The growth of e-commerce has helped broaden our global economy, allowing us to easily leap geographic boundaries and time zones with the click of a button or a tap of our smart device screens. However, with convenience, this expansion has opened the door for counterfeit goods to land in the hands of unsuspecting shoppers, representing serious challenges for retailers as well as brands.
The market for counterfeit goods in the United States exceeds $1 trillion annually, based on the value of goods seized by law enforcement, according to the Organization for Economic Cooperation and Development (OECD). The so-called fake omnichannel, or “fomnichannel,” is often indistinguishable from the real thing by the consumers — they may spend money buying fake products without even realizing it. The damage caused by an imitation product can be as minimal as the loss of a few dollars or as serious as long-term physical injury — if that product contains toxic materials or false safety certifications. For retailers and brands, the damage can be extensive too, as losing consumer trust can lead to lost sales and a negative brand image.
With consumers’ expectations for extensive product selection and fast delivery rising, it’s more important than ever for retailers and brands to protect product authenticity by implementing proactive anti-counterfeit strategies.
Inventory visibility to confirm authenticity
The foundation of any good anti-counterfeit plan is inventory visibility, and the use of Electronic Product Code (EPC)-enabled Radio Frequency Identification (RFID) has become a critical enabler in that pursuit. Using this standards-based technology ensures product authenticity — individual items can be uniquely identified by serial numbers with EPC-enabled RFID, rather than just at the SKU level. Through more efficient authentication processes and the ability of RFID tags to hold more information about where the product was manufactured, the use of RFID in retail can significantly reduce the number of imitation products on the market.
The EPC framework on which RFID operates is based on the same GS1 Standards that thousands of businesses already have in place to facilitate barcode scans for increased visibility. When implementing item-level RFID, retail trading partners can leverage existing technology investments, such as enterprise resource planning (ERP), inventory management and point-of-sale systems. Using technology solutions that leverage this standard, brand owners assign a unique serial number to each item, which is then stored in a database. On the retailer’s end, employees can scan the item’s tag and immediately find out whether or not the numbers are among those assigned by the original manufacturer. Serialization also helps a retailer spot out-of-sequence numbers, which can signal counterfeit products. Further, using RFID tags at the source can also enable speedier, more informed stops for international shipments when traveling through customs.
RFID as a multi-Issue solution
It’s clear that RFID has many uses and benefits — and protection from counterfeit products is just one of them. That’s why it’s important to note the ways in which an investment in RFID can help retail companies tackle several different challenges at once. For instance, retail companies are realizing that the consequences of limited inventory visibility are not only detrimental from an anti-counterfeit perspective — they also lead to significant inventory distortion in the form of overstocks, stock-outs and shrinkage, which represents another $1 trillion issue for retailers worldwide, according to IHL Group research.
Over the past three years, RFID has also become a key part of the omnichannel conversation in retail, with major retailers such as Macy’s and Target publicizing item-level RFID roll-outs to support improvements to their operations and overall consumer experiences. According to ChainLink Research, RFID has been experiencing a healthy growth rate due to the technology’s maturing ecosystem and stability as well as its price reductions.
Like the usage of the barcode and electronic data interchange (EDI) to fulfill basic supply chain management needs, retailers and brands now see RFID usage as the foundational way to meet the ever-expanding demands of today’s customers. New fulfillment methods, such as buy online and pickup/ship from store would not be easily executed without having massive safety stock — or leveraging the increased product visibility made available by the use of RFID.
RFID increases item availability, which research from the RFID Lab at Auburn University says can lift sales from 2 percent to 20 percent for retailers. Using RFID, inventory accuracy within SKUs improved from an average of 63 percent to between 95 percent and 99 percent, results that are not only based on extensive research by the RFID Lab, but have also been validated by retailers.
Brand owners also clearly benefit from the ability to provide and maintain more granular data about their products, which can help accelerate any kind of problem-solving, including product authentication. According to RFID Lab research, using EPC-enabled item-level RFID throughout the entire supply chain improves electronic proof of delivery (EPOD), lowers receiving time by 90 percent and can improve shipping and picking accuracy by up to 80 percent. Additionally, RFID helps the manufacturer save on operational costs, reduce obsolete inventory write-downs and increase margins.
The unintended consequences of a global supply chain
A global supply chain made so accessible via the Internet has connected shoppers to the items they desire in ways we never imagined before. But this phenomenon also carries with it the unintended consequence of making the retail supply chain vulnerable.
Leveraging the power of GS1 Standards, retail trading partners can solve this problem with a clearer view of their inventory in real time. They can share data, trace product and mitigate counterfeit risk from the moment goods are shipped from the factory. This combination of accurate product identification information, real-time inventory visibility and trusted product data boosts consumer confidence and ensures brand protection for retail companies.
Michelle Covey is Vice President of Apparel and General Merchandise at GS1 US and leads the GS1 US Apparel and General Merchandise Initiative.