There is booming business in importing low priced designer cosmetics and brand name goods into Europe that were meant for other countries.
It is called parallel importing.
Until brand owners make prices the same the world over, a Swiss high tech startup company has come up with a way to foil modern day brand pirates.
The profits in parallel importing lie in price differences between countries. Brand name and luxury items meant for the US or Singapore are offered at prices lower than they are in Europe.
"Wherever a brand is successful, wherever there is a margin to be made, you will find grey markets," says Guido Benadini, a former Swatch marketing man who now works with the Swiss-Swedish brand consulting and software company, Crossmedia International.
Top names, such as Oral B, Levis Chanel, Lancome, CDR, Estee Lauder, MAC, YSL, Anna Sui, D&G, Bulgari, Escada, even MontBlanc pens, are just some of the brands that make it on to the grey market.
Parallel importing is banned in Europe with countries outside the union. The EU is trying to stop importers from buying anything from Levi jeans to perfume in the US or Singapore (to name two examples) and selling them cheaper than items brought in via the manufacturer's distribution channels. These are genuine without alterations.
Grey market products
Grey market products are distinct from counterfeits, which are copies of branded products, identically packaged and marked, intended to deceive the consumer.
Grey marketeering is on the increase, as is counterfeiting of brand name products. Brand experts lump counterfeits and grey market imports together.
"They both have a negative impact. They undercut contracts made with existing distributors. They undermine the quality and related services that a manufacturer has spent time and money building," says Benadini.
AlpVision SA, based in Vevey, helps manufacturers to identify authorised products for a particular market. It enables printed codes to appear on the packages of cosmetics, drugs, or other high value items, that are not discernible to the naked eye. It calls the technology Cryptoglyphs. It is an effective form of digital watermarking.
Other technologies, such as holograms and inserting certificates with authentication codes into packages have been used, but grey marketeers find ways to get around them, even going as far as hiring workers to scratch out or cut out the codes from the primary packaging, according to Fred Jordan, AlpVision CEO.
His company's technology makes it impossible to remove the digital watermarks because "to do so would destroy the entire package", according to Jordan Besides, holograms and the like are intrusive. They interfere with the look, he says.
AlpVision's technology is invisible, but can be viewed with a standard optical scanner equipped with AlpVision's software. Standard industry printers are equipped with its software, which then prints a code onto the packaging or papers - basically very tiny dots arranged in a pattern that is difficult to reproduce.
The solution appeals to industry as no expensive adjustment to the printing factory equipment or change to the printing process is required. The resulting secure documents "are virtually impossible to reproduce", says one of the licensees of AlpVision's technology in a press release.
Licensing is key
An AlpVision licensee, dotrix n.v, a Belgian manufacturer of the high-speed inkjet digital color press equipