Entrupy State of the Fake

2020 EDITION

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FOREWORD: ENTRUPY STATE OF THE FAKE 2020

The growth of global commerce is a wonderful thing, but it’s not without side effects. Over time, we have seen the rise of opaque supply chains, and when combined with the less personal nature of online transactions, it is an environment that has benefited counterfeiters while eroding consumer trust. Counterfeiting continues to pervade across the world at a much faster pace and detrimentally impact society in myriad ways.

This is the problem that Entrupy is committed to solving.

In the inaugural Entrupy State Of The Fake report in 2019, we aimed to provide unique insights about counterfeiting in the luxury resale market, by shedding light about the rate of counterfeiting for different brands, geographies and business types in the resale market. We are thankful to the media, fashion and luxury industries, and consumers for the incredibly positive response to our 2019 report.

In this 2020 edition of the Entrupy State Of The Fake report, we share new insights about the types of counterfeits found in the luxury resale market, and take a deeper look at how counterfeiters operate behind the scenes. We delve into counterfeiting supply chains and distribution methods, and examine their societal impact. We also review current industry solutions and provide our recommendations to improve the way that industry fights the global counterfeiting problem.

We hope that this annual Entrupy State Of The Fake report will become a data source for a problem that remains a massive invisible threat to humanity. We endeavor to continue being transparent in sharing our data with the world in the hope that it helps to build a better, safer and more forthright society.

As always, we welcome any feedback or questions.

Vidyuth Srinivasan
Chief Executive Officer, Entrupy Inc.

About Entrupy

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ENTRUPY PROVIDES ON DEMAND, AI-POWERED AUTHENTICATION SOLUTIONS TO RETAIL BUSINESSES GLOBALLY

Entrupy by the Numbers

  • $ 350M WORTH OF INVENTORY SECURED by Entrupy's
    technology solutions
    to date*
  • 45 COUNTRIES WITH CUSTOMERS enabling trust for retail businesses globally
  • 15M UNIQUE IMAGES collected from authentic and counterfeit inventory from diverse global sources to train Entrupy's AI algorithms
  • 30 TEAM MEMBERS in 8 cities around the world

* As determined by average retail prices of authentic merchandise on the secondary market

Entrupy Authentication Solutions

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  • LUXURY AUTHENTICATION

    • Instantly identify authentic and counterfeit luxury goods
    • Powered by artificial intelligence and microscopy
    • Used by sellers of high-end accessories to certify the authenticity of their merchandise
    • Backed with a financial guarantee
    Authentication
  • FINGERPRINTING: RETAIL RETURNS

    • Virtually tag and identify individual objects uniquely with a single image
    • Powered by advanced computer vision and microscopy
    • Used by retailers to verify the identify of returned products at the point-of-return
    • Can be implemented anywhere without modification to the product
    Fingerprinting
  • SNEAKERS: LEGIT CHECK TECH

    • Instantly identify authentic and counterfeit sneakers
    • Powered by artificial intelligence
    • Used by sellers of sneakers to ensure the authenticity of their merchandise
    • Backed with a financial guarantee
    • Launched in 2020. Stay tuned for data in 2021!
    Sneakers
  • Authentication
  • Fingerprinting
  • Sneakers

TRUSTED AND RECOGNIZED BY THE WORLD'S TOP ORGANIZATIONS

Select Customers:

Industry Awards:

Industry Initiatives:

What they say about Entrupy:

  • Dubai Department of Economic Development

    Partnering with Entrupy gives the Dubai DED a powerful, reliable and scalable method of protecting our economy from the scourge of counterfeit products. With Entrupy’s authentication technology, our inspectors now have the ability to instantly detect fraudulent products and ensure they never reach local markets or the general public. This will help us to continue reinforcing trust in our economy.

    - Mohammad Ali Lootah, CEO Commercial Compliance and Consumer Protection Sector

  • ShopGoodwill.com (Goodwill e-commerce platform)

    Over the years, shopgoodwill.com has benefited from our local community’s generous donations of high-end items. At the same time, we’ve witnessed ‘Caveat Emptor’ first hand, and that skepticism keeps us from maximizing the full value of that generosity. With the Entrupy Certificate of Authenticity, shoppers can feel confident about their transaction and great about themselves, because their purchase benefits the Goodwill mission to change lives through the power of work.

    - Ryan Smith, Senior Director of Online Operations

  • Style Theory (Singapore-based fashion rental business)

    Authentication is a service we take pride in, especially when dealing with multiple sources of assets and in a rental business where there are many change of hands and transfers. We invest in developing multiple layers of security to reduce identity fraud (dubious sources) and stand by our policy of no counterfeits.

    - Brenda Ling, Senior Buyer

  • Nordstrom

    Nordstrom has partnered with Yerdle, a technology and logistics startup company, to power the backend operations of the resale platform including cleaning and repairing of product, inventory processing and fulfillment, pricing and authentication of certain luxury designer items in partnership with Entrupy.

