Total Market For Product Image Security Technologies example essay topic

Product & Image Security - The Problem Product & Image security mainly addresses the problem of product and document related crimes. During recent years product related crimes have increased at very high rates. Some research indicates an estimated growth rate of such crimes at as high as 60% annually in the 90's, growing from around 3.5% of world trade to up to 7% today. The result is great losses to industry and commerce in the form of direct losses from decreased authentic product sales, and losses to governments in the form of lost taxation.

There are social costs involved, with an estimated 200,000 jobs lost worldwide per annum as a result of counterfeiting. And finally there are health hazards to the public as a result of counterfeit drugs, auto spare parts, faulty replacement aviation parts (! ), unsafe toys, etc. The legal systems in the world have not kept up with the pace of product related crimes, and the punishment imposed on such crimes are often ridiculously low compared to the damage imposed. It is widely believed that because of the low risks and the extraordinary potential gains, organized crime is getting increasingly involved in this kind of crime.

The National Crime Intelligence Service (NCIS) reports that 26 percent of organized crime groups are involved in product counterfeiting. There is a slowly evolving awareness of the problem among authorities, but little has been done so far in the field of legislation in general, and in the field of sanctions in particular. As a result most of the burden of prevention falls on the industry itself! Product related crimes include: 1. Counterfeiting. The copying and marketing of branded products - normally including packaging and product configuration.

The counterfeiters are becoming increasingly sophisticated, resulting often in difficulties to differentiate between the original product and the counterfeit. As a result the brand owner loses twice: once by the loss of the sales and secondly by the erosion of the value of the brand (brand erosion). Counterfeiting is a $200 billion industry in the US alone according to the IACC (International Anti-Counterfeiting Coalition). Counterfeiting Intelligence Bureau estimated the worldwide counterfeit market at $600 Billion in 1998.

Other forms of counterfeit includes: . Warranty frauds, which means removing warranty markings and replacing them with counterfeit markings. The automotive industry reported an estimate of an annual loss of $750 million / year due to this type of fraud... Receipt and return frauds, which means taking copies of valid receipts, then taking goods from the shop shelves which are then "returned" for refunds which take the form of cash or credit notes. Credit notes are also increasingly counterfeited. The problem of counterfeiting is in particular damaging to the following industries, according to a recent "Labels & Labeling Consulting" report: The market in Counterfeit Products Value of Counterfeit goods as % of legitimate market in 1998 Video Tapes 50% Computer Software 43% Music Tapes & CD's 33% Toys 12% Aircraft Spare Parts 10% Medicines 6% Watches 5% Perfumes 5% Medicines emphasize maybe more than any other sector the severity of counterfeiting.

In economic terms the counterfeit market of drugs is $15 billion dollars. Not only does this constitute a heavy loss to the Pharmaceutical companies, but also endangers public health. One example being the fake gentamicin responsible for at least 17 deaths in the US between May 1, 1999 and January 11, 2000.2. Gray Market Diversion. The shifting / reselling of branded products from authorized distribution channels to unauthorized channels, in order for third parties to profit from brand owners pricing policies. Gray market diversion is often referred to as parallel trading.

3. Unauthorized Distribution. The distribution of branded products "from the back door" of manufacturers producing on behalf of the brand owner. This kind of distribution may be of goods not meeting the quality requirements of the brand owner, or may be produced in "an extra shift" on behalf of the manufacturer. A major problem to the brand owner is that products which are distributed are indistinguishable from the original product. With the increasing trend of outsourcing manufacturing this is becoming an major problem to many brand owners.

4. Retail Theft or Shop lifting. Thefts of products from the shelves or from the storage space in stores. Retail theft include theft committed by shoppers as well as staff. The increasing size of stores, a relaxed attitude towards shoplifting from authorities, increased drug abuse, night opening, etc. has lead to retail theft become an ever increasing problem. According to an IACC research, the estimated value of retail theft added up to $120 Billion worldwide in 1998.5.

