Lost revenues from counterfeit, “overrun” and diverted goods has largely been accepted as the reality cost of doing business in a globalized economy—the millions spent on enforcement and an ongoing arms race of labeling and materials technologies necessary investments against an inevitable and persistent force. Fake goods represent a $461 billion global industry, and it’s continuing to grow, online and off. But the status quo is at last being disrupted. As with all aspects of business, digitization of the supply chain and digitization of products is changing everything.
Fundamentally the problem of brand protection is a problem of analytics. If a brand inspector were to be present at the manufacture of each product item and then accompany it throughout its lifecycle of distribution and retail into the hands of the consumer, problems of illegitimate production, diversion in the channel and counterfeit at the point of retail would be eliminated, but clearly at absurd cost. But with digitization, that’s effectively exactly what can be now be done, with technology making it possible to follow product items, each with their own unique digital identity, right from their point of production, through the channel and retail and into the hands of the consumer. This provides unprecedented data analytics and real-time traceability, making for visibility and enforceability that could only be dreamed of in the past.
A Broken System
The brand protection battle isn’t easy. The problem goes far beyond knockoff luxury handbags. In fact, sneakers and shoes are copied the most, and copyright infringements regularly occur for car parts, drugs and even strawberries. Tiffany recently won a $19 million judgement against Costco. The discount retailer was selling bogus rings with the jewelry company’s branding. Costco might have thought it was selling legitimate products, but verification was hard to do and therefore didn’t get done. Amazon, Alibaba and Etsy are finding it hard to weed out phony products listed for sale on their marketplaces because authenticating product is tough to do at scale and velocity. Of course the reality is there are many retail channels that are comfortable with the status quo, pocketing margin with plausible deniability.
Enforcement is incredibly expensive for brands, and for many it feels like a “whack-a-mole” problem requiring constant expenditure against a persistent force that’s always finding another route to market. On-product materials technologies are expensive, replicated by counterfeiters rapidly, and not accessed or accessible to distributors, retailers or consumers. The situation is broken.
How Digitization Revolutionizes Brand Protection
A key aspect of the digitization of the supply chain is the digitization of the product items themselves. Every product item can now be given a unique digital identity at its point of production, giving it a digital passport carried both on the product through smart tags and labels and in the cloud with an Active Digital Identity™ that travels with the product item throughout its lifecycle. This instrumentation at the point of production brings critical visibility, with brands for the first time having analytics on the volume of product produced and being able to manage and capture data about products that both informs their distribution and provides visibility as they progress into the hands of the consumer. With a digital identity accessible to all who encounter the product item, verification is a simple matter of scanning, the digital identity on the product and its cloud half providing a robust mechanism of digital cryptographic authentication, and one that generates a digital trail for brands to follow. If a product doesn’t have a digital identity, it is by definition illegitimate, and the accessibility of digital identities to retailers and consumers alike means that on-demand verification becomes trivial, making enforcement far more effective.
With digitized identities on products, Costco could have authenticated each product easily, and Tiffany would have had visibility of transaction. With mobile devices now capable of recognizing product identity automatically through their native camera applications, the ease with which consumers—and indeed anyone in the supply chain—can interact with products means that authentication and data gathering has become hugely easier and hugely more accessible. Digitized products turn on this firehose of data, and with it visibility and insight.
New Models of Brand Integrity Management
EVRYTHNG is working with major role players in the supply chain ecosystem to enable digitization of products at massive scale. Working with Avery Dennison, WestRock, Crown Packaging and other major supply chain service providers, the production capabilities to attach unique digital identities to products including apparel and footwear, home goods, beverages, luxury goods, food products and consumables at huge scale is in place. Working with GS1, the coding mechanisms used by brands for retail can now support digital identities in the cloud and converging supply chain, retail POS and consumer interaction applications into a single smart identity on-product.
As digital identities and serialization bring transparency, measurability and enforceability, EVRYTHNG is making new models of brand protection and brand integrity management easily accessible. We’ve partnered with packaging leaders such as Avery Dennison to embed products with GS1-compatible digital identities at the point of manufacture. This means that we can manage product authenticity for any product at massive scale. Not only that, by joining up end-to-end data from the supply chain and the customer relationship, EVRYTHNG enables operational cost efficiencies and new 1-to-1 consumer engagements throughout this new digital product lifecycle
Let’s take an example of how these building blocks form a solution. Right now many footwear and apparel brands are battling the problem of “overrun,” in which a factory covertly produces excess products, the so-called “third shift.” While these products are indeed made in a legitimate factory, the “overrun” garments are unauthorized and may end up in either a genuine retail store or in a gray market, impacting the profits and reputation of the brand. Digitization provides measurement at the point of production, providing measurability and measurability. With each item with its own digital identity, the brand, a retailer or a consumer can immediately determine a wealth of information about that garment when it is scanned by a smartphone, and contribute to the traceability of the product—for example if it’s genuine, and if it’s in the right intended country or store. With crowdsourced data from consumers, brands can reveal trends and insights way beyond what is possible from their over-stretched brand protection teams.
According to the OECD, 2.5 percent of global imports are counterfeit and illegitimate, with U.S., Italian, French and Swiss brands most affected. For companies losing tens of millions of dollars every year, digitization changes the game and breaks the cycle. With products generating data throughout their lifecycle, the visibility is brought to where there was none before, and accountability becomes enforceable with authentication accessible to retailer and consumer alike. It’s a brave new world.