    - Nordstrom See You Tomorrow re-commerce program press release

  • RetailInsider.com Transforming Retail Awards 2019

    The final award of the evening – the Overall Technology Innovation of the Year (sponsored by Webloyalty) – went to the fingerprinting certification technology from Entrupy which allows retailers to authenticate luxury goods. As resale markets grow and counterfeiting becomes an ever bigger problem the judges felt Entrupy’s solution was truly game-changing for both retailers and consumers.

    - Glynn Davis, Editor

  • Chic Consignment (Massachusetts-based luxury consignment business)

    Before Entrupy, we were relying primarily on experienced staff who were trained to identify the hallmarks of a brand. We would also take the integrity of the consignor into consideration as many of our top consignors consistently bring us high end things, many of which have brand authentication cards, receipts, etc. However, in the age of superfakes, that is no longer enough.

    - May Doherty, Owner

Entrupy Insights:
Counterfeiting in the Luxury Resale Market

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OVERVIEW OF ENTRUPY AUTHENTICATIONS IN 2019

Dollar value* of Authentic and Unidentified items, 2017 - 2019

* As determined by average retail prices of authentic merchandise on the secondary market

Authentic vs. Unidentified items, 2019

Entrupy Insights

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In 2019, the vast majority of items scanned by Entrupy's business customer base were verified as Authentic. 9.6% of items were not certified as Authentic (referred throughout this report as "Unidentified"), down from 10.2% in 2018.

BRANDS WITH MOST AUTHENTICATIONS IN 2019

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By total number of Entrupy authentications performed

  • LOUIS VUITTON

    2019 VALUE
    $34M
    2018 VALUE
    $21M
    MOST AUTHENTICATED MATERIAL
    MONOGRAM CANVAS MONOGRAM CANVAS
    MOST AUTHENTICATED STYLE
    NEVERFULL NEVERFULL

    Entrupy Insights

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    Louis Vuitton remained the most popular brand for authentications among Entrupy's customers in 2019, with its market popularity buoyed by Virgil Abloh, CEO of Off White, becoming the brand's director of menswear.

    The universal popularity of Louis Vuitton's numerous signature coated canvas lines, coupled with their entry into streetwear, has solidified their top spot.

  • COACH

    2019 VALUE
    $3,400K
    2018 VALUE
    $400K
    MOST AUTHENTICATED MATERIAL
    LEATHER LEATHER
    MOST AUTHENTICATED STYLE
    SWINGPACK/SOHO SWINGPACK/SOHO

    Entrupy Insights

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    Coach significantly increased in its popularity for authentications among Entrupy's customers in 2019.

    The relatively lower pricing for Coach items in the resale market makes it an accessible brand for customers. Popular collaborations with Disney, Tabitha Simmons and YETI OUT further drove demand for their products.

    Vintage Coach remains popular amongst Entrupy customers, however the most common Coach era of bags tested are from 2007-20.

  • GUCCI

    2019 VALUE
    $12M
    2018 VALUE
    $5M
    MOST AUTHENTICATED MATERIAL
    GG CANVAS GG CANVAS
    MOST AUTHENTICATED STYLE
    DIONYSUS DIONYSUS

    Entrupy Insights

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    Upon taking over as creative director in 2015, Allesandro Michelle brought an all-inclusive, gender neutral and eclectic sensibility to the fashion house geared towards a younger demographic.

    A revival of vintage and classic styles are being seen across a number of luxury fashion houses including Gucci. The signature horsebit design and the reintroduction of GG supreme canvas vintage styles are a few that have been reimagined for the modern day.

  • CHANEL

    2019 VALUE
    $23M
    2018 VALUE
    $12M
    MOST AUTHENTICATED MATERIAL
    CALFSKIN / LAMBSKIN LEATHER CALFSKIN / LAMBSKIN LEATHER
    MOST AUTHENTICATED STYLE
    CLASSIC FLAP BAG CLASSIC FLAP BAG

    Entrupy Insights

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    2019 saw the passing of legendary Chanel creative director Karl Lagerfeld, who was hired in 1983 to reinvigorate the Chanel brand.

    The Classic flap bag, introduced in 1980’s as Lagerfeld's take on the 2.55 bag designed by Coco Chanel herself in 1955, remains the most popular Chanel bag tested amongst Entrupy customers.

  • PRADA

    2019 VALUE
    $3M
    2018 VALUE
    $2M
    MOST AUTHENTICATED MATERIAL
    NYLON NYLON
    MOST AUTHENTICATED STYLE
    GALLERIA TOTE GALLERIA TOTE

    Entrupy Insights

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    Prada was one of several luxury fashion houses to participate in the revival of popular vintage and 00’s era handbag styles. In 2019, they released the "re-edition" 2000 nylon shoulder bag and a number of other reimagined nylon styles.

    Prada launched Re-Nylon as a move to sustainable sourcing with the goal to convert all nylon products to ECONYL® ( the regenerated nylon fabric) by 2021.

