The number of retail e-commerce platforms has continued to rise as sales in the sector are predicted to grow to approximately $7.4 trillion by 2025. This increase has opened up a plethora of low-cost and accessible avenues for small retailers and freelancers to both sell their products and reach larger audiences. 

However, as a result of this ease of access, it has also made it easier for individuals to sell counterfeit products anonymously online. A recent report by Citron Research found that Etsy has fallen victim to this in a big way, having now become one of the largest platforms in the world for counterfeit goods. 

The report, stating that the percentage of fake products on Etsy’s site has become an even greater percentage of its revenue, has been a huge wake-up call for the industry. Especially after the firm’s reputation and share value took a dive last month - falling by 8.4%. 

With such a high volume of goods sold on e-commerce platforms, monitoring and prosecuting fake accounts can seem overwhelming and unrealistic for some businesses However, solutions like Distributed Ledger Technology (DLT) are helping the e-commerce and retail sector to take greater steps towards identifying and preventing the sale of fake products.

So, what are the main challenges of this growing counterfeit market and how can businesses use technology to prevent counterfeiters from slipping through the cracks?

 

Don’t overlook the damage: Why fakes can erode your brand 

Fraudulent products currently account for around 3.3% of world trade - and in the European Union (EU), counterfeit and pirated goods account for 5.8% of all imports from third countries (meaning countries that are not a member of the EU, or territories whose citizens do not enjoy the EU right to free movement).

But what’s the big deal? Well, these fakes have the power to harm brands in a big way.Not only does it damage brand reputation by introducing doubt in the authenticity and quality of their merchandise (especially for those specialising in luxury goods), but it also presents safety risks too (for instance with electronics and children’s toys). Without a regulated product journey, items may not be as safe as the real thing - posing real risks to consumers who are unaware of the differences.

One of the biggest problems here is that fakes are increasingly challenging to distinguish - they might even be made in the same factory as the real thing. Many counterfeiters have been able to gain access to the same supply chains, factories and materials as the real brands, making detection close to impossible for the average buyer. 

On top of this, fraudsters can create their own equipment and materials - even moulds - that are nearly identical to the originals. They might choose to manufacture their goods in locations with lower labour costs and regulations that result in the exploitation of local communities. This has destructive implications for the economy and ESG ambitions at large. 

For example, the UK government recently reported that the annual loss to the economy through counterfeiting and piracy is already at £9 billion - causing 80,500 job losses each year. 

All in all, the existence of these copycats can erode buyer trust and loyalty which is challenging to rebuild. So, what can companies do about it? 

 

Embrace emerging technology: How a foundation of DLT can protect your supply chain

Emerging technologies like DLT are becoming a vital foundation to help brands facilitate transparent supply chains that make it easier to identify and eliminate counterfeit goods. 

The features of this database technology mean that it lends itself well to digital identity and asset tracking, enabling more secure, tamper-proof ways of conducting due diligence for businesses. 

DLT-based solutions combined with product tagging technology improve trust, transparency and traceability through the creation of customer-friendly certificates that provide proof of a product's authenticity. This is because the legitimacy of goods is verified by an expert before being marked with a unique identification tag that can help businesses prove to buyers that they are who they say they are. 

The use of DLT in combination with product tagging is growing in popularity as brands look to create stronger links (“digital twins”) between tagged, physical products and secure databases that help manage them. For example, DLT can sit beneath tagging solutions like Radio Frequency Identification tags (RFID), Near-field Communication technology (NFCs) and QR codes - this helps improve processes' efficiency and security. 

When used by themselves, some tags, like RFID tags, face challenges with vulnerability to basic cloning and security, meaning that counterfeiters can use these methods to create fake tags. However, integrating RFID tags with DLT creates a tamper-resistant record of a product's movement through the supply chain that provides a higher level of security and transparency. 

This is due to DLT’s use of cryptography. This feature means it encrypts essential information that secures data and ensures the confidentiality of all transactions. Its decentralised network also helps enforce this since there is no single point of failure for the whole system to be compromised in a security breach. 

Introducing the protection that comes with DLT could be a game-changer for brands and their consumers. But adoption by industry leaders and growing partnerships will be essential. With more collaboration, DLT can facilitate greater trust and protection across a wide variety of markets when it comes to counterfeit goods. Helping customers to trust in their favourite brands again.