The counterfeit business is thriving, while genuine businesses are suffering greatly. According to one report, counterfeit goods cost the global economy an estimated $323 billion in 2018. As stated by Forbes, counterfeiting is the world’s largest illegal industry. By 2022, the counterfeit business will be worth $2.8 trillion and cost 5.4 million jobs. The world is experiencing a tremendous supply crunch, causing shipment delays, and counterfeiters may seize this opportunity to acquire a larger market.
Is the Primary Aim Substantial Businesses?
Every major business suffers greatly from counterfeit products, including cosmetics, pharmaceuticals, cooking oil, and clothing. Gartner estimates that over 60% of “extra virgin” olive oil is bogus. Counterfeit goods have a tremendous impact on a company’s brand image.
Counterfeiting costs the world roughly $90 billion each year. Counterfeiters make millions by selling low-quality copies, and firms must move beyond established techniques to find a viable remedy. Counterfeiters gain strength as a result of supply chain interruptions and manufacturing shortages.
The pandemic also disrupted the global supply chain, allowing cartels to flood the market with counterfeit goods to meet demand. The size of the counterfeit product industry demonstrates the failure of authentic countermeasures, and corporations have also recognized this.
To combat counterfeiting, new technology like blockchain must be deployed. Several luxury firms, notably LVMH, have implemented blockchain technology after identifying it as an efficient technique for combating counterfeit goods.
The Sectors Most Affected
By giving consumers more affordable options, counterfeit goods stifle innovation across industries. This has a negative impact on the brand image and is quite expensive for enterprises. The following list of sectors has been most negatively affected:
- Footwear: As of 2016, 22% of the total value of counterfeit products seized by customs were shoes. Mass-market companies like Adidas, Nike, and Reebok and premium names like Michael Kors, Gucci, and Louis Vuitton, were targeted by counterfeiters. Due to counterfeit goods being marketed under these companies’ brands have incurred losses in the billions of dollars.
- Fashion and clothing: According to data, the clothing industry is the second most affected by counterfeit goods. According to Ghost Data, 20% of fashion items marketed on social media channels are counterfeit. Counterfeiters advertise fake products in the pretence of branded products on Instagram and other popular platforms. The fashion sector lost more than $50 billion in 2020 due to selling counterfeit goods. This figure includes duplicates of clothing, watches, perfumes, and other items.
- Pharmaceuticals: To say the least, the impact of counterfeit products on the pharmaceutical business is terrifying. The pharmaceutical industry lost more than €10.2 billion in 2020 due to the sale of counterfeit pharmaceuticals. Antibiotics, lifestyle treatments, pain relievers, anti-malarial drugs, diabetic treatments, and central nervous system medications are fake pharmaceuticals that are often correctly made and constitute a substantial hazard to public health.
Other industries significantly impacted by counterfeit products include toys, jewelry, electronics, and leather goods.
Some organizations disregard the production of counterfeit goods containing their logos, claiming that the cost of pursuing counterfeiters outweighs the losses. Furthermore, social media networks ignore messages that promote counterfeit products since they increase interaction.
Ways Businesses Can Spot and Stop Counterfeits
Businesses will have to shoulder the burden of combating the counterfeit industry. Traditional tactics have failed to deter counterfeiters, and it is necessary to look beyond them to address the problem. The following are four tools that firms can use to detect and prevent counterfeits:
- Human authentication: Businesses can use regulators to do physical inspections, sampling, and testing on-site and provide verification certifications. These regulators can also audit sellers’ review ratings in the case of digital operations to prevent falsified evaluations.
- AI-assisted verification: Customized artificial intelligence-powered systems may assess and recognize the genuine article’s features, components, and ingredients in accordance with the conventional approach for determining authenticity.
- Digital authentication: This is an excellent quality control method. Techniques such as DNA analysis and spectral photography are applied to capture and record the product as a digital object. Later, blockchain technology is utilized to confirm the object’s legitimacy by tracking it from beginning to end.
- Validating predetermined: handling points is crucial to ensuring that goods are shipped from the right distribution center and sold at the right retail location. QR, RFID, or NFC chips can be used to complete scans and record the scanner’s geolocation for validation at handling points. Both the store and the customer can scan all parts of the supply chain.
While these issues can help to tackle the problem, there are certain flaws to consider. The human verification method would be inadequate in the case of huge enterprises that create thousands of products every day. One option is to combine all three methods, but the cost will skyrocket. There is a need for a low-cost solution to eradicate counterfeiting across industries.
Blockchain as a Potential Solution
Improved traceability and end-to-end tracking can significantly assist organizations in combating counterfeiting, and blockchain is assisting businesses across industries in tracking their shipments in real time.
Walmart is utilizing blockchain to increase openness in the food supply network. Ford uses it to track down cobalt suppliers. FedEx uses blockchain to protect its chain of custody. Businesses are increasingly using blockchain.
By identifying a product’s proof of origin or provenance, blockchain aids in the fight against counterfeiting. By integrating this with blockchain’s end-to-end tracking system, companies can ensure quality checks at every level, from manufacturing to delivery.
Frequent Types of Smart Tags Used by Businesses
Smart tags are key to a blockchain-powered solution for preventing counterfeiting. Businesses employ smart tags to actualize blockchain provenance identification. They are attached to items to identify manufacturing location, track present location, and assign specific information at various stages.
- RFID identification tags: Radiofrequency identification tags communicate using radio waves. To receive signals from an RFID tag, a reader is needed.
- QR codes: Businesses commonly use them for payment and shipping tracking. Unlike RFID tags, QR codes can be read by any smartphone or tablet, making it easy for businesses to check on the status of their shipments.
- NFC chips: NFC is an acronym for near-field communication chip, this component are made form silicon and are attached to an antenna to enable short-range wireless communication between two devices. An NFC chip combined with blockchain results in enhanced trust and transparency in the supply chain.
When a smart tag is affixed to a product, the data from each new transaction, together with the matching time stamp, is transferred to the blockchain, creating a trust layer for the data by making it immutable. This allows concerned parties to follow a cargo and observe history from the start.
We are seeing the advent of blockchain-powered solutions that provide businesses with specialized tools to combat counterfeiting. They use distributed ledger technology to generate a digital trail throughout the whole supply chain.
Platforms automate the flow of money and services in the supply chain, removing the chance of fraud. Blockchain-powered anti-counterfeiting technologies can be simply integrated with legacy systems. As a result, a blockchain is a low-cost option for combating counterfeiting.
Counterfeiters will strive to capitalize and expand their market share as consumer demand rises. The world urgently requires a low-cost solution to combat counterfeiting. Because the adoption rate of blockchain appears to be promising, entrepreneurs have the chance to use it to improve the global economy. Furthermore, blockchain solves the counterfeiting problem without replacing legacy systems. The breadth of leveraging blockchain continues to expand as firms digitize their operations.