BRAND RANKINGS: MOST AUTHENTICATIONS FROM 2017-2019

By total number of Entrupy authentications performed in each year
  • Louis Vuitton
  • Coach
  • Gucci
  • Chanel
  • Prada
  • Burberry
  • Fendi
  • Saint Laurent
  • Dior
  • Hermès
  • Céline
  • Chloé
  • Balenciaga
  • Bottega Veneta
  • Goyard

ENTRUPY INSIGHTS
BIGGEST MOVERS: 2018 TO 2019

Handbags

Coach rose three places: from 5th in 2018 to 2nd in 2019

  • 2019 saw a number of popular Coach collaborations including Disney, Tabitha Simmons and YETI OUT.
  • Vintage Coach remains popular amongst Entrupy customers, however the most common Coach era of bags tested are from 2007-20.

Saint Laurent rose two places: from 10th to 8th

  • A revival of vintage and classic styles are being seen across a number of luxury fashion houses including Saint Laurent, particularly pieces featuring its classic "YSL" logo.

Dior rose two places: from 11th to 9th

  • Creative director Kim Jones designed every look for superstar boyband BTS's tour, appealing to a younger demographic.
  • True to current revival trends, Entrupy's customer authentication volumes for Dior products reflected an uptick in demand for early 2000-era bags such as the Saddle Bag and Dior Canvas styles.

Celine dropped three places: from 8th to 11th

  • 2018 saw the exit of beloved creative director, Phoebe Philo, which has led to diminished demand for Celine products in both firsthand and secondary retail markets.

BRANDS WITH HIGHEST UNIDENTIFIED RATES IN 2019

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By proportion of Entrupy authentications with unidentified results

  • GOYARD
  • HERMÈS
  • CÉLINE
  • BALENCIAGA
  • DIOR
  • GOYARD

    2019 UNIDENTIFIED %
    35%
    2018 UNIDENTIFIED %
    31%
    MOST UNIDENTIFIED MATERIAL
    GOYARDINE CANVAS GOYARDINE CANVAS
    MOST UNIDENTIFIED STYLE
    SAINT LOUIS PM SAINT LOUIS PM

    Entrupy Insights

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    The limited supply of authentic Goyard in the market is a major factor in its high unidentified rates as there is simply not enough authentic product available in the market to fulfil demand.

    Counterfeiters take advantage of the desirability of popular, hard-to-find styles such as the St. Louis Tote and infiltrate fakes into the market.

  • HERMÈS

    2019 UNIDENTIFIED %
    20%
    2018 UNIDENTIFIED %
    28%
    MOST UNIDENTIFIED MATERIAL
    CLEMENCE LEATHER CLEMENCE LEATHER
    MOST UNIDENTIFIED STYLE
    BIRKIN BIRKIN

    Entrupy Insights

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    The high proportion of unidentified Hermès items is likely a result of the strong market demand for the brand's highly desired Birkin styles, which are released by Hermès in limited supply.

    In 2019, Entrupy identified 8% of all unidentified Hermès items as "superfakes."

  • CÉLINE

    2019 UNIDENTIFIED %
    18%
    2018 UNIDENTIFIED %
    22%
    MOST UNIDENTIFIED MATERIAL
    OTHER- LEATHER OTHER- LEATHER
    MOST UNIDENTIFIED STYLE
    LUGGAGE TOTE LUGGAGE TOTE

    Entrupy Insights

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    The high desirability of exiting creative director Phoebe Philo’s coveted designs such as the luggage tote is theorized to have prompted a surge of unidentified items tested with Entrupy.

    Counterfeiters may have jumped on the opportunity to push Philo-era fakes into the market as the supply began to dwindle.

    In 2019, Entrupy identified 11% of all unidentified Céline items as "superfakes."

  • BALENCIAGA

    2019 UNIDENTIFIED %
    17%
    2018 UNIDENTIFIED %
    21%
    MOST UNIDENTIFIED MATERIAL
    GOATSKIN LEATHER GOATSKIN LEATHER
    MOST UNIDENTIFIED STYLE
    CLASSIC CITY CLASSIC CITY

    Entrupy Insights

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    Balenciaga's recent resurgence has been buoyed by the popularity of the brand's sneaker styles among athletes and hip-hop artists.

    Counterfeiters have capitalized on this rising popularity to push fake Balenciaga styles including the Classic City bag.

  • DIOR

    2019 UNIDENTIFIED %
    15%
    2018 UNIDENTIFIED %
    17%
    MOST UNIDENTIFIED MATERIAL
    CANVAS CANVAS
    MOST UNIDENTIFIED STYLE
    LADY DIOR LADY DIOR

    Entrupy Insights

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    The high demand for trendy styles from the '90s and early 2000s, such as the Lady Dior and Saddle bags, drove the high unidentified rate in 2019.

EXPLORE AUTHENTICITY RATES AROUND THE GLOBE

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  • THE AMERICAS
  • ASIA-PACIFIC
  • EUROPE & MIDDLE EAST
  • THE AMERICAS

    2019 Unidentified %
    10.2%
    Most Authenticated Highest Unidentified %
    #1 Louis Vuitton Goyard
    #2 Coach Hermès
    #3 Gucci Céline

    Entrupy Insights

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    In the Americas, Coach was the fastest growing brand for authentications, increasing its volumes by over 1000% from 2018 to 2019.

