Can Blockchain Solve Fake Goods Entering the Market?

In a nutshell: China bears a counterfeit problem. Let’s say it out loud and face it. Let’s get it off our chests. Admitting you have a problem is the first step to solve it. This isn’t something recent, fake goods have a long history in the country. Today, even as an economic powerhouse with ever-growing markets, and generous business opportunities, China can’t seem to figure out their counterfeit issues. But there’s light at the end of the tunnel.

 

The fundamental problem is that China’s retail channels are particularly opaque. There is little to none traceability of goods coming down the distribution tiers. Producers can’t even tell where their products end up, who’s acquiring them, or at what price point. Consumers, on the other end, simply can't know where the products come from, and most importantly if they’re the original goods. The wine and spirits business is one of the most distressed. Billy Chan, Co-Founder of DripChain estimated that 70% of alcohol bottles sold in China are fake. A concern both, in economic and health terms. 

Improving traceability has become an opportunity itself for people from all backgrounds, who are both helping the economy and making a name for themselves. Billy Chan is one of them, he developed Blockchain; the closest we’ve come to clear up our everlasting counterfeit problem. 

Billy Chan is a Canadian born Chinese that has been living in China for the past eight years. He moved to China after a school trip to Shanghai. “This city just captured me right from the start, I mean, the future is China. The future is Shanghai”. He was quickly employed by China’s Microsoft branch where he worked until he was bitten by the entrepreneurial bug. 

Billy had always been involved with technology but had a restaurant background too: his family runs several Chinese restaurants in Vancouver. “I wanted to focus in helping the small business community in China,” says Billy. He knew how fragile young startups where and chose to help by fighting fake products; specifically, in the food and alcohol industry. His solution was creating Blockchain.

DripChain

The wine and spirits business is one of the most distressed. Billy Chan, Co-Founder of DripChain estimated that 70% of alcohol bottles sold in China are fake. A concern both, in economic and health terms.

Blockchain is a traceability interface. In Billy’s words, it’s an end-to-end ecosystem that enables brands to trace their goods across the market. “Once you start seeing transparency in your supply chain you start seeing fewer fake goods” states the founder. Blockchain is a way to pinpoint every step a product takes along the distribution channels, from producers to end consumers; “From farm to fork and from grape to glass,” as Billy says.

The system requires everyone participate, all involved most input data to the program every time they buy or sell goods. The result is having products with a clear background, confident traceability.

The drink industry is not the only one that benefits from systems like Blockchain. Producers and importers, both national and foreign, are eager to trace goods that are commonly defrauded like honey, maple syrup, olive oil, and many others. To think they can use the information generated by Blockchain to adjust their selling strategy, develop new distribution channels and find opportunities in diverse markets is stimulating. 

Consumers are also interested in tracing their food. Chinese parents think twice before serving a glass of milk to their children. Is it real milk? Or a dangerous counterfeit? Consumers will keep their wallets half shut when they don't even know if bottled water is safe. On the other hand, consumer confidence will help boost sales while increasing loyalty to trusted brands. 

It hasn’t been easy; In order to trace goods effectively, every element in the chain has to compromise some of its logistical data. And distributors are not really compensated for collaborating. Supporting the tracing ecosystem represents putting in more work in an already busy 24-hour operation.

Billy realized he needed all tiers of the trade to cooperate, so he devised an incentive program. This concept makes Blockchain stand out amongst other traceability systems and is really his major innovation. Incentives in the form of gamification did the trick.

 Gamifying is applying recreational game strategies, to any part of the society. Gamified incentives engage users and rewards them for being part of the system “It keeps them wanting more”. Billy called for the creator of the iconic video game Call of Duty to help him gamify the food and beverage chain of supply, that's how serious he is. 

Blockchain is not yet out for sale, it’s in a development phase. But everyone, producers and consumers alike, is looking forward to it. The ambitious project is a push in the right direction but might not be the ultimate solution for the fraudulent practices in the market; the government must play its part. “It’s not only legislation but enforcement: Ensuring that people are caught selling fake milk…” concludes Billy. 

Some problems take longer to solve, they have deeper roots. And let’s be honest, China is not the only market with counterfeit problems; even first world European countries and modern western economies face the same enemy. China once again seems to be leading the way to fight it.

 

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Author: Franco Salzillo, Certified Somm & Wine Writer