Fake food is a problem, Alibaba hopes blockchain is the cure
The e-commerce giant says fraud is costing the global food industry $40 billion a year. Can blockchain-based tracking clean up the supply chains?
Alibaba’s Jack Ma has said that in less than 20 years, the e-commerce giant he founded will have two billion customers and 10 million businesses trading on its network.
If this prediction is true this will make Alibaba the fifth biggest “economy” in the world, outsized only by the US, China, the EU and Japan. That’s a lot of stuff.
And, potentially, a lot of fakes too. Counterfeiting is something that Jack Ma has been talking about a lot recently. And for good reason.
In January the US government put Alibaba on a trade blacklist for a second year running because of suspected counterfeits sold on its Taobao Marketplace platform.
Amazon too has been at the centre of a raft of allegations that claim the American-based online trading giant, that now clears an eye-watering $550 million a day in revenue, is “awash” with counterfeit goods.
In 2016 Ma made witty headlines when he annoyed luxury good brands by claiming that today’s fakes “are of better quality and better price than the real names” because the counterfeits use the same “factories, exactly the same raw materials but they do not use the names.” But clearly this is no joke to Ma, Alibaba or the wider online retailer sector.
In an open letter to China’s National People’s Congress last year, Ma asked for counterfeiters to be jailed.
“If, for example, we imposed a seven-day prison sentence for every fake product sold, the world would look very different both in terms of intellectual property enforcement and food and drug safety, as well as our ability to foster innovation,” he said.
Buying a fake dress will cause damage to the ripped-off brand’s bottom line. It might, if detected, cause embarrassment to the wearer’s pride. But purchasing fake food or medicine online is a different matter entirely.
Which brings us to blockchain.
While China has clamped down heavily on speculative cryptocurrency trading and mining, it is, after some high-level political lobbying from the likes of Jack Ma, Baidu’s Li Yanhong and Tencent’s Pony Ma, rapidly becoming the world leader in blockchain development and deployment.
In 2017, there were 400 global patent applications and more than half came from China. Tech conglomerate Tencent’s blockchain portfolio is already wide-ranging and includes finance, gaming, health and logistics. And while search engine giant Baidu might have been derided earlier this year by the blockchain community for launching its own collectible digital cat called Laici Gou that, talking of fakes, does seem startlingly similar to the original CryptoKitty, it has also joined the top-tier global open-source Hyperledger project in late 2017 to work on what it says will be the world’s biggest photo library.
Alibaba, meanwhile, owns more blockchain patents than any other company on the planet. Up to now these have had a financial focus, with all 49 patents belonging to its Ant Financial subsidiary. But the news that it has just started piloting a blockchain supply chain project called the Food Trust Framework that will track and authenticate cross-border trade, could have real significance on how global supply chains are managed and policed.
Fake food has been a real concern in China, scandals are common and the arms-length nature of online retailing has made the problem worse. Alibaba, on launching the Food Trust Framework, said that fraud now costs the food industry $40 billion a year.
Another Chinese retailer, JD.com, worked with IBM, Walmart and Tsinghua University’s National Engineering Laboratory for E-Commerce Technologies to launch the Blockchain Food Safety Alliance in 2017 that aims to bring transparency and authenticity to the global food supply.
Both JR’s and Alibaba’s system rely on the scanning of QR codes that will call up information on a farmer, grower or manufacturer as well as shipping and storage data. While it is easy to understand how this would work for a sealed packet of paracetamol it’s less clear, however, for say a box of oranges or a crate of fish. What’s to stop someone keeping the box with the QR sticker but swapping the item inside?
The owner of what might become the world’s fifth biggest “economy” should have an answer.
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