  • ASIA-PACIFIC

    2019 Unidentified %
    6.5%
    Most Authenticated Highest Unidentified %
    #1 Louis Vuitton Goyard
    #2 Gucci Saint Laurent
    #3 Chanel Balenciaga

    Entrupy Insights

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    In Asia-Pacific, Fendi was the fastest growing brand for authentications by Entrupy customers, increasing its volumes by over 400% from 2018 to 2019.

  • EUROPE & MIDDLE EAST

    2019 Unidentified %
    9.0%
    Most Authenticated Highest Unidentified %
    #1 Chanel Céline
    #2 Louis Vuitton Saint Laurent
    #3 Gucci Chloé

    Entrupy Insights

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    In Europe & Middle East, Burberry was the fastest growing brand for authentications by Entrupy customers, increasing its volumes by almost 300% from 2018 to 2019.

EXPLORE AUTHENTICITY RATES BY COUNTRY

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  • THE AMERICAS
  • ASIA-PACIFIC
  • EUROPE & MIDDLE EAST
  • UNITED STATES
  • CANADA
  • MEXICO
  • PANAMA
  • BRAZIL
  • UNITED STATES

    2019 Unidentified %
    10.2%
    Most Authenticated Highest Unidentified %
    #1 Louis Vuitton Goyard
    #2 Coach Hermès
    #3 Gucci Dior

    Entrupy Insights

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    In the United States, the proportion of Unidentified results for authentications of Goyard products increased from 20% in 2018 to 37% in 2019.

  • CANADA

    2019 Unidentified %
    10.6%
    Most Authenticated Highest Unidentified %
    #1 Louis Vuitton Goyard
    #2 Chanel Balenciaga
    #3 Gucci Céline

    Entrupy Insights

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    In Canada, Bottega Veneta was the fastest growing brand for authentications by Entrupy customers, increasing its volumes by 300% from 2018 to 2019.

  • MEXICO

    2019 Unidentified %
    6.6%
    Most Authenticated Highest Unidentified %
    #1 Louis Vuitton Dior
    #2 Gucci Céline
    #3 Prada Saint Laurent

    Entrupy Insights

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    In Mexico, Prada was the fastest growing brand for authentications by Entrupy customers, increasing its volumes by over 600% from 2018 to 2019.

  • PANAMA

    2019 Unidentified %
    8.5%
    Most Authenticated Highest Unidentified %
    #1 Louis Vuitton Fendi
    #2 Gucci Gucci
    #3 Chanel Chanel

    Entrupy Insights

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    Entrupy commenced working with businesses in Panama during 2019, with Louis Vuitton being the most popular brand for authentications.

  • BRAZIL

    2019 Unidentified %
    10.3%
    Most Authenticated Highest Unidentified %
    #1 Louis Vuitton Balenciaga
    #2 Chanel Goyard
    #3 Gucci Hermès

    Entrupy Insights

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    In Brazil, the proportion of Unidentified results for authentications of Louis Vuitton products decreased from 21% in 2018 to 9% in 2019.

  • JAPAN
  • SINGAPORE
  • THE PHILIPPINES
  • THAILAND
  • AUSTRALIA
  • JAPAN

    2019 Unidentified %
    3.8%
    Most Authenticated Highest Unidentified %
    #1 Louis Vuitton Goyard
    #2 Gucci Balenciaga
    #3 Coach Saint Laurent

    Entrupy Insights

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    In Japan, the proportion of Unidentified results for authentications of Balenciaga products increased from 20% in 2018 to 25% in 2019.

  • SINGAPORE

    2019 Unidentified %
    3.7%
    Most Authenticated Highest Unidentified %
    #1 Chanel Goyard
    #2 Louis Vuitton Céline
    #3 Gucci Balenciaga

    Entrupy Insights

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    In Singapore, Burberry was the fastest growing brand for authentications by Entrupy customers, increasing its volumes by almost 300% from 2018 to 2019.

  • THE PHILIPPINES

    2019 Unidentified %
    34.2%
    Most Authenticated Highest Unidentified %
    #1 Chanel Fendi
    #2 Louis Vuitton Goyard
    #3 Gucci Saint Laurent

    Entrupy Insights

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    In the Philippines, Dior was the fastest growing brand for authentications by Entrupy customers, increasing its volumes by 600% from 2018 to 2019.

  • THAILAND

    2019 Unidentified %
    23.7%
    Most Authenticated Highest Unidentified %
    #1 Chanel Balenciaga
    #2 Louis Vuitton Saint Laurent
    #3 Gucci Coach

    Entrupy Insights

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    In Thailand, the proportion of Unidentified results for authentications of Prada products increased from 11% in 2018 to 30% in 2019.

  • AUSTRALIA

    2019 Unidentified %
    10.6%
    Most Authenticated Highest Unidentified %
    #1 Chanel Goyard
    #2 Louis Vuitton Dior
    #3 Gucci Céline

    Entrupy Insights

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    In Australia, the proportion of Unidentified results for authentications of Dior products increased from 11% in 2018 to 29% in 2019.

