Consumers need protection against counterfeit products; can blockchain, Big Data, and Artificial Intelligence save the day?
Take a stroll down the touristy part of any town and you’ll surely come across all manner of food, souvenirs, and trinkets on sale. But what’s interesting is that street vendors are hawking branded goods, many of which are luxury brands! Handbags, wallets, jewelry, you name it – everything with a price tag can be haggled. You can’t help but wonder though, if they are most likely to be fake, why would people buy them? Or could it be that they are blissfully unaware that the items are fake?
In today’s world, more people are shopping online than at brick and mortar stores. Based on a 2016 report by the United Parcel Service (UPS), 51% of shoppers now make their purchases online as compared to 48% in the year before. Therefore, counterfeit goods that are being sold online are something shoppers need to keep an eye out for. Things came to a head in 2016 when German shoe manufacturer Birkenstock parted ways with Amazon US over counterfeits being sold on their e-commerce platform.
It is getting even harder to distinguish counterfeit products from the originals they’re based on. In a report by O2O Brand Protection, good imitations can fool the consumer’s naked eye because of very similar material and craftsmanship. And of course, buying a branded item at the fraction of the price is an amazingly big pull. The report surmised that there remains a vast market for cheap rip-offs of luxury products.
Just how enormous is this market? According to a report by The Organization for Economic Cooperation and Development (OECD), imports of counterfeit goods are worth nearly half a trillion dollars a year. The report estimates the value of imported fake goods worldwide at USD 461 billion in 2013. It added that the highest amount of seized goods originated from China (63%) while the top countries whose companies had their Intellectual Property (IP) rights infringed upon were the US (20%), Italy (15%), France (12%), and Switzerland (12%).
Fake goods, real consequences
China has had a long history in trying to deal with counterfeit goods. While donning fake clothing may be disastrous in some social circles, things become much grimmer if instead, the legitimacy of food products comes into question. Precisely such a case made international headlines back in 2008 when the industrial chemical melamine was added into milk powder.
The chemical, which is used to make plastics, fertilizers, and concrete, can cause kidney stones and renal failure. It was added to fool government testers because melamine shows up as apparent protein content. A large number of people were affected by this and according to a BBC report, the scandal led to the deaths of six babies and made 300,000 individuals ill. The report notes that “the incident led to a worldwide recall of Chinese dairy products. Despite a crackdown on melamine-laced milk products, some batches of tainted supplies have been found on sale since 2008.”
More recently, hundreds of thousands of vaccines administered to Chinese children were found to be faulty after a government inspection of the manufacturer’s premises in July. CNN reported that the guilty company has been fined 3.4 million yuan for their mistake and unused vaccines for rabies, diphtheria, and tetanus are currently being recalled.
Although dangerous products are being removed from shelves, it is difficult to determine for sure if all tainted products have been accounted for. Can technology help in this respect? Apart from counterfeit foodstuffs with adverse health effects, bogus electrical appliances have been another source of increasing concern. According to an Electrical Safety-First article in June 2018, 1 in 7 people in the UK admitted that they had suffered loss or serious damage as a result of purchasing dodgy electrical items from e-commerce websites.
The UK-based organization warned, “They may look like the real deal, but counterfeit electrical products are particularly risky as they often contain faulty parts that can overheat and catch fire or deliver a fatal electric shock.”
In a Guardian report, the organization also revealed that about 18 million people, or one in three UK consumers, have bought at least one counterfeit electrical product online by mistake. “They were led to believe that the product was genuine, only to find it was a knockoff item at risk of causing an electric shock or even a fire.”
Much of what incentivizes unscrupulous parties to produce counterfeit goods is how cheap and easy the process is. Making an item look, feel, smell, and taste as close as possible to the original, or sometimes just ‘close enough’, is enough to secure a payday for the pirates. From the packaging design down to the colors and fonts; everything can be copied, depending on the cost to do so.
Ensuring authenticity with blockchain
But companies are pushing back with technology. Blockchain technology is now being applied to certain supply chains – from factory to warehouse, to retailer, and finally reaching the customer. Each step of the way, the product in question can be marked and tracked. The products will receive a unique ID or ‘passport’ and every movement they make can be location-tagged and time-stamped.
