solutions but to concurrently support multiple identities (tags) for a single item. This means brands can apply a multi-layered authentication option — increasing the complexity and challenge to counterfeiters without necessarily increasing the cost. This is a huge breakthrough in the industry. We’ve removed the complexity for the brand and consumer, and the technology innovation on the backend marks a milestone in brand protection.
Counterfeiters are getting more sophisticated and levels of fraud are booming, especially with the rise in eCommerce. We believe the answer lies in data-driven authentication – where we combine on-pack codes and supplement with supply chain tracking data gathered throughout a product’s journey. This creates a multi-layered protection method beyond any current anti-counterfeit deterrents. The good news is that this technology is real and available today. In the months ahead, I’ll be sharing more about product innovation as it relates to real shifts in consumer behaviour and supply chain dynamics. Next up, I’ll be tackling the topics of authentication and reCommerce.
I’d welcome your questions related to data-driven authentication as well as your thoughts on the challenges we’re seeing in the consumer good industry post-pandemic. I hope you will stay tuned for my next blog in this series and in the meantime, connect with me here on LinkedIn or drop me a note at firstname.lastname@example.org.