  • UNITED KINGDOM
  • ITALY
  • RUSSIA
  • CZECH REPUBLIC
  • UNITED ARAB EMIRATES
  • UNITED KINGDOM

    2019 Unidentified %
    5.2%
    Most Authenticated Highest Unidentified %
    #1 Chanel Balenciaga
    #2 Louis Vuitton Fendi
    #3 Gucci Chloé

    Entrupy Insights

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    In the United Kingdom, Fendi was the fastest growing brand for authentications by Entrupy customers, increasing its volumes by 300% from 2018 to 2019.

  • ITALY

    2019 Unidentified %
    20.6%
    Most Authenticated Highest Unidentified %
    #1 Gucci Fendi
    #2 Louis Vuitton Balenciaga
    #3 Chanel Saint Laurent

    Entrupy Insights

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    In Italy, Gucci was the fastest growing brand for authentications by Entrupy customers, increasing its volumes by over 800% from 2018 to 2019.

  • RUSSIA

    2019 Unidentified %
    18.7%
    Most Authenticated Highest Unidentified %
    #1 Louis Vuitton Céline
    #2 Chanel Gucci
    #3 Dior Balenciaga

    Entrupy Insights

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    In Russia, the proportion of Unidentified results for authentications of Céline products increased from 13% in 2018 to 38% in 2019.

  • CZECH REPUBLIC

    2019 Unidentified %
    18.3%
    Most Authenticated Highest Unidentified %
    #1 Dior Chloé
    #2 Gucci Saint Laurent
    #3 Louis Vuitton Hermès

    Entrupy Insights

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    In the Czech Republic, the proportion of Unidentified results for authentications of Chanel products decreased from 38% in 2018 to 33% in 2019.

  • UNITED ARAB EMIRATES

    2019 Unidentified %
    4.8%
    Most Authenticated Highest Unidentified %
    #1 Louis Vuitton Céline
    #2 Chanel Louis Vuitton
    #3 Gucci Dior

    Entrupy Insights

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    In the United Arab Emirates, the proportion of Unidentified results for authentications of Louis Vuitton products decreased from 17% in 2018 to 7% in 2019.

EXPLORE AUTHENTICITY RATES BY STATE

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  • CALIFORNIA
  • FLORIDA
  • GEORGIA
  • ILLINOIS
  • INDIANA
  • MICHIGAN
  • NEW JERSEY
  • NEW YORK
  • PENNSYLVANIA
  • TEXAS
  • CALIFORNIA

    2019 Unidentified %
    10.2%
    Most Authenticated Highest Unidentified %
    #1 Louis Vuitton Hermès
    #2 Gucci Goyard
    #3 Chanel Céline

    Entrupy Insights

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    In California, the proportion of Unidentified results for authentications of Prada products increased from 9% in 2018 to 13% in 2019.

  • FLORIDA

    2019 Unidentified %
    13.4%
    Most Authenticated Highest Unidentified %
    #1 Coach Balenciaga
    #2 Louis Vuitton Goyard
    #3 Gucci Céline

    Entrupy Insights

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    In Florida, Dior was among the fastest growing brands for authentications by Entrupy customers, increasing its volumes by over 400% from 2018 to 2019.

  • GEORGIA

    2019 Unidentified %
    11.8%
    Most Authenticated Highest Unidentified %
    #1 Louis Vuitton Goyard
    #2 Gucci Hermès
    #3 Chanel Balenciaga

    Entrupy Insights

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    In Georgia, the proportion of Unidentified results for authentications of Balenciaga products increased from 25% in 2018 to 40% in 2019.

  • ILLINOIS

    2019 Unidentified %
    5.7%
    Most Authenticated Highest Unidentified %
    #1 Louis Vuitton Goyard
    #2 Gucci Balenciaga
    #3 Chanel Dior

    Entrupy Insights

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    In Illinois, Saint Laurent was among the fastest growing brands for authentications by Entrupy customers, increasing its volumes by over 130% from 2018 to 2019.

  • INDIANA

    2019 Unidentified %
    5.9%
    Most Authenticated Highest Unidentified %
    #1 Coach Goyard
    #2 Louis Vuitton Dior
    #3 Gucci Céline

    Entrupy Insights

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    In Indiana, the proportion of Unidentified results for authentications of Prada products increased from 8% in 2018 to 25% in 2019.

  • MICHIGAN

    2019 Unidentified %
    10.2%
    Most Authenticated Highest Unidentified %
    #1 Coach Hermès
    #2 Louis Vuitton Chloé
    #3 Chanel Dior

    Entrupy Insights

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    In Michigan, Saint Laurent was among the fastest growing brands for authentications by Entrupy customers, increasing its volumes by over 800% from 2018 to 2019.

  • NEW JERSEY

    2019 Unidentified %
    7.4%
    Most Authenticated Highest Unidentified %
    #1 Louis Vuitton Goyard
    #2 Chanel Céline
    #3 Gucci Fendi

    Entrupy Insights

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    In New Jersey, the proportion of Unidentified results for authentications of Goyard products increased from 33% in 2018 to 40% in 2019.

  • NEW YORK

    2019 Unidentified %
    21.8%
    Most Authenticated Highest Unidentified %
    #1 Louis Vuitton Goyard
    #2 Gucci Céline
    #3 Chanel Chloé

    Entrupy Insights

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    In New York, the proportion of Unidentified results for authentications of Chanel products increased from 17% in 2018 to 20% in 2019.

