Why Digital Identities Are the Key to Protecting Brand Authenticity and Integrity

For the 2021 holiday season, shoppers and retailers worried about inventory shortages and shipping delays, but for this most recent holiday season, many brands were dealing with an excess of product. At the same time, organized retail theft is on the rise, with 57 percent of retailers reporting an increase in 2022 year-over-year, according to the U.S. Chamber of Commerce. In 2023, it’s imperative that retailers have full visibility into their inventories and invest in solutions that allow them to track where products are across every link of the supply chain.

Brands and retailers can gain access to unprecedented amounts of data that help them optimize inventories and fight theft, fraud and shrinkage when they digitize their products at scale. By ensuring each individual item has a unique digital identity linked to a digital twin in the product cloud, a brand can then leverage artificial intelligence and machine learning to surface data insights that were previously inaccessible. Digitizing products by applying QR codes or watermarks to packaging or labels can also help brands protect their reputations by giving consumers an easy way to access the product details and authentication information they're seeking.

Digitization technologies help retailers and brands:

• Curb fraud by making packaging a source of sophisticated data: A September National Retail Federation study found that retailers lost $94.5 billion in 2021 because of theft (organized, employee or other), up from $90.8 billion in 2020. Counterfeit schemes expose companies and consumers to inferior products, threaten brands’ reputations and, in extreme cases, potentially endanger consumers. Advanced digital watermarks for packaging provide batch-lot and item-level traceability. By applying serialized or custom identifiers to product packaging, brands are better able to fight fraud. When every product has a unique digital identity that can be tracked in the product cloud, the process of authenticating items becomes more accurate, secure and scalable. Certain solutions can identify fakes and help companies significantly curb losses due to parallel trade and diverted goods, as digitization makes it possible for items to be tracked across the supply chain and even once in the consumer’s hands.
• Tackle inventory issues with more accurate, real-time tracking: One of the most effective ways for companies to protect their brand integrity and deliver a great customer experience is to keep a proper handle on inventory. Most brands have only limited visibility into where their products are and who is holding them at any given time. By digitizing products, brands gain access to intelligent insights into each product’s exact location and journey thus far, as do their customers. Brands can access actionable insights from across the entire value chain through product digitization, as it allows for the sharing of product data between brands, retailers, consumers, supply chain partners and recyclers.
• Enable end-to-end traceability to gain consumer trust: In an era when consumers expect brands to be fully transparent about the origin, ingredients and sustainability credentials of the products they manufacture and sell, the ability to track a product’s supply chain journey is crucial. Some 4 trillion consumer products are made, shipped and retailed globally every year, yet the end-to-end journey of each item is, for most goods, a black hole of insight, not only for the brands that create them, but also for shoppers looking for details about the items.

With digitization technology, brands and consumers can gain real-time visibility into a product’s journey and interactions all the way through the supply chain, from factory or farm to retail shelf to consumer and on through resale, recycling or reuse. Consumer-friendly technologies like QR codes and packaging watermarks give shoppers an easy way to access information about a product’s provenance and authenticity so they can fully trust the brands they're shopping.

Product digitization technologies help brands turn packaging into a rich source of data that can be used to fight fraud and theft, optimize inventories, and build brand trust and loyalty. These tools enable complete, real-time visibility into individual products’ lifecycles, from sourcing to sale and beyond, to help businesses operate more smoothly and provide the transparency today’s customers demand.

The good news is that the technology and global standards needed to facilitate mass scale product digitization continue to advance to meet real market needs. Product digitization will be non-negotiable for consumer brands in 2023.

Judy Moon is global head of sales at Digimarc, a pioneer in digital watermarking and cloud-based product data..