Product authenticity matters.
Counterfeiting Overview & Damages
Fake items are produced across virtually every product category, spanning from medicine to detergents to car parts, with watches, bags, clothing, jewellery, and perfume being most at-risk. The counterfeit industry has ballooned, growing to be a $461 billion industry according to a 2016 report by the Organisation for Economic Cooperation and Development. That is equal to 7% of global trade. Put in more relative terms, it means for every $1 spent on a legitimate purchase, $0.025 (or 2.5 cents) is lost to a counterfeit item. At such a big size, counterfeiting has become the largest underground industry in the world.
This makes luxury companies uneasy. As a Boston Consulting Group spokesperson explains, brands “cherish their reputations for quality and exclusivity. Flimsy copies undermine them.” As a result of faked goods, authentic sales becomes devalued and brands also experience loss of goodwill, damage to reputation, and trademark dilution. What is more, is the difficulty it takes to fight fake-goods websites and counterfeiting operations, leading brands to target businesses that facilitate counterfeiting. One facilitator in particular is Chinese behemoth, Alibaba, a company many luxury brands have brought claims against. These claims require a lot of effort, time, and money and ultimately go unheard.
The Solution: Product Authentication
With so much at stake, brands are seeking solutions to curb the production of fake items, and to deter consumers from purchasing them. Near Field Communication (NFC) product authentication has therefore developed as a simple and effective answer to counterfeiting. It has become a favorite solution for brands as its impact is twofold; it deters the production and sale of counterfeits and also provides additional value back to brands through enhanced customer experience.
Embedded NFC chips combined with smart experiences are the key to product authentication as it provides a visual confirmation of a product’s details. Because items display their specific attributes, swapping NFC chips between genuine and counterfeit items becomes a non-issue. Moreover the authenticity of the NFC chips themselves is secured by a dynamic 32 bit hash, which is only recognizable by the issuing organization (the brand) using a private key. Item authenticity can be verified by customers by simply tapping the embedded product with an NFC enabled smartphone.
Product authentication also provides extra value to the consumer. The digital experience related to the embedded chip can be programmed to do more than just verify a product; it can also be programmed with exclusive content for consumers. For example, an experience can include the object provenance and item production number, increasing the exclusivity and value of the product. It can also provide care tips, and act as storage for digital tickets and receipts. Experiences can also be dynamic, providing certain types of content and information before purchase, and changing content after purchase, which also helps increase and secure the value of the product before its sold. After purchase, owners can register their product to claim ownership. These types of experiences work to create a sense of security for customers who can verify a product is theirs.
For customers who have been duped into a knockoff handbag or other luxury good, the pains are real. These cases go widely un-documented and unsolved. Leaving customers stuck to bare the costs. NFC enabled products put brands on the offensive, making it easy for customers to identify fakes with the tap of their phone. Doing so eliminates customer pain and boosts brand reputation long term.
The exclusive content embedded into a genuine item pivots the value from the superficial desire of simply being seen with the product to enjoying the entire product experience. Having a dual benefit for both brand and consumer, product authentication has proven to be a robust solution against counterfeiting.