“Every product has its own code,” said Ant Financial Vice President Geoff Jiang. In a conversation with Tech in Asia, he explained that, “We know where the product comes from, its source, and which retailer it’s coming from.” Ant Financial, a financial services company under the e-commerce giant Alibaba Group, is developing a blockchain solution for Alibaba’s supply chain.
This is both an open and closed system at the same time. Open in the fundamental sense of what a blockchain is. As a distributed ledger, each party in the supply chain is granted permission to access, read, and write information relating to a specific product. The manufacturer makes a note when a product is made, the logistics company notes down when the product is in transit, and the warehouse notes when the product arrives and leaves. Lastly, the customer may use their phone to electronically verify the product’s authenticity and shipping history via scanning a sensor or QR code.
This system can be made secure and closed off to any outsiders who are not involved in the supply chain. Furthermore, it would be too costly and complex for counterfeiters to copy this system. Counterfeiters want to maximize profit margins and simplify processes to avoid risk of massive losses over raids and immediate shut downs. Their tasks are made more complicated with blockchain technology as a deterrent, as they not only have to reproduce the product and packaging, but also the entire digital infrastructure.
“The risk of counterfeiting will be very high – the cost will be too high,” added Jiang, inferring that the endeavor would no longer be one considered worthwhile for the counterfeiters to undertake.
Scaling up security
Talk to early-adopters of any emerging technology and you will hear the same thing – that there is still room for improvement if growing pains are endured for the time being. Even the Video Assistant Referee (VAR) system, FIFA World Cup’s first use of video technology to improve refereeing decisions, did not escape criticism when it was introduced at the recent tournament in Russia. FIFA, however, was optimistic of the benefits it would bring and were proven right when VAR did allow many incorrect refereeing decisions to be reversed. With further tweaking, its application will undoubtedly improve with each tournament.
A giant hurdle for blockchain technology is the technical side of its implementation, more specifically the bandwidth issues involved. This is one argument that opponents of Bitcoin use against the cryptocurrency, which is built on blockchain architecture. When the number of Bitcoin transactions in 2017 grew 300% year-over-year, delays became immensely more noticeable. At the time, it was not unheard of for transactions to take days to be made. This naturally upset investors, especially when prices fluctuated wildly every hour.
A comprehensive way to tackle this challenge is with the adoption of Big Data Analytics (BDA), especially when the issue not only involves a staggering sum of data, but also added complexity when the data comes in varying formats. A robust BDA platform is capable of connecting to numerous formats, making collaboration possible for all parties throughout the supply chain.
“One challenge in implementation is coordinating between all the different parts of the supply chain, which includes different data sources,” said JD.com’s blockchain R&D head Haibo Sun. Speaking to Tech in Asia, Sun cautioned, “Being able to trace an object from the beginning of the supply chain would then require all participants along that supply chain to coordinate, but different suppliers may have different IT capabilities for transferring data, and may store their data in different formats.”
After processing petabytes of different datasets, BDA technology can also help users drill down into the data to identify suspicious transactions. Advanced BDA platforms now come equipped with Natural Language Programming (NLP); this skips trawling through massive datasets and allows users to unearth shoddy transactions simply by ‘conversing’ with the platform. Incorporated with AI technology, BDA platforms can even tackle user queries using voice commands.
Employing Deep Learning technology, there are tech companies coming up with camera solutions to scan designer bags by taking microscopic pictures that take into account the details of the material, workmanship, as well as wear and tear. Makers of the camera solution said that it magnifies objects 260 times larger, ensuring that counterfeits undetectable by the human eye can be identified and caught by digital means.
What therefore is the future of anti-counterfeit technology?
The world’s largest retailers and e-commerce players are battling to win consumer confidence and together with tech players who have ingenuous ideas employing blockchain, Big Data Analytics, and Artificial Intelligence, they are taking the fight to the pirates. Fake goods may still thrive in smaller enclaves which are at present untouched by the sweeping advances in technology. Based on the trends however, on how technology and digitization has and continues to disrupt numerous industries, it isn’t too far a stretch to surmise that fake goods will eventually suffer the same fate of the video piracy business which culminated with the advent of Netflix and other online streaming businesses.
Tech & Data Evangelist