Counterfeit items are on the rise. These merchandise have been rising steadily since 2013 whereas commerce in real items have stagnated and even barely declined since 2014.
An Organisation for Financial Cooperation and Improvement (OECD) 2019 report places the estimated measurement of the worldwide counterfeit market at US$509 billion, representing as much as 3.3% of world commerce. Luxurious footwear and clothes are the 2 most counterfeited classes of merchandise, making up 22% and 16% of the whole commerce respectively.
“These figures are simply the income from counterfeit merchandise. They don’t symbolize the whole injury performed to luxurious manufacturers. If a faux branded watch prices US$100 by the seashore, the lack of income for the model would most likely not be US$100, however US$10,000 as an alternative,” says Rene Bernard, founder and CEO of LuxTag.
“However the one who bought the faux watch just isn’t an actual buyer, or perhaps a potential buyer of the watch model. Actual watch collectors wouldn’t embarrass themselves by sporting low-cost fakes. They’re a unique financial class of consumers. So, these manufacturers don’t essentially see low-cost counterfeits as their greatest drawback.”
The larger drawback is the place clients are unwillingly cheated into shopping for counterfeit merchandise at full worth, which hurts the manufacturers’ standing amongst them, says Bernard. With these elements mixed, it’s troublesome to evaluate the whole injury counterfeits have inflicted on these companies.
However the injury performed is actually sizeable sufficient to drive the hand of these firms. Luxurious manufacturers are actively combating counterfeits by investing in safety and anti-counterfeiting measures comparable to distinctive serial numbers, certifications, guarantee playing cards with holograms and distinctive markings on the merchandise.
Whereas these measures enable clients to confirm the authenticity of the ultimate product to a sure extent, these strategies do have their limitations, says Bernard. The measures don’t adequately deal with the weaknesses within the provide chain, the place merchandise can nonetheless be swapped, modified, duplicated and redistributed again into the market.
Thus, Bernard and his two co-founders began LuxTag in 2016 to assist manufacturers and companies deal with this situation by digitising bodily belongings with using blockchain know-how.
Battling fakes
LuxTag secures bodily merchandise by assigning them a singular digital id on the blockchain. In contrast to a picture or music file, which may be copied indefinitely on the pc, digital objects on the blockchain can’t be duplicated, simply as bitcoins can’t be replicated and reproduced with out mining.
The product is then “linked” to the distinctive digital id by radio frequency identification stickers, QR codes, close to area communication know-how or a singular serial quantity. The digital id then tracks the thing’s journey by the availability chain till it reaches the client and past into the secondhand market.
Bernard explains how this method may help deter counterfeiting by illustrating the thought means of an unscrupulous counterfeiter. “A counterfeiter buys a luxurious watch from a real retailer and registers his private data earlier than the watch’s digital id or certification is assigned to him. With the real watch, the counterfeiter could make a whole lot of excellent copies, together with the serial quantity.
“However there can solely be one digital certificates. It can’t be duplicated, solely transferred. The counterfeiter finds his first sufferer and sells the faux together with the real digital certification. Congratulations, he has now made US$8,000 in income from a US$10,000 watch.
“However now, he’s left with a real watch and a whole lot of fakes with none certification. He might promote these cheaply by the seashore, however it’s not economically viable. Even when he manages to promote all of them, the fakes have the identical serial quantity. If a number of folks attempt to confirm the serial quantity on-line, it is going to be flagged as suspicious exercise and alert the model. The counterfeiter dangers getting caught as a result of his data is saved on the possession data.”
The system additionally deters counterfeiting throughout the provide chain as a result of the product leaves a knowledge level on the blockchain at every stage of producing, which may be traced again if the product is discovered to be faux.
Whereas LuxTag is probably not the right resolution to finish worldwide counterfeiting, it could possibly assist make counterfeiting much less economically viable and riskier for counterfeiters. It additionally provides clients a straightforward option to confirm the authenticity of the product, which evokes confidence within the model.
“We at the moment have a reside resolution for a luxurious watch model from Switzerland. It has simply produced its first batch of Luxtag-secured watches, about 500 items. We have now but to expertise a counterfeit incident and the consumer could be very pleased with the answer,” says Bernard.
Past anti-counterfeiting
Whereas LuxTag’s anti-counterfeiting measures are a terrific worth proposition, manufacturers are particularly eager on its potential to trace merchandise past the purpose of sale. The corporate offers post-sale information analytics and insights into manufacturers, which assist open the door to the used merchandise market.
