How Blockchain and IoT Can Defeat Counterfeiting in the Fashion Industry

Imitation is the sincerest form of flattery. But brands that lose billions to counterfeit products don’t feel it that way. 

Cambridge dictionary defines counterfeiting as something that is made to look like the original of something else, usually for dishonest or illegal purposes .

Basically, it is the practice of creating fake versions of products at a low cost and selling them at a high value.  It is a nuisance for the fashion industry as both the brand’s reputation and revenue streams suffer as a result.

According to the Global Brand Counterfeiting Report 2018, the losses suffered due to online counterfeiting amounted to $323 billion in 2017. Luxury brands such as Gucci and Louis Vuitton incurred $30.3 billion in the same period. 

Why Counterfeiting Is Massive in the Fashion Industry

Counterfeiting is higher in the fashion industry. Since the attraction of most items is the brand and not the quality, dubious retailers simply slap logos of globally popular brands on their items without thinking twice. 

Meanwhile, customers while buying new clothes don’t mind getting their hands on knock-off brands as they cost considerably less than the authentic items. This creates an environment where the market is flooded with shirts from Praduh’ and hoodies from Adidos’.

Add eCommerce websites that specialize in selling these knock-off brands to the mix and you have a situation where authenticating the products is nearly impossible.  

With the problem now existing on a massive scale, brands are fighting back. Louis Vuitton has date codes’ to validate their products while Chanel has placed hologram stickers with distinctive serial numbers in its handbags’ lining. 

But this might not be enough as the technology that creates these fake products is far too sophisticated to be thwarted by any outdated methods. 

Blockchain and IoT Might to the Rescue?

Businesses might finally have an answer to counterfeiting with the help of Blockchain and IoT. While IoT can provide unique traceability and identification, blockchain can create a potent chain of custody information. 

Pair these technologies together and you have a holistic solution where the origin, ownership, and location of raw material and product at every stage of the value chain is recorded. This gives manufacturers, customers, and partners an impressive level of authentication and transparency. 

Blockchain along with IoT can track and share product’s origin across a number of stakeholders- it is far more effective against counterfeiting than hologram stickers and date codes. 

A Solution Across the Supply Chain 

Combined, Blockchain and IoT create a comprehensive solution, where counterfeiting is combated at all stages of product development. Here are some important highlights of this process.

• Manufacturer and supplier join a blockchain platform and utilize smart’ tags for tracking and confirming the origin and location of every item. 
• These smart tags can be applied to a single product or the entire batch.
• Tags can take forms of RFID, security labels that have unique QR codes and digital tags that possess individualized software components. 
• Only legitimate, verified tags and products need to be part of the blockchain to maintain a level of authenticity. 
• In the manufacturing process, each batch or item is monitored at every stage along with the production, transportation, distribution, and sales process. 
• Data that is relevant is logged at every step.

IoT Approach is Already in Application

Authentic or Not is a Toronto based company that applies an IoT approach towards merchandise authentication. It bridges the gap between technology and clothing by embedding microchips into clothing apparel and other products.

In their own words, Authentic Or Not is a Patented FashionTech technology that can make your company’s products transmit a digital experience instantly by embedding our durable microchips inside merchandise . 

These microchips are integrated with IoT and are resistant to withstand washing and dry-cleaning situations. By hovering their smartphone in front of merchandise with the microchip, customers and retailers can confirm its authenticity. 

However, it’s interesting to note that IoT-led solution to counterfeiting does not necessarily require microchips. Pseudo-connected devices and other similar technologies can also be a part of this trend. Products with a unique identifier that cannot have a direct connection to the internet are eligible to participate in what’s known as the Internet of Products. 

A brand’s product’s directory like barcodes and similar two-dimensional code labels can be built with assistance from RFIDs, QR codes and other unique product identifiers. As it happens, this technology is a cost-efficient alternative to the microchip -which is more feasible for high-end luxury items. 

By maintaining a digital record, fashion brands can empower retailers and customers alike to simply run a check on the web against the authentication labels. Here, it becomes easy to check the physical markers against the centralized IoT inventory or product data directory of the brand.

The user-product data can help brands enable other features such as warranty management. 

Potential Benefits of Advanced Counterfeit Detection

Going back to the combination of blockchain and IoT- the system that monitors a product thought its lifecycle offers extraordinary benefits. Brands can see improvement on not just financial, but on operation aside of things. 

Here’s how the blockchain and IoT solution can optimize company performance. 

1. Chances of Fraudulent Sales Can be Decreased Significantly

Blockchain and smart tags allow companies to protect their brand name which might get blemished by low-quality copies floating around the market. This solution also allows third-party retailers, channel partners and regulators to authenticate the product. Customers are also saved from being duped by dubious retailers. Meanwhile, the revenue of sales goes to legitimate parties while regulators can easily trace the source and chain of custody for the products on sale.

2. Unneeded Servicing and Repair Can be Avoided

Front-end applications that are linked to the blockchain platform can make it easy for support representatives to verify genuine claims, even before inspecting the product. A much more efficient authentication gives room to personnel to allocate more time and resources to valid, high-value functionalities such as enhancing responsiveness and upgrading customer satisfaction. 

3. Likelihood of Defects Can be Decreased 

By creating a single provenance data source, manufacturers have the opportunity to avoid defects due to fake parts and decrease the cost of validating material and meeting regulatory requirements. From the point the product arrives in the warehouse to the instance it will leave, all is recorded in an event log that’s available to all stakeholders. Suppliers and manufacturers can utilize the blockchain platform to verify items, mark divergences from previously agreed sourcing arrangement and stop low-quality and defective pieces from becoming involved in the production process. 

Conclusion

Despite investing millions of resources, the fashion industry has achieved little success in battling the scourge of counterfeiting. However, they might finally have a solution through IoT and blockchain. 

As IoT and blockchain evolve further, brands will have a surefire way of monitoring their products through the supply chain, protect their brand name, build customer trust and ensure that the company’s bottom-lines remain strong. 

To sum up, these technologies can help high-end fashion outlets safeguard their products from uninspired imitators.