Fighting counterfeit products through microscopic imagery

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Authenticity isn’t just a buzzword brands use to connect with their customers. It’s a valued commodity in an age of counterfeit products. In 2013, global trade in counterfeits was worth an estimated $500 billion, according to the Organization for Economic Co-operation and Development, and is projected to reach $1 trillion by 2022.

An effective product authentication system, then, has great potential to help retailers. It can significantly reduce the possibility of buying and selling fraudulent products, everything from batteries to high-end luxury goods, and can lead to increased sales as consumers become more confident about the authenticity of products. Employees spend less time authenticating goods, which reduces operating costs; above all else, the brand’s integrity is protected.

Ryan Smith, senior director of online operations for Goodwill of Orange County, Calif., has been using such a system for several months and says it has “really increased the efficiencies and the accuracy of our authentications.”

Prior to using Entrupy On Demand Authentication, Smith says it could take its third-party authenticators “days, with a lot of tedious back and forth” before receiving an authentication —which might not be accurate.

Now “we have a very, very accurate process. It is super easy to deploy and use, and we have seen our product sale price points go up, which means we can now obtain as much revenue from donations as possible.”

‘MINUTE DIFFERENCES’

Entrupy launched its product authentication system in 2016; co-founder and CEO Vidyuth Srinivasan says the company spent three years microscopically mapping the surfaces of physical objects like shoes, watches, handbags and branded jewelry and has millions of images in its cloud-based database.

“Images of authentic brands are similar in the way they look at a microscopic level,” Srinivasan says. “When a manufacturer creates a brand, they try to make it consistent. However, when someone makes a fake, there is a very high probability that many factories will be making those fake items, and they will not be consistent. What we learned is that microscopically you can detect those fakes even when they are invisible to the eye.”

He says Entrupy has perfected the process to where it is now 99 percent accurate, both in detecting false products and in verifying the authenticity of real or legitimate brands, in minutes.

Quentin Caruana, founder and managing director of Irvine, Calif.-based Marque Supply, calls the system “a game-changer,” increasing accuracy, sales and time saved. Marque Supply is the largest wholesaler of luxury goods in the United States and the operator of ecommerce sites for consumers and retailers. Caruana has been using the system for almost three years.

“In our business the main issue is authenticity,” Caruana says, “because there are so many fakes out there.”

Not only does the authentication process take just “minutes, covering today about 90 percent of the high-volume designer brands that sell in the market,” he says, “but by getting down to the microscopic level, it focuses on not providing a false positive.”

If it errs, he says, “it is on the side of caution. If it can’t determine that a product is authentic, it will refer it to Entrupy, and they will make a manual assessment.”

Entrupy’s database is used to train artificial intelligence algorithms.

“We tell the algorithms what to look for to identify the minute differences between authentic and counterfeit products,” Srinivasan says, “and we use the database as it grows to continuously tweak the algorithms to get better and better over a broadening range of products.”

The power of AI “is that you’re always two steps ahead of the counterfeiters,” he says. “Even if they are counterfeiting a new product, that item’s own uniqueness, for each brand and each style, becomes the security mechanism. Neither the manufacturer nor the retailer needs to add any other security mechanism.”

‘HIDDEN BENEFITS’

The system does not entail any infrastructure changes or infrastructure costs. Users pay a service fee that varies according to volume; Smith says a return on investment is almost immediate because the “hidden benefits such as operational time savings, the ability of Goodwill to have confidence in the products it is selling or displaying on its website as well as the consumer‘s confidence in the Goodwill brand, are tremendous.”

Caruana says retailers buying and selling high-end luxury goods can cover the cost of the service “the first time they are saved from making a bad buy.”

“On the flip side,” he says, “it’s a selling tool because customers have more confidence in the expensive items they are buying. They receive a certificate that guarantees that the item is authentic and if it is not, they receive a full refund. It pays for itself on your first sale.”

Retailers using the system receive an Apple iPod Touch attached to a handheld high-resolution microscope. The Entrupy software loaded on the iPod guides the user through capturing an image and uploading it to Entrupy’s servers to authenticate the product or identify it as counterfeit.

Entrupy can also provide a certificate of authenticity for each item, backed by a pledge to refund a buyer for products misauthenticated by Entrupy. That means someone purchasing an item in an Iowa pawn shop “can have the same confidence they would have when buying directly from the brand’s manufacturer or from a brand name store,” Srinivasan says.

Entrupy currently has a store network of over 600 retailers worldwide, ranging from pawn shops and other resellers to online retailers. And the network — as well as the database of items in the product authentication program — is rapidly growing.

Some retailers are preparing to use another new Entrupy authentication system called Fingerprinting, designed to identify return fraud, “helping the retailer verify that items being returned were actually purchased in the stores they are being returned to,” Srinivasan says.

In the 2018 Organized Retail Crime survey from the National Retail Federation, respondents estimated 11 percent of sales would be returned and fraudulent returns would account for about 8 percent of total returns.

In some cases, Srinivasan says retail customers have told him they were experiencing retail return fraud as high as 11 percent of total returns.

Entrupy is “trying to promote a circle of trust for branded products regardless of whether you are a retailer, manufacturer or reseller,” he says. “And to do it by using just images, with no other technology needed.”

Liz Parks is a Union City, N.J.-based writer with extensive experience reporting on retail, pharmacy and technology issues.

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