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Track, Trace, & Monitor: How IoT, Blockchain & AI Are Helping In Denting The USD 1.82 Trillion Counterfeit Markets

Created on May 7, 2021

Over the years, brands have been battling counterfeiting, putting measures in place to counter counterfeiters or reduce the effect of counterfeiting to the barest minimum. Both digital and physical assets are prone to this global problem. Today, counterfeiting is a massive global menace that’s worth $1.82 trillion. The International Chamber of Commerce forecasts that the global economic worth of counterfeiting could reach $4.2 trillion by 2022.As companies celebrate advancements in tracking, monitoring, and authentication solutions, so do counterfeiters become more sophisticated in replicating products and digital assets. Global brands are faced with the responsibility to protect their reputations by preventing fake parts or materials from entering the supply, production & distribution chains and stopping look-alikes & reverse-engineered products from affecting sales.

Before now, tracing & authentication were always cumbersome for companies to execute successfully due to the complex supply & distribution networks, fragmented data pool, and multi-tier retail structures. However, recent breakthroughs in IoT, Blockchain, and AI technologies have made tracking, tracing, and monitoring assets – physical & digital – an absolute breeze.

Counterfeiting is a global phenomenon with substantial implications on the digital economy that result in the loss of billions of dollars in business income. Companies aside, counterfeiting poses health, social, safety, and financial risks to consumers. Counterfeiting is common in the pharmaceutical industry; according to a report by Boston Consulting Group, BCG, $75 billion – $200 billion worth of fake drugs are bought by consumers each year. The electronics space is also massively ‘plagued’ by this worldwide menace. According to the Alliance for Gray Market and Counterfeit Abatement, producers buy counterfeit electronic parts worth about $100 billion every year.

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Counterfeiters go the extra mile in faking luxury products. The global luxury market is ‘flooded’ with innovative look-alike products, leading to a negative impact on brand reputation and disastrous economic implications. The BCG article says that about 10% of luxury goods for sale in the European luxury market are faked, leading to about $28 billion lost to counterfeiters.

Effects Of Counterfeiting On Manufacturing

Due to the complex supply chain, manufacturers find it difficult to authenticate supplies. The use of fake components and raw materials during the manufacturing process has a negative impact on quality. Consequently, this leads to customer dissatisfaction, legal issues, and brand reputational problems in the long run.

A statistical report released by Semiconductor Industry Association (SIA) shows that counterfeit electronic parts cost computer chip manufacturers over $7.5 billion in income every year in the US. Counterfeiting leads to more disastrous outcomes when fake components are incorporated into sensitive systems such as health support equipment, military equipment, and aircraft navigation systems.

How Counterfeiting Affects Sales

A research report by MarkMonitor, a leading organization in enterprise brand protection, revealed that 47% of brands lose sales income to counterfeiters. According to the same information, one out of three brands reported a loss of more than 10%.

Fake labels and reverse-engineered products ‘flood’ the market and make it difficult for individuals and organizations to know counterfeit products. Complex distribution chains and multi-tier retail systems make tracking counterfeit goods an uphill task. Malicious actors take advantage of secondary markets to sell their products without detection. Counterfeits can cut down a company’s cash flow. Remember, every counterfeit item sold is a potential customer lost by the legitimate manufacturer of the faked item.

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An announcement on the European fashion industry shows interesting findings. The economic cost of IPR infringement in the clothing, footwear, and accessory sector study reveals that the fashion industry lost 9.7% of sales because of counterfeiting. A whopping sum of 26.3 billion euros of revenue is lost to counterfeiters annually by the same sector.

Nike lost millions in revenue between 2016 and 2018 due to counterfeiting. During that period, over 385,00 pairs of fake sneakers were shipped to the US

from other countries. It resulted in a loss in revenue of about $70 million. Many brands across industries have similar experiences. An increase in after-sales service requests, replacements, and bad reputations are other losses companies incur due to counterfeits.

How Technology Is Playing A Role In Helping Global Brands Combat This Menace

A combination of IoT, Blockchain & AI technologies helps brands combat counterfeiting by providing them with tech solutions for tracking, tracing & monitoring. Anti-counterfeit solution providers use cutting-edge technologies to counter the activities of counterfeiters. With these technologies, brands can give unique identities to items with tamper-proof blockchain-protected information for validation.

It affords brands, consumers, and partners fraud-proof & transparent authentication strategies. Cryptographic identifiers (QR codes, RFID) are assigned to items or a batch of items. The legitimacy of an item can be confirmed by running authentication of the cryptographic tags on a shared blockchain platform. At every point of the product cycle, a legitimate asset – both digital & physical – can be distinguished from counterfeits using the identifiers.

RFID Tags

Implementing an anti-counterfeit technology solution makes a lot of difference. A study by Boston Consulting Group and Cisco on how technology can help manufacturers reduce the effect of counterfeiting revealed that implementing a technology solution could provide brands with an estimated net benefit of 2%-5% of total revenue. Using anti-counterfeit technology solutions, companies could reduce fraudulent sales by 60% – 80%.

Recently, NetObjex, a leading player in the digital asset space, struck a partnership deal with Zortag for anti-counterfeiting and tracking of assets for the digital economy. NetObjex provides enterprise software and business solutions for real-time tracking, tracing, and monitoring of digital assets. NetObjex’s infrastructure unifies IoT, AI, and blockchain technologies as a continuum for intelligent automation and data marketplaces.

Zortag provides a unique identity to any physical item, which is almost impossible to be duplicated. Such an item may be an article of commerce, an entity, or an individual. Zortag’s technology has a wide application, including protecting brands from counterfeit products, providing secure access to digital assets, authenticating products for sale, and more.

In a nutshell, the partnership makes NetObjex a comprehensive anti-counterfeit technology solution provider.

Final Word

Malicious actors will continue to evolve in finding more innovative ways of faking products. Consequently, there is a need for global brands to be a thousand steps ahead of counterfeiters. This calls for the implementation of state-of-the-art anti-counterfeiting tech solutions. In this respect, NetObjex is an all-in-one anti-counterfeit solution provider for brands with both digital and physical assets.

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