Consumers often fall prey to buying counterfeit products, as there is little or no way of verifying their authenticity. While the traditional brick and mortar retailer might have been able to vet the validity of counterfeit products, ecommerce sites find it hard to track third party sellers who have easy access to consumers. In fact, the counterfeit and pirated products are projected to drain $4.2 trillion from the global economy, and will put 5.4 million legitimate jobs at risk by 2022 according to the International Chamber of Commerce (https://iccwbo.org/global-issues-trends/bascap-counterfeiting-piracy/).
Imitation is not always the best form of flattery in the illegal business of counterfeiting. Here, ‘Blockchain’ could be the panacea, or the magic wand, that would help retail and CPG companies thwart counterfeiters.
Blockchain is ‘an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way’; simply put, it is a growing list of undeletable or unmodifiable records called blocks, linked using cryptography. Blockchain, by design, brings in transparency since it is accessible throughout the value chain. Traceability is assured since the records are permanent and cannot be deleted or modified – they can only be added and linked.
A retail or consumer brand, such as a luxury fashion brand, can implement Blockchain by creating a digital twin where it assigns a digital identity to each product. Let us consider a pashmina shawl and its attributes – the origin of its ingredients (cashmere of Kashmir), styled by a well-known designer of Paris, high quality low micron of fiber, etc. All these product attributes can be tagged to the unique digital identity created. This, in turn, can be accessed via a mobile application by scanning a QR code or Near-Field Communication chip (NFC) placed on the product. The application can determine whether the item is registered on the brand’s Blockchain. If the item is not registered on the Blockchain, it can be tracked and a potential counterfeit can be identified. If the item is registered on the Blockchain, the potential customer can access all the information attributed to the product through a public key. This puts transparency and information at the fingertips of the customer.
So now, the customer can be confident that he/she is not a prey to the counterfeiter’s trap!
Blockchain also helps track the touch points in the value chain from where quality issues occur, as this is where counterfeits typically enter the system. The organizations can take appropriate remedial action proactively, thus ensuring that customers get a premium consistent quality product, thereby increasing customer satisfaction.
Blockchain not only helps mitigate the risk of counterfeit in the primary market but also brings about authenticity and trust in the second hand luxury market as the transfer of ownership can be traced easily. Transparency also gives the customers more confidence, both in the primary and second hand markets. It creates unparalleled brand equity, thus justifying the premium charged for high-end luxury products.
While companies spend a lot of effort time and money creating a luxury brand, counterfeits are like termites that eat into their revenues as well as reputation. Organizations can effectively address these challenges by mitigating the risk of counterfeit through digitalization, structured operations and efficient Blockchain platforms.