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Entrupy Technology Looks to Curb Luxury Counterfeits at the Customs Level

Counterfeiting is the bane of every big brand but an acute problem for luxury labels in particular.

Three-year-old startup Entrupy developed a system based on proprietary artificial intelligence authentication technology and microscopy to gives brands, consumers and law enforcement agents, among others, a tool to verify whether their high-end product is fake or for real.

In the 2019 edition of the Entrupy State of the Fake report, the company set out to uncover trends and changes in the counterfeiting landscape. According to Entrupy, 90 percent of items scanned using its technology were found to be authentic, up from 85 percent in 2017. While the dollar value of authentic product more than doubled from $17.5 million in 2017 to $43.5 in 2018, $5.9 million worth of “unidentified” luxury goods were scanned last year, compared to $3.6 million in 2017.

Entrupy believes certain trends on the secondary market could be responsible for these results. Not only is there greater accountability among sellers for the goods they put up for sale, but everyday consumers are also banding together in Facebook groups and forums to point out counterfeits and prevent them from falling into the hands of an unsuspecting shopper.

However, advancements in authentication technology, coupled with heightened brand attention to, and enforcement of their intellectual property, could make some counterfeiters think twice about whether trafficking in knockoffs is worth the risk, Entrupy said.

The company spent more than two years developing its database of luxury reference samples, and today it has the infrastructure in place to authenticate 15 of the top luxury handbag and accessories labels from Balenciaga and Hermès to Dior and Saint Laurent. Louis Vuitton accounted for the lion’s share of products scanned using Entrupy’s handheld device at 50.9 percent in 2018, while Gucci bags formed 13.5 percent of the total, Chanel took 12.3 percent, and all other brands comprised the difference.

Year over year, Louis Vuitton’s dominance at the No. 1 spot remained unchanged, while Gucci and Prada traded places for the No. 2 and No. 3 positions. Entrupy said other brand movement within its top 10 was linked to the arrival of brands newly supported by its authentication technology as well as new materials, like a Prada nylon, added to its reference database.

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Strong demand for Prada accessories led to the biggest year-on-year rise in the value of merchandise authenticated by Entrupy. In the fourth quarter of 2018, Entrupy scanned $1.5 million worth of Prada goods, up from $230,000 from the year-ago period and showing the highest growth among all 15 brands. Chloe, “among the most difficult to authenticate manually,” Entrupy said, had $527,000 worth of goods scanned, compared to just $35,000 the year prior. The company said millennial-favorite Balenciaga is getting a popularity boost from its status among athletes and rappers, helping it grow from $89,000 to $946,000 worth of goods scanned last year.

Rates of authentic versus “unidentified” products vary from one brand to the next. Goyard (31 percent) and Hermès (28 percent) were found to have the most products that couldn’t be authenticated, Entrupy said, while just 3 percent of Bottega Veneta products were deemed “unidentified.” However, the company pointed out that the volume of products scanned from each brand also differs significantly and factors into the percentage of fakes versus real.

“The popularity of a brand drives demand for the brand’s items from buyers in the secondary market. This increases the opportunity for nefarious businesses or unethical consumers to bring fakes into the market,” the report said, adding “The high proportion of unidentified Goyard and Hermès items is likely a result of the high demand for the Goyard St. Louis and Hermes Birkin styles.”

Then there’s also the scarcity factor. Brands including Goyard and Hermès “historically ensure there is a limited supply of their products have a higher proportion of Unidentified because there are simply fewer Authentic ones in the secondary market,” the report explained.

Given that secondary markets have shifted heavily onto the internet, it’s little surprise that online resellers drive the highest value of authenticated products at $19,082 as well as the highest value of goods that couldn’t be verified: $1,756. Offline resellers drove $11,362 of authenticated and $1,349 unverified goods, while $1,634 worth of goods sold on marketplaces were unidentified, compared with $9,277 worth of authenticated merchandise, according to Entrupy.

Vidyuth Srinivasan, who co-founded Entrupy and serves as CEO, said certain factors prevent the company from supporting authentication for a brand like Michael Kors, citing the label’s “turnover of new products and new kinds of materials” as a particular challenge.

Entrupy plans to expand its areas of coverage as it proves that its scanning technology is making a difference to multiple stakeholders.

“Our goal is to protect everybody up and down the value chain. We want to work with the brand, retailers, law enforcement, resellers and maybe even consumers,” Srinivasan explained. “But the difference is if you’re able to track and trace better at the manufacturer and up the chain, then the number of counterfeits you will be exposed to over time will actually reduce at the consumer level.

“If you have a one-size-fits-all tool at the border, you will see more efficient enforcement of counterfeit goods at the customs level,” he said.