An Interesting Solution to China’s Counterfeiting Problem
Surprisingly, it’s not Alibaba. The answer might come from “IoT” and the lowly QR code.

Penfolds was the latest premium wine label to (re-)discover that fake versions of its wines were circulating throughout Shanghai. In covering this never-ending story, the Sydney Morning Herald neatly lined up China’s counterfeit wine problem: Chinese consumers love top brand name products and shady people are willing to sell them fake versions of the same.

But China’s counterfeiting problem isn’t the focus of this article. Instead, it’s the proposed solution to that problem: the Internet of Things (IoT).

Don’t get your hopes up though. This wont be a stroll through the latest cutting edge IoT technology out there. Instead, we will focus on that tiny and not-at-all sexy IoT launch pad—the Quick Response (QR) code.

In the US, the QR code is only remotely relevant to the every day life of your smart phone. It helps you board an airplane but not much more. It’s all about the Apps in the US.  Adding contacts to your address book, Facebook, or LinkedIn, means typing in the name or email address.  Paying the driver means tapping the  Uber or Lyft App.  Getting brand discounts means using Twitter, Pinterest, or Instagram.

None of the above requires using a QR code.

However, in China, none of the above Apps is available or easily accessible.  Instead, people use their Chinese counterparts such as Didi (Uber), Alibaba (Amazon/eBay) or WeChat (FaceBook/Paypal/Instagram/you get the picture).  And unlike Apps in the US, all of these Chinese Apps involve heavy use of QR codes.

This is how it works.

If you’re walking around China, then your smartphone is either in your hand or at the ready because at any moment you may need to start scanning every QR code in sight. Or at least the ones that you want or need. The ones that allow you to buy awesome kungfu movie tickets at a discount or manage your company’s tax reporting.

In China, you are part of the Internet of Things and the QR code is your way in. 

Not convinced yet? Here’s a sample of my completely typical QR-tastic week in Shanghai.

When I paid for my taxi ride on Monday morning, I scanned the code on the dashboard and the fare was deducted from my bank account.  When I  signed up for that Thursday night pilates class I didn’t show up for, I QR-coded my way in. At every business meeting that week, I didn’t even bother with business cards. Those of us who wanted to stay in contact just scanned each others’ individual QR codes.

Exactly how dependent has modern Chinese life become on QR codes? The taxi driver who took me to the airport refused cash – can’t you just scan my code?

This is why QR codes are part of the “MUST HAVES” in China.

Will the QR code provide brand managers an easier and less expensive way to put an end to fake everything in China (rather than hiring trademark attorneys like us to investigate and prod the authorities to carry out an anti-counterfeiting raid)?

Who knows. But given the level of consumer buy-in for QR codes, a top brand wont remain a top brand in China if it can’t communicate through the QR code pathway.

Here’s what we propose for every premium brand:

Start working the QR code

You probably already have a QR code on your product’s packaging—go ahead, take a peek if you don’t know. If you see a boring, ugly thing that puts you right off, then your design is wrong. In China, brands and even ordinary people are creating functional QR code designs that are interesting and help tell their story. Remember, this is what your customer will see and spend a few seconds focusing on.

Is your market share really so great that you can let that opportunity pass by?

Give people somewhere they want to go

A QR code that matches your brand story needs to actually lead somewhere worth the trip. That place is trustworthy information land.

For example, China’s food safety and counterfeit food concerns are real. Providing more consumer information is what the Chinese government wants. Specifically, the law requires that  producer-to-retailer product documentation for the food and beverage market be kept and available for inspection. But if you’re a premium brand of any kind, then you should be very familiar with every face and place in your supply, distribution, and retail sales chains.

All of which means this data could sit in the Cloud waiting for audit or it could be used to verify that the expensive gift your customer gave his future mother-in-law isn’t fake.

That said, relating this information to your customers is very much a new kind of design challenge. One recent empirical study asked several Chinese respondents to rate their IoT product interaction experiences. Products with an engineered feel weren’t nearly as popular as those products with a warmer feel. And that’s the key. The IoT product must work well but it must also foster a connection.

So the information exists and used properly its another chance to tell your brand story.

But how do you up the trust?

Blockchain!

Designed to help ensure the validity of high-stakes low-trust transactions, blockchain technology is actually a natural fit in this area. If your QR code and your landing site are designed to tell the story you want, then using individual product information provided by your supplier, manufacturer, distributor, retailer to the blockchain gives a boost of credibility to that story. Because no one person or group of people can change what comes out.

Yes, what we’re saying is that you too can tell everyone you know that you’re working on a blockchain project. And this isn’t a futuristic as it sounds, at least in China. Huawei recently announced that it will be supporting open source blockchain as a service development. For those not in the know, Huawei is the leader in the Chinese mobile phone market. You should expect other Chinese tech companies to follow suit.

What this means is that off-the-shelf (read: cheap) blockchain mobile phone solutions for every conceivable problem are coming. And the QR code is the most natural way in.

But nothing in life is that easy and every system has it’s problems.

The QR code solution outlined above presumes that counterfeiting is caused by a lack of information. In fact, it’s a tailored solution for people who actually want to know if the product in their hand is real or a fake.

That’s not everybody though. Some consumers don’t care or simply choose to ignore the provenance of the products they buy. If you’re paying USD 50 for a bottle of wine that usually costs USD 150, do you really think you’re getting the real thing? In those cases,  a QR code isn’t the solution and the old anti-counterfeiting methods are all that’s left.

IoT can solve some problems but not all.

This article first appeared in Law360 on April 30, 2018 (available at https://www.law360.com/articles/1038362).  It is written by Amy Hsiao and Samuel Speed

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