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 childrens’ 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 tool to help brands facilitate transparent supply chains that make it easier to identify and eliminate counterfeit goods. 

The features of this technology can be used to build solutions with digital identity and asset tracking at its core, enabling more secure, tamper-proof ways of conducting due diligence for businesses. 

DLT-based solutions combined with Radio Frequency Identification tags (RFID), Near-field Communication technology (NFCs) and QR codes can make processes more efficient and secure. They can improve trust, transparency and traceability through the creation of customer-friendly digital certificates that provide proof of a product's authenticity. The legitimacy of goods are 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 combination of the two technologies also establishes stronger connections between physical products and their digital counterpart. This approach, often referred to as "digital twins," is gaining popularity amongst e-commerce brands. 

As the saying goes, two brains are better than one - and the same can be said when looking at product tagging technology. When used alone, they can face vulnerabilities such as basic cloning and security breaches. Counterfeiters can exploit these weaknesses to produce fake tags. However, integrating this technology with DLT will create a tamper-resistant record of a product's movement through the supply chain and build trust in the tagging technology itself.

And for those interested in how it works, DLT’s underlying cryptography encrypts vital information ensuring data security and maintaining transaction confidentiality. The decentralised nature of DLT networks strengthens this security since there is no single point of failure that can compromise the entire system in the unfortunate event of a security breach.

Introducing this power duo will be a game-changer for brands and their consumers. DLT will facilitate greater trust and protection across a wide variety of markets, whilst product tagging will help provide consumers with the information they need to trust in their favourite brands again.