Podcast Interview on Digital Innovation and Counterfeiting with Catobi, Countercheck
Digital Innovators, Innovation Spritz session with Pietro Gagliano, Manager at Countercheck on Counterfeiting Industry & the Role of Countercheck and host Alessandra Martina Ceppi.
Counterfeiting is a massively growing industry with a holding of 3.3% in international trade, as per the reports by OECD published in 2016. One would say, what can be the harm of buying cheap imitations if they are fulfilling the purpose of flaunting a social identity. But, conversely, buying any fake product is definitely to cause harm to the buyers in hindsight.
“What does Countercheck do?” Alessandra Martina Ceppi to Pietro Gagliano.
Countercheck is a technology developed that is to be installed locally in the distribution centres of logistics partner companies. It allows the logistics officials to check the parcels arriving in the inventories and identify the authenticity of parcels that can be counterfeit in nature in terms of packaging or inside the material. Countercheck follows a process: Whenever a potentially suspicious package is identified, the collaborators present at the supply chain proceeds with further investigations and communicate about it to the referencing brand of that particular product.
“We are able to provide an end-to-end solution for Brands, reducing manual work to the bone — indeed, I would say practically to zero, which is highly appreciated by the Brands who work with us :)” claims Pietro.
Understanding the functioning of the software and how it will help logistics detect counterfeits in the supply chain, the interviewer got intrigued by this unique solution to combat counterfeits. With an interest to know more about who and how it is helping, she puts another question to our Manager.
“I am really interested to learn about Who is this software for?”
Countercheck aims to cater for brands that have counterfeiting problems, regardless of their industry. Even though we are a scaling start-up beginning to expand our horizons, we have already collaborated with various companies and brands in the Luxury Sector who seek technological assistance in pinning down and destroying the counterfeits of their brands supplied through the belts of supply chains. We have partnered with brands and companies from Italy, which are already renowned names in the international market. In addition to that, we are expanding to focus on other consumer sectors such as consumer electronics, toys, fashion (clothing and accessories), pharmaceuticals, and other consumer goods in general.
As we grow into other sectors, we are further aiming to collaborate with companies in other sectors that are suffering from the problem of infringement of Intellectual Property. Organisations like EUIPO (European Union Intellectual Property Office) — a body of the European Union that deals with the protection of intellectual property — has also started to focus and find datasets from various sectors including Food & Beverage, Cosmetics, Body Care Products, Personal Care Products, Baby Care products and more which can pose serious problems to the health of citizens. Reckoning the problems proposed by these organisations we are headed to solve these outgrowing issues with the help of technology over policy.
As the interviewer understands the benefits a prospect can get involved with this technological solution in their brand protection strategies, she moves on to another query.
“What were the most problematic markets and why? What have been the difficulties so far and how did you go about intervening on the blocks?”
The market for counterfeit products is difficult to estimate, as the business of counterfeiting is operated solely by criminals. “Yes, because counterfeiters are nothing but criminals, we must not forget that they run a shady business, creating a hidden economy that it is not easy to track and quantify,” says Pietro.
These are the people who operate illegally without respecting human rights, equality and inclusion, laws for the protection of the environment and the community.
The primary problem is that people who buy a counterfeit product — whether it is a super fake or a fake imitation — are not aware that they are spending their hard-earned money directly on deceptive products that are satiating the pockets of criminals.
“In the past, I have also bought some counterfeit products, without even the awareness of doing it most of the time, but attracted by the super advantageous price and, like many, I was not aware of the effects of that simple and quick purchase.
The cheap availability of fakes that closely resemble genuine articles duping customers and harming brands was one of my main motivations to join Countercheck” Pietro adds.
Fighting against counterfeiting and limiting if not stopping the sales of fakes worldwide will have a strong impact on the planet, on people both today and for the generations to come.
We are witnessing a market that in 2016 was worth about 500 billion euros and that today, with the flourishing eCommerce and the ease of delivery of small packages quickly and economically, it is estimated that it has crossed the bar of 1 trillion.
“It is a crazy figure!” exclaims Pietro.
The consequences of which are considerable. The consequences are not only related to social space, but also economic space in any region, for brands and governments — resulting in unpaid taxes, unpaid contributions to workers, and much more.
To curb this bloating problem, luxury brands have spent tens of millions of euros over the years to tackle this problem — which signifies how much the Brands suffer from this problem and are doing their utmost to fight it.
