The Future of Branding Needs Transparency
Companies need open and immutable provenance documentation for EVERY product
Ever wonder if that purse you bought from a consignment store is a real Louis Vuitton? Looking at the branding on the product gives you some idea but how can you really be certain that it’s not just a good replica? In this day and age, where one unwelcome revelation can go viral to destroy your brand, isn’t it worth having some insurance?
The consumers’ perception of counterfeit products have a negative effect on the consumer perception of luxury brands. Both the consumer’s brand associations and how consumers perceive the quality of luxury brands are affected by counterfeit products. — Cademan, Henriksson & Nyqvist, Linnaeus University, 2012
Counterfeiters copy labels, mimic unique features and details so that the product looks like the real deal. Hardly a day goes by when there isn’t a report of some brand or another discovering counterfeit products. Beyond the usual reports of counterfeit handbags, clothes and jewelry, come reports about teams of people building fake Ferrari and Lamborghini cars.
What is very concerning to brands is that the level of sophistication that counterfeiters are going to. No longer are they just producing goods that look like the originals, but they are matching these with sales receipts and shipping documents so that these products can be returned to legitimate retail locations for full money back (hurting revenues and profits) and other such scams.
In our research we have found that almost half (47 per cent) of brands are losing revenue due to counterfeiting. We’re not just talking about tiny amounts of money, either: one in three brands said the loss in sales equates to more than 10 percent.
Additionally, four-in-ten organizations have experienced an increase in the occurrence of counterfeiting and brand infringement. This has, more often than not, originated from a variety of components related to digital transformation on a global scale, including but not being limited to: advances in social media for companies (61%); chat/messaging (52%); artificial intelligence (51%); the dark web (48%), and augmented reality (47%). — Chrissie Jamieson, IP Watchdog, 2018
How bad is the problem? The number of brands expecting to experience counterfeit goods is expected to grow up to 50% by 2020. The same report explains that these firms lose up to 10% of their revenues to counterfeit goods. Global Brands Counterfeit Report 2018 estimates the size of this loss is $1.2 Trillion dollars. The problem of counterfeiting is massive and only getting bigger.
“The amount of total counterfeiting globally has reached to 1.2 Trillion USD in 2017 and is bound to reach 1.82 Trillion USD by the year 2020 which includes counterfeiting of all equipment/products from defence equipment to counterfeiting of watches.” — Global Brand Counterfeiting Report, 2018
There is a clear course of action for these brands: provide full-chain of provenance to all parties in the supply chain and tie this to the packaging to increase the brand confidence.
How would this work? For each product produced, an immutable record of its production, distribution, etc. would be recorded on a blockchain backed solution and tied to previous steps so that fraud during the processes up to retail are protected. Once the product(s) are shipped to the end sale point, the packaging becomes very important and any special identification is tied to the provenance record. A process step would be that each end sale point (retail or on-line shipping location) would be required to scan the unique bar/QR code so that any product after this event is either tied to this location and time, or if not, it is identified as counterfeit. Counterfeits can also be identified if a product is returned out of sequence or at a different location that is logical based on the provenance.
The benefits of a more secure supply chain provenance solution are increased revenues, decreased counterfeit returns, better brand value and, ultimately, higher stock price or brand value.
About Northern Block, Inc. — Northern Block is a boutique blockchain consulting firm. Northern Block’s mission is to create trust and transparency into data that is important and valued. We enable businesses to create operational efficiencies around asset transactions and to increase their brand power through trust and transparency with their customers. To learn more, visit www.northernblock.ca.