Why luxury brands are putting microchips in your clothes and accessories 30-Sep-16
Fakes are everywhere. The flash of an ‘LV’ logo on New York’s busy Canal Street, or a pile of lookalike Chanel bags at Istanbul’s Grand Bazaar, hardly warrants a raised eyebrow these days. But counterfeiting continues to plague the luxury sector, costing European clothing and accessories companies an estimated …26.3 billion – about 10 percent of their sales, every year and doing damage to the reputation of their brands to boot.
Those of us who’ve ever been duped into buying a replica Hermès scarf at a second-hand store, or a knockoff Marc Jacobs bag on Ebay, have felt the pain of counterfeiting all too well.
Brands have long turned to trade associations and law enforcement agencies in costly efforts to shut down those making and selling knockoffs, but recently, they’ve also begun to seek out more technologically driven solutions. Moncler announced that beginning with its spring/summer 2016 collection, all of its products will contain small radio frequency identification (RFID) chips, each containing a unique ID that will allow users to scan and authenticate their goods via their smartphones or through the code.moncler.com website. Employing the same technology that allows Apple Pay users to swipe their phones at cash registers in lieu of pulling out their credit cards, it will make it far easier for customers to identify if the $1,200, Moncler-branded down coat they’ve just bought is a fake – no online guide necessary.
Moncler isn’t the only Italian-based luxury brand to use microchips in the battle against counterfeiting. Beginning with its pre-fall 2014 collection, Salvatore Ferragamo began embedding RFID chips into the left soles of its women’s shoes to allow the company to verify their authenticity. It has since added the tags to products in other categories, including women’s bags and luggage and men’s shoes and small leather goods.
RFID chips are not new, even in the retail sphere. Major merchants including Walmart and the UK’s Marks & Spencer chain have for years been working with their suppliers to attach RFID tags to products in order to help with inventory tracking and management, allowing those retailers to quickly assess where products are in the supply chain; how many they have in stock at a given warehouse, store or even specific clothing rack; and replenish accordingly.
Brands like the accessibly priced German women’s clothier Gerry Weber, which added RFID chips to its care tags in 2011, have seen double-digit sales increases almost immediately after integrating the technology, simply because they are able to restock their products more accurately and efficiently, says Steven Owen, executive vice president of sales and marketing at NXP Semiconductors, which makes Gerry Weber’s tags. Other companies have used it to fight theft, using the unique serial numbers in the RFID chips to prevent people from returning unregistered products to stores, or to target suppliers illegally producing excess stock and selling them on the open market.
So why are luxury brands getting involved now? Owen says that, though there’s been a clear business case for years, companies have been slow to adopt the technology, in part because building a system that identifies and tracks a company’s entire catalogue requires a considerable investment, costing a couple of million dollars for a small to medium-sized company to start. The proposition has also become more attractive as the quality and sophistication of these systems has improved, and as the size and price of chips have gone down. It costs Gerry Weber, for example, nine cents to tag each of the approximately 30 million garments it produces each year.
As with any new technology, particularly of the tracking variety privacy concerns abound. Gerry Weber deactivates its chips at point-of-sale, but for Moncler and Ferragamo, that would defeat the purpose. In Europe, where data privacy laws are more strict, you have to tell the client if you’re providing such a product with an RFID chip and serial number, says Owen. Indeed, Burberry discloses its uses of RFID on its website. There are some US state laws prohibiting, for example, the surreptitious scanning of RFID chips in ID cards, but nothing requiring that a retailer disclose chips are embedded in the products they sell.
It’s not hard to imagine a day in which everything, from our razors to the dollar bills in our wallets, are embedded with microchips. And the technology will only get more sophisticated over time. Last year, for example, researchers at Nottingham Trent University in the UK unveiled a prototype for embedding RFID chips into yarns. Three months ago, they launched a company, Advanced E-Textiles Ltd, to bring it to market.