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How brands are fighting counterfeit cosmetics with blockchain

The connection between the beauty industry and blockchain is still in its infancy, but due to the pressing need for more transparency in the industry, it'll evolve to serve a broader purpose in the coming years.
How brands are fighting counterfeit cosmetics with blockchain
How brands are fighting counterfeit cosmetics with blockchain
Counterfeit cosmetics harm consumers and companies and break trust
Counterfeit cosmetics harm consumers and companies and break trust
Recent developments in blockchain allow for verification of product origin and ingredients
Recent developments in blockchain allow for verification of product origin and ingredients
Blockchain can protect both beauty conglomerates and small brands
Blockchain can protect both beauty conglomerates and small brands
Supply chains are going through a severe crisis. The beauty industry has been hit by a horrendous increase in counterfeiting. Counterfeiting has damaged the reputation and profits of brands and the health of consumers

Supply difficulties have led to an increase in the production of counterfeit cosmetics. Taking advantage of the cosmetics industry's difficulties, counterfeiters flooded the market with their products – cheap cosmetics and perfumes that at first glance are indistinguishable from the original. Another reason for the increase in counterfeit products, besides delivery problems, is the shift of sales to the Internet and the growth of marketplaces that don't keep a close eye on products.

Skin care is a leading category, accounting for 36% of the global market, and considered one of the most lucrative avenues for attackers.

The U.S. Patent and Trademark Office ranks the production and sale of counterfeits among the largest criminal enterprises in the world and predicts that counterfeiting will contribute $4.5 trillion to the global economy by 2024.
Counterfeit cosmetics endanger customers and brands
According to the Red Points report on toxic ingredients, counterfeit beauty products can contain arsenic, copper, mercury, beryllium, cadmium, bacteria, animal waste, cyanide, and solvents. For example, laboratory analysis of counterfeit MAC lipstick showed that the concentration of lead in it exceeds the allowable limits by 15 times.

Multiple violations and unsanitary conditions of counterfeit production can cause serious health problems. It has been proven that low-quality eye makeup can cause various viral and bacterial infections.

Counterfeits cause significant financial losses for the brands themselves: In the 2020 pandemic year, the cosmetics industry lost $5.5 billion due to a dramatic influx of counterfeits. Just as importantly, counterfeiting threatens the reputation of reputable companies.

The brand protection company INCOPRO estimates that 66% of customers lose trust in a brand once they've bought a counterfeit product with its name and logo. If the Red Points agency is to be believed, 50% of consumers are also convinced that it's up to the manufacturers of the original to solve the problem of counterfeits. In turn, practice shows that effective resistance to counterfeiting is impossible without the active participation of buyers. They should be no less involved in the fight against counterfeiting than the brands do.
Counterfeit cosmetics harm consumers and companies and break trust
Counterfeit cosmetics harm consumers and companies and break trust
Recent developments in blockchain allow for verification of product origin and ingredients
Recent developments in blockchain allow for verification of product origin and ingredients
Blockchain can protect both beauty conglomerates and small brands
Blockchain can protect both beauty conglomerates and small brands
Blockchain in the fight against counterfeiting
Companies are trying to fight counterfeiting in a variety of ways. Some companies, like Foreo and Beautyblender, have partnered with Red Points, an agency that develops technology solutions to protect intellectual property. Using data from the Brand Intelligence platform, companies track misbranding online and make quick decisions to block it.

Experts believe that the counterfeiting boom has once again underscored the importance of consumer safety and brand transparency that blockchain can provide. This technology not only enables cryptocurrency transactions, but is also a practical tool for coordinating logistical processes. Blockchains with information about all product movements and all related transactions allow customers to trace the origin of the product and understand if they have encountered counterfeits.

In 2019, LVMH has turned to blockchain to protect its own fashion and beauty brands. The Aura blockchain network, which LVMH developed with Microsoft, stores data on the origin of raw materials and the production process – generally the entire lifecycle of a product before it reaches the customer. Aura also shows where the supposed perfume bottle was originally purchased and where it is offered for resale, which helps keep track of trade on the gray market.

Groupe Clarins has just converted information on 26 of its products and agencies to blockchain. The system has three interfaces: one for suppliers to provide information on ingredients, certificates, and facts such as harvest dates and batch numbers of plants. The second interface is needed by consumers for verification, which is a platform called T.R.U.S.T. And the third interface stores all data like a vault.

Brands are using blockchain technology to lift the veil of false claims and ultimately change the way we store. Amid growing attention that the beauty industry is not as transparent as it should be, this is very convenient for brands looking to increase consumer trust.
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