Product Tampering. Product tampering includes the deliberate contamination of food, beverage, health care, toiletries and cosmetics, etc. Other forms of product tampering include grazing - i.e. the sampling of products without purchasing, and pilfering - i.e. the removal of some of a product from its container. Tampering also occurs to facilitate fraudulent refunds, when the package is opened and its contents are exchanged for a counterfeit product, whereupon a the package is returned to the manufacturer for a refund.

Product & Image Security - Technological Solutions In order to tackle the problems posed by counterfeiters, unauthorized distributors, shoplifters, etc. technologies have been developed to allow authentication, track and trace capabilities, EAS systems (Electronic Article Surveillance), and more. There are 3 levels of security systems protecting against product related crimes; Overt, covert, and forensic. Level 1 - Overt Security. Overt security features, such as watermarks in legal tender, or holograms on credit cards, allow end users to make a fair evaluation of the authenticity of the product. However, most overt solutions may be counterfeited at very low costs. It is estimated that the cost of counterfeiting a hologram may be as low as a few thousand dollars.

Level 2 - Covert Security The definition of covert security is that a machine of some kind is required to read the security mark which is embedded. There are various types of covert security: Micro text, digital systems such as barcodes, and security ink - machine readable ink, magnetic systems, novel methods for altering the molecular structure of materials such as polymers which allows embedding invisible markers, etc. Level 3 - Covert Forensic Security Forensic, i.e. biochemical substances, may be used for fingerprinting products, such as drugs, spirits, etc. with a unique chemical marker. There are approximately 200 companies and 500 technologies worldwide offering security solutions. However, most of these technologies are outdated, and the counterfeiters are today capable of making counterfeits which include many traditional security features. There is a relatively small number of companies offering unique and difficult to counterfeit security solutions.

Moreover, many companies offering security solutions do not have the capabilities to offer end to end solutions. Product & Image Security - The Market A research published in 2000 by Labels & Labeling Consultancy estimated that the total market for Product & Image Security technologies was at $21 Billion in 1998, divided into the following categories: Global Demand for Product & Image Security 1998 Product / System $ Mn Traditional Security Printing 7,009 Holograms 808 Security / Intelligent Labels 950 Tamper Proof Closures 1,258 Tamper Proof Cartons 9,365 Electronic Article Surveillance - Tags 780 Electronic Article Surveillance - Systems 845 Total 21,005 The global demand for product & image security was expected to grow at an annual rate of 7% between the years 1998-2003. The various products systems in the following table: Global Demand for Product & Image Security $ Mn Product / System 1998 2000 2003 CAGR (%) Traditional Security Printing 7,009 7,290 7,740 2 Holograms 808 1,334 2,900 29 Security / Intelligent Labels 950 1,855 3,205 27 Tamper Proof Closures 1,258 1,392 1,656 6 Tamper Proof Cartons 9,365 9,740 10,340 2 Electronic Article Surveillance - Tags 780 1,086 1,877 19 Electronic Article Surveillance - Systems 845 1,120 1,660 15 Total 21,005 23,817 29,378 7 Security labels is the fastest growing segment. Adding more intelligence to a label is becoming a key priority for many manufacturers who suffer losses because of infringements on their brands, etc. Source tagging, i.e. incorporating the security label at the production site, is a major driving force for this market because of cost benefits as well as higher level of security.

These intelligent labels include special inks, holograms, special construction with RFID capability, anti-scan and anti-copy capabilities. The holograms market is also expected to show rapid growth. The slowness of adoption of holograms by the security print industry as an anti-counterfeit measure has to do with historically high costs. Another explanation is a conservative approach by the industry.

Now holograms appear on banknotes (new Euro), and passports, after being adopted early by the credit card industry. There are hundreds of holograms producers worldwide, but only a dozen active in security holograms. Growth drivers of this industry, apart from the rapid growth of the counterfeiting industry, is the increasing awareness among end users (brand owners, manufacturers), and their increasing willingness to dedicate resources to protecting against counterfeits, prevent gray market distribution, etc..