  • PENNSYLVANIA

    2019 Unidentified %
    15.1%
    Most Authenticated Highest Unidentified %
    #1 Louis Vuitton Goyard
    #2 Coach Céline
    #3 Gucci Louis Vuitton

    Entrupy Insights

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    In Pennsylvania, the proportion of Unidentified results for authentications of Louis Vuitton products increased from 17% in 2018 to 24% in 2019.

  • TEXAS

    2019 Unidentified %
    7.0%
    Most Authenticated Highest Unidentified %
    #1 Louis Vuitton Hermès
    #2 Gucci Céline
    #3 Coach Dior

    Entrupy Insights

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    In Texas, Dior was among the fastest growing brands for authentications by Entrupy customers, increasing its volumes by over 400% from 2018 to 2019.

BUSINESS TYPES WITH HIGHEST UNIDENTIFIED RATES IN 2019

BUSINESS TYPE 2019 UNIDENTIFIED % INVENTORY SOURCE RELATIVE RISK
C2C MARKETPLACE 10.8% Items often come from an individual's personal collection, which may have been purchased from other resellers and/or thrift stores to be "flipped" for profit. Highest: Hotbeds for counterfeiters to sell fake items due to lack of authentication programs but decreasing as marketplaces add authentication services.
PAWN 10.2% Items are purchased from individuals at the point of sale. High: Merchandise coming from individual consumers and being taken in by untrained salespeople significantly increases the risk of counterfeits.
OFFLINE RESELLER 8.2% Items are often purchased outright from individual consumers who may or may not have an established reputation. Medium: Merchandise coming directly from consumers and nonexpert sales people increase the risk of counterfeits entering the supply chain.
ONLINE RESELLER 7.0% Items often come from a stable of reliable sources such as consignors and other resale companies, with whom the reseller has a history of transacting. Low: Unreliable sources are generally eliminated from the supply chain before they can exert negative impact.
WHOLESALER 1.0% Because these specialized players have strict rules for intake and sourcing, items usually come from reputable sources that may include other businesses, auctions and marketplaces. Very Low: High levels of expertise & experience keep "bad actors" from penetrating the supply chain.

Combating the Counterfeiting Problem

Video Poster Image

COLLABORATIVE APPROACHES ACROSS INDUSTRY ARE REQUIRED TO COMBAT THE COUNTERFEITING PROBLEM

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  • Brand
  • Retailers
  • Marketplaces
  • Government
  • Industry

Brand

Key problems

  1. Brands lose revenues from the diversion of genuine sales to counterfeit channels.

  2. The widespread distribution of counterfeits can dilute a brand's value in the eyes of consumers.

  3. Intellectual property enforcement can be a "whack a mole" game for brands.

Common solutions

End-to-end product traceability solutions

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  • These solutions enable products to be traced through their entire lifecycle, both physically and digitally - improving information flows, visibility and the detection of unauthorized or counterfeit products through the supply chain.
  • By extending these solutions to consumers, brands can empower customers to verify a product's authenticity and identity at the point of sale, consumption or in the after market.

Close collaboration with law enforcement

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  • Brands commonly work with governments and law enforcement agencies to support investigations into counterfeit activities, and provide evidence that lead to the prosecution of counterfeiters and their distributors and buyers.

Examples in action

LVMH's AURA platform for tracking luxury goods

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  • LVMH, in partnership with Microsoft and blockchain software company ConsenSys, has developed the AURA platform, a blockchain system for tracking and authenticating luxury goods.
  • According to reports, in 2020 the luxury conglomerate will launch this technology for Louis Vuitton and Parfums Christian Dior brands.

Columbia Sportswear on the front line

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  • Columbia Sportswear Company takes a proactive approach to fighting counterfeiters, by working closely with customs officials and law enforcement in over 50 countries to seize millions of counterfeit products.
  • In 2017, Columbia worked with Greek authorities to help seize 19,200 pairs of counterfeit Columbia shoes.

Entrupy Insights

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In 2019/20, Entrupy was selected as 1 of 26 companies to take part in Season 3 of LVMH's La Maison des Startups accelerator program, fostering collaboration with other leading technology startups and LVMH's 75 brands to develop innovative solutions.

Retailers

Key problems

  1. Retailers bear the risk of fraudulent customer returns entering their product inventory.

  2. Publicized cases of counterfeits being discovered by customers on shelves or after sales, can negatively impact a retailer's reputation and erode buyer trust.

  3. Retailers lose revenues from the diversion of genuine sales to counterfeit channels.

Common solutions

Authentication technology solutions to verify products

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  • First and second-hand retailers have traditionally relied upon internal knowledge and subjective verification procedures to verify the authenticity of goods - this commonly presents a challenge with expertise being difficult to source, maintain and scale.
  • Increasingly, retailers are turning to sophisticated product authentication technologies (such as those offered by Entrupy) to enable a more foolproof and efficient process for verifying goods.

Information sharing between brands and retail partners

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  • Close relationships between brands and retailers have become more critical than ever, to enable strong controls over the sourcing and distribution of authorized goods.
  • For retailers, increasing the scope in which product security information is shared by their brand suppliers empowers stronger detection and enforcement efforts at retail level.

