Padmakumar Nair is the co-founder and CEO of Ennoventure. An alumnus of the MIT Sloan School of Management, he brings with him over 18 years of leadership experience across the globe in devising strategies that bring companies to success. He has managed multi-disciplinary, cross-functional and geographically diverse teams to optimise business value by following a motivational style of leadership and encouraging open communication.
According to a recent report by Worldpay FIS, the Indian ecommerce industry will grow by 84% to a value of $111 billion by 2024. This is fuelled largely by the surge in demand during the Covid-19 pandemic, when social distancing norms compelled shoppers to rely on online portals. A negative side-effect of this, however, is that counterfeit goods now have an easy way to reach unsuspecting customers. Combating this calls for concentrated efforts from producers as well as the government – particularly with regard to product packaging and branding.
How counterfeiting grew during the pandemic
The Covid-19 pandemic flung the economy into disarray. Counterfeiters, whose previous ventures were mostly in alcohol and tobacco, saw a golden opportunity to fool large swathes of a stressed population. Many took advantage of the sudden demand for safety equipment to sell fake sanitisers and PPE kits. Medicines too were counterfeited and sold in large numbers, adding further stress to the already overworked healthcare industry. In fact, counterfeiting went up 20% in 2020 as compared to 2019 – a particularly disturbing figure in the light of the fact that India is steadily increasing its global exports presence.
Another recent trend in counterfeiting is that of consumer goods, particularly those sold online. Ecommerce has removed many of the entry barriers for small merchants – almost anyone can set up an online shop with one of the big marketplaces like Flipkart or Amazon. Moreover, since the pandemic began, online shopping became the channel of choice for all kinds of goods and not just fashion or luxury items. This has provided customers all over India with immense power in terms of choice, and has democratised the marketplace to include small and medium sellers in addition to MNC brands.
However, low barriers to entry also make things easier for counterfeiters, who can set up an online shop and sell knockoffs with no trouble. The key challenge here is combating highly aspirational buyers- especially those in low-income brackets – who are often indifferent to using cheaper versions of clothing or cosmetics as long as they ‘look’ authentic. Counterfeiters are becoming increasingly sophisticated in the kinds of packaging, textures and branding they can mimic, to the extent that they can infiltrate genuine supply chains without arousing any suspicion. Many counterfeiters can even copy holograms or QR codes, which are the traditional anti-counterfeiting options for packaging. While ecommerce marketplaces do their own checks on sellers, they are often unable to identify fakes in time and may be slow to remove the seller from the platform. This forces authentic brands to constantly have to recall their packaging and design new QR codes – an expensive and time-consuming process – while buyers continue to get duped in the meantime. Merchants thus have little incentive to adopt traceability and authenticity solutions – they neither have legal protection, nor are they convinced that those solutions will do any real good.
How anti-counterfeit solutions can make the industry more transparent and reliable
The global anti-counterfeit packaging market is set to rise from $106.3 billion in 2020 to $188.2 billion by 2025. In particular, mass encoding technology is set to lead this space owing to its product tracking solution through various nodes in supply and logistics. Cryptography, Blockchain and AI are set to contribute in a big way to anti-counterfeit measures that offer foolproof security with minimal hassle. Special care also needs to be taken to identify the exact vulnerabilities at different stages in the supply chain. For instance, adulteration is most likely to happen at the manufacturing stage, while fake packaging can happen during transportation as shipments are moved from warehouse to container or vice versa.
One technology that has attracted interest in recent times is the invisible cryptographic signature. With these, companies need not waste time and money on changing their production process or their package design as they would have to for traditional holograms or QR codes. Instead, the signatures are embedded invisibly throughout the package, making them impossible to copy or remove.Customers can scan the package to check the signature and verify that their order has not been tampered with. These scans also enable geotagging for easy tracking throughout the shipping process, so that any suspicious activity can be caught at once.
Anti-counterfeiting technology is only part of the story. To truly combat the spread of fake goods, customers need to be aware of how to tell genuine goods apart, which calls for committed customer engagement drives from brands. The more familiar a customer is with a brand, the less likely they are to be duped by a knock-off. There is thus a clear case for brands large and small to have an active social media presence and to frequently share information about its products, processes and packaging so that buyers always know what to look for.
As digitisation proliferates and more sellers are empowered to sell online, it is essential to remember the flipside to the benefits of ecommerce – which is that there is much more scope for counterfeiters to steal market shares. While tightened legislation is certainly called for, manufacturers also have a responsibility to invest in anti-counterfeiting technology as well as in brand awareness programmes to protect their customers from fakes. Once the entire country is aware of and alert to counterfeit goods, real progress can be made on eliminating them.