“That is particularly fascinating for the luxurious watch sector as a result of it has give you the official time period CPO, or licensed pre-owned. World gross sales for brand spanking new luxurious watches are rising at 2% to 4% each year, however transactions within the secondhand market are rising at 20% to 40% yearly — 5 to 10 occasions quicker,” says Bernard.
“The manufacturers recognise this and wish to get their foot within the door of the secondhand market. They wish to preserve tabs on the product after it’s offered and serve the secondhand consumers. So, this isn’t passive however energetic, dwelling information that follows the product.”
Prospects are vibrant within the luxurious items sector, however LuxTag is actively exploring totally different industries in the hunt for its personal area of interest to market its companies. Bernard explains that the corporate doesn’t wish to be a jack of all trades however grasp of none.
“We’re nonetheless available in the market discovery stage. We’re a 2½-year-old start-up and we now have this cool know-how and invention. So, the problem proper now’s to determine, deal with and give attention to essentially the most promising sector and actively neglect different seemingly promising actions,” he says.
To this point, the sectors Bernard finds promising are luxurious items, fast-moving shopper items, commencement certificates and collectables comparable to numismatics. Numismatics is the examine or assortment of currencies, comparable to cash and paper cash, with an elaborate ecosystem of coin conservation, analysis and grading, which requires anti-counterfeiting measures. The US-based Numismatic Conservation Companies estimates that the marketplace for uncommon cash within the US to be properly over US$Three billion a yr and it’s rising steadily.
Counterfeit drinks are additionally a trigger for concern in Malaysia. In 2017, Johor officers seized 210 bins containing faux child milk powder price RM42,000 in 5 separate raids. Final yr, 19 instances of methanol poisoning had been reported in a span of simply 10 days on account of counterfeit branded alcohol.
Faux diplomas and {qualifications} are additionally a prevalent situation in Malaysia. Akhbar & Associates, a Malaysian fraud investigation company, reported that 5% to 7% of the potential hires they investigated for firms had faux levels whereas 10% to 15% had levels from unaccredited universities.
LuxTag is actively addressing this drawback by e-Scroll, an anti-counterfeit resolution that validates the possession of academic {and professional} credentials or accreditation utilizing blockchain know-how. Presently, there are about 20,000 graduates from Malaysia, Indonesia and the Czech Republic who’ve had their certification protected and secured by LuxTag by way of e-Scroll.
“There are two sorts of counterfeit certifications on the market. One is forgeries utilizing photoshop, or low-cost forgeries that you would be able to purchase on-line. The second variant is the place, sadly, some corrupt folks in universities situation a authentic certificates and add the knowledge to the registrar’s division,” says Bernard.
“e-Scroll will clear up each issues. It should confirm that the certificates has been signed by the registrar’s division and the co-signer in addition to the small print of the graduates, the course they’ve attended and so forth. We shield this information in the intervening time of commencement. So, somebody can’t simply add an additional graduate in a while as a result of Luxtag has secured the whole batch.”
Whereas Bernard is extraordinarily optimistic on the outlook for LuxTag, he’s no stranger to uncertainty, particularly in his capability as president of the Entry Blockchain Affiliation (Malaysia). The corporate was based by three tech geeks who had been pushed purely by their enthusiasm for innovation and know-how at a time when the blockchain hype was at its peak.
“Individuals are continuously praising the know-how. They discuss all the probabilities, the issues that may be performed utilizing blockchain, however no one is definitely doing it. We needed to create an answer that makes use of a few of the distinctive properties of blockchain and we determined to give attention to preserving the distinctiveness of objects,” says Bernard.
“We thought of vehicles, folks, passports … however as a small start-up, it’s troublesome to work with the federal government. So, we determined to enter luxurious merchandise, the place we might take care of non-public firms. We studied the sector and located our first buyer, a small European model. However it went out of enterprise proper after we finalised the answer for it.
“That didn’t work out properly. Nonetheless, we began to enterprise into different instructions, utilizing the identical idea of preserving bodily and digital uniqueness. That’s the place we’re proper now.”
Whereas blockchain know-how has but to totally mature when it comes to adoption and use instances, he’s vastly optimistic about its prospects, particularly on the earth of anti-counterfeiting. “We foresee a future the place we now not should base our buying choices on assumptions that the merchandise are real. As a substitute, we are able to have assurances that the product we purchased is the actual factor as a result of there’s a dataset for it. We are able to scan, examine and know with certainty,” he says.
“If we now have the assets, we are able to set up this as an open commonplace that manufacturers can simply faucet into, like an utility programming interface. However we now have restricted assets proper now. So, we have to take this one step at a time and deal with one drawback after one other so we are able to transfer on to the following course of.”