Examples in action

UK luxury department store: Combating retail returns fraud with "fingerprints"

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  • Armed with the Entrupy Fingerprinting solution, the UK luxury retailer can instantly determine whether a customer's return is the same exact item that was originally fulfilled to that customer.
  • At the point of processing a return, an employee can take a single microscopic image using the Entrupy Fingerprinting app, to compare it against the original for tiny discrepancies that may indicate potential returns fraud.

Walmart sets the standards for its suppliers

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  • Walmart, the retail giant, operates more than 11,600 stores around the world and works with 100,000 suppliers.
  • Walmart uses its massive buying power to enforce strict standards upon its suppliers for information sharing and business practices, enabling strong controls over its sourcing function.

Entrupy Insights

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Entrupy Fingerprinting enables the unique characteristics of individual products - that are often imperceptible to the human eye - to be registered and subsequently verified with a single microscopic image.

Marketplaces

Key problems

  1. Publicized cases of counterfeits being sold on online marketplaces can negatively impact their reputation and erode buyer and seller trust.

  2. Online marketplaces are increasingly bearing legal liability for counterfeit goods being sold on their platforms by bad acting sellers.

  3. Listings takedowns and other forms of policing can be challenging for online marketplaces, due to the scale and diversity of listings, and anonymity of buyers and sellers.

Common solutions

Online monitoring solutions and listings takedowns

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  • Online monitoring solutions systematically query search engines and crawl websites of interest to identify potential counterfeit listings and brand infringements.
  • Leading online marketplaces commonly operate their own self-monitoring programs which enlist the help of brands and industry groups to detect and remove counterfeit listings being sold on their platforms.

Mandatory authentication processes

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  • To supplement online monitoring solutions, many online marketplaces have embedded product authentication as a key part of the transactional workflow.
  • In such cases, products are required to be authenticated, either by human experts, or using product authentication solutions, such as Entrupy, prior to final delivery to the end buyer.

Examples in action

Amazon's Project Zero monitoring program

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  • Amazon’s monitoring program, Project Zero, enables the scanning of 5 billion daily listing update attempts. Brands provide key data points about themselves (e.g., trademarks, logos, etc.) to drive the AI-based system, and are empowered to take action against suspicious listings themselves with a self-service counterfeit removal tool.
  • Critics of the program have claimed that it is a band-aid solution to a systematic problem for the global marketplace.

StockX's sneaker authentication process

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  • StockX, the e-commerce auction site for sneakers, luxury handbags, watches and streetwear requires that every product sold on their platform undergo strict product verification and authentication processes.
  • StockX's in-house team conducts "a multi-point inspection across the entire product" prior to shipping the verified good to the end buyer.

Entrupy Insights

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Entrupy is an authentication partner for e-commerce marketplaces and retailers, powering the instant detection of counterfeit goods at the point of transaction.

Government

Key problems

  1. Customs and border patrol agencies are often hampered by manual inspection processes that are based on human judgement, which are inefficient and difficult to scale.

  2. Tax revenues are displaced by the diversion of genuine sales to counterfeit channels.

  3. Global enforcement activities have become more challenging with the increasing sophistication of counterfeiting production and distribution practices.

Common solutions

Domestic enforcement activities

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  • Domestic efforts to curtail counterfeiting are fought on multiple fronts - via inspections at customs and borders, raids and investigations of suspected counterfeit distributors, and coordination across multiple government and law enforcement agencies.

Multilateral cooperation across international agencies

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  • Bilateral and multilateral engagements between government agencies are necessary for effective exchange of information on intellectual property enforcement operations, share best practices and to facilitate joint enforcement actions.

Examples in action

Dubai local enforcement efforts

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  • The Dubai Department of Economic Development (DED) partners with brands, international agencies and technology solution providers (including Entrupy) to fight against local counterfeiting activities. In 2016, the DED announced it had recovered goods worth Dh 1.6 billion (USD $435 million).
  • According to Mr. Ahmad Almheiri, Senior Manager of Trademark and Commercial Agencies Disputes at the DED: "The establishment of administrative level actions against counterfeiters will effectively help in reducing the visibility of counterfeit products in the market."

US-China Joint Efforts

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  • The US and China agreed that both parties will work to “combat the prevalence of counterfeit or pirated goods” on online platforms.
  • China has agreed to consider revoking an e-commerce platform’s operating license if there are repeated sales of counterfeit or pirated goods. The US, meanwhile, has agreed to study additional measures of combating the online sale of counterfeit or pirated goods.

Entrupy Insights

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Entrupy is an authentication partner for Dubai's Department of Economic Development, enabling local agents to instantly detect counterfeits during inspections and raids.

Industry

Key problems

  1. Consumers commonly lack awareness about the prevalence and risks of counterfeit products.

  2. A whole-of-industry approach to fight the global counterfeiting problem is difficult to facilitate, due to a hesitation by stakeholders to share commercially sensitive information.

  3. Intellectual property rights laws and policies are not standardized globally, which creates challenges for international enforcement actions.