Continuing to the question asked on what are the most problematic markets Countercheck’s Manager explains -
Undoubtedly, the most problematic market belongs to the Chinese provinces. To date, more than 60% of the counterfeit products in the world are produced in China and distributed through traditionally operated channels (by sea or by land mostly) around the world. Clearly, these Chinese marketplaces are the primary provenances that are reaching customers in Europe & USA, but counterfeiters are also very much present and operating inside local marketplaces in Europe and the USA.
“In fact, how many times it happens to search for a product on a marketplace in Italy and there are: free delivery costs and delivery times between 30 and 40 days. The reason is simple, suppose I wanted to buy a smartphone cover, for which in Italy I pay 10 euros for an official brand (If I go to the store, or I have to add 5 euros for as delivery charges if I buy it from an online marketplace). But, then I go to a marketplace and find the same cover being sold at 2 Euros later sent to my house, without any transport costs. How is it possible?” Pietro questions the audience and Alessandra. He explains further, “Let’s do two calculations: the cost of the cover is 20% of that of a genuine one because the criminal evildoer skips paying the taxes and pay less than the minimum wage to an employee or a worker (as is instead legislated in Europe or the USA). This expense is enormous for a normal company but not for counterfeiters who do not use certified materials, and are made of products that are extremely harmful to health…and much more…. So, here is that the cover costs 20% of the price.”
However, following the same trail — with significantly lower impacts — there are other problematic markets such as Turkey, India and in a small way Italy even provides its negative contributions to the decline in sales of genuine brands.
The difficulty faced so far
with counterfeit products is that intercepting these items has always been centralised on customs and, moreover, completely done manually. As a result, it is clear to identify where the bottleneck lies. With millions of parcels entering Europe each year, it is physically impossible to manage this problem efficiently. The key number quantifying this problem is 1%. Which in fact is that only 1% of the counterfeit products that enter Europe every day that customs are able to identify and destroy — which is a lowercase number.
“I’m an electrical engineer by training and believe me, having 99% effectiveness (as known as 1% error) is a generally stellar result — so it seems the counterfeiters are doing everything right, don’t you think? This is why we decided to create an automated, scalable solution, which allows us to block and identify over 90% of the articles, reversing the percentage in our favour, in the favour of decent people” says Pietro with a conviction.
Regarding, How countercheck goes about intervening on the blocks:
To stop the distribution of counterfeits, the goal was to intervene in the middle — between producer and customer on the distribution chain. Countercheck set up its software on these supply chains and ensured that this chain was interrupted and the traffic of counterfeit products stopped. Therefore, by intervening in the distribution centres of logistics companies in coordination with brands’ assistance, we ensure that the products are never delivered to end customers.
As the interviewer understood the problem of markets, she raised a question in the same space:
In which markets have you entered? How are brands facing the problem now and what alternative solution are you proposing?
Currently, Countercheck is present only in Europe with distribution centres in the Netherlands with DPD — one of the world’s largest players in supply chain management and distribution. In the same centre, Countercheck has carried out a pilot program for several months this year and is preparing to bring the technology to other distribution centres in the world.
Pietro adds to answer the question, “We are aware that Brands now need a solution that is scalable and manageable by the teams they currently have at their disposal and we have finally done it. As mentioned, the Brands rely completely (numerically 100%) on customs that bring out poor results. With us, without any additional effort, they will be able to see their Brand protected in a solid and effective way”.
Although several Brands, especially in the cosmetics sector, were going in the direction of registering and using Blockchain technology, this fundamentally has two important problems:
“The first is of an aesthetic nature.
These Brands invest multi-millions of euros in the aesthetic development of their products and in design. Adding a technological verification development by affixing QR Codes, barcodes or the like is jarring for every designer. Imagine buying an iPhone or a Polo shirt with a QR code on it (Laughs). No thanks, I buy it because it works well and because it is beautiful, right !?
With our technology, the Brand will not be hit in any way. Zero!”
“And what might be the second problem”, questions Alessandra.
To which Pietro clearly replies
“The second is linked to the result to be achieved.
If this technology is used today, brands basically want to communicate to customers by virtue of affixed QR and barcodes, who buy their products confirming that they have actually purchased an original product. But on a fundamental level, nothing is added to block the counterfeit items, which is the real focus of the problem — to not let a counterfeit product reach a consumer, eliminating the instance of suspicion.
Certainly, the blockchain has the potential in verifying the entire supply chain and is considerable. But in your opinion, how easy will it be to ask criminals to have their entire supply chain verified? I would say that we are at the limits of the impossible, which is why at present it is not a viable and preferential track”.
It was a pleasure to share Countercheck’s mission and purpose with Catobi and we are delighted to have onboarded with Alessandra for this insightful session. We seek to cover more such sessions with Catobi on the problem of counterfeiting and how Countercheck is fighting to stop it.