Common solutions

Public education campaigns

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  • Industry bodies representing brands and other industry professionals work to curtail counterfeiting and protect the shared interests of their members globally.
  • They are mandated by their members to inform the general public of the dangers of counterfeiting.

Influence with international governments

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  • Industry bodies often undertake advocacy work with international governments to advance the interests of their members against counterfeiting.
  • They commonly promote thought leadership within their mandate, to influence the public and ultimately to enact policies which protect stakeholders from counterfeiting.

Examples in action

Unifab's consumer awareness during COVID-19

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  • Unifab is a French association of 200 organizations representing many sectors, whose mission is to fight against counterfeiting and protect intellectual property globally.
  • In 2020, Unifab launched a digital consumer awareness campaign to inform the public of the heightened threat of counterfeit commerce during the COVID-19 global pandemic, including risks to health and safety from fake medical supplies.

INTA's international advocacy for IP laws

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  • The International Trademark Association (INTA) works to promote effective trademark laws and policies worldwide on behalf of its nearly 6,500 members.
  • INTA carries out its policy and advocacy work through model laws and guidelines, board of directors resolutions, amicus briefs, testimony and submissions, and reports.

Entrupy Insights

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In 2020, Entrupy is a member of the inaugural Unifab Lab, a forum which enables brands, solution providers, and intellectual property experts to exchange about the needs and strategies in the fight against counterfeiting.

OUR RECOMMENDATIONS TO FIGHT THE GLOBAL COUNTERFEITING PROBLEM

  1. Brands must build even closer bonds with their supply chain partners

    • Currently the extent of information sharing by brands across their supply chains is highly variable. Retailers and distributors often bear the risks of counterfeits infiltrating their inventory, but have limited access to product security knowledge and/or mechanisms that are controlled by brands, to effectively monitor, investigate or enforce against incidents which can corrupt their supply.
    • Forging closer, multi-lateral relationships across the supply chain, with an emphasis on bilateral information sharing, will benefit brands and their partners.
  2. Brands must strengthen their engagement with consumers

    • Continual consumer engagement by brands and industry bodies about the dangers of counterfeiting to educate shoppers about the personal risks and societal costs of counterfeiting.
    • Brands can further reduce the demand for counterfeit "substitutes" by building stronger relationships with their customers. For luxury brands, the traditional emphasis has been on marketing the qualities of their products and longstanding brand heritage. More recently, these brands have developed campaigns that highlight product sustainability, experience and exclusivity.
    • Counterfeit sales have exploded online, particularly in the less regulated resale channels. Some brands may benefit from starting their own resale platforms (certified pre-owned), to discourage consumers from buying from "less reputable" sellers on any platform.
  3. Industry stakeholders must jointly co-opt new anti-counterfeiting technology standards

    • Despite the popularity of advanced anti-counterfeiting technologies - such as IoT-powered product security solutions and digital traceability platforms that leverage blockchain - being implemented at brand-level, other parties in the supply chain are unable to derive benefits, either (a) due to a lack of multi-lateral information sharing (as mentioned above), or (b) due to a lack of industry-level technology standards which makes deployment difficult or unscalable.
    • To maximize the benefits of technology on all fronts, it would be of interest for all industry stakeholders to jointly co-opt industry -based technology standards - where access to anti-counterfeiting solutions can be provided without compromising on brand confidentiality or trade secrets.
    • According to Mr. Ahmad Almheiri, Senior Manager of Trademark and Commercial Agencies Disputes at the Dubai Department of Economic Development (DED): "Technology can serve as a reliable median between authorities and trademark owners and/or their representatives by establishing an infringement claim platform which allows right holders to file an infringement case against the counterfeiters. Moreover the continuous development within AI technology physically help in identifying counterfeit and digitally aids websites to identify counterfeit goods based on different attributes."
  4. Industry stakeholders must collaborate and share information

    • Traditionally brands and retailers have been coy about sharing proprietary market intelligence about counterfeiting with industry peers, due to competitive tensions and a concern that any external acknowledgement of the counterfeiting problem may tarnish their public image.
    • Given the continual growth of the counterfeiting problem, a greater impetus is needed across all of industry to bring a united front to the fight against counterfeiting with significantly improved sharing of intelligence and best practices.
  5. International authorities must be provided stronger laws, tools and resources to enforce IP rights

    • A lack of universally strong and consistent trademark rights around the world hampers the efforts of authorities to enforce rights in different jurisdictions.
    • International lawmakers, working together with brands and industry bodies, must work together to ensure authorities have the requisite legal tools to fight counterfeiters at borders, and points of manufacturing and distribution.

SOURCES AND ACKNOWLEDGEMENTS

Sources:

Current Trends in Counterfeiting

Entrupy Insights: Counterfeiting in the Luxury Resale Market

  • Entrupy Analysis: we have analyzed the data from all authentications performed by Entrupy customers from around the world to identify counterfeiting trends in the luxury resale market, and derive insights on how we can further deter its growth.

Combating the Counterfeiting Problem

Acknowledgements:

We would like to provide our special thanks to the following customers and partners who provided us with access to their expert commentary and/or access to their digital media for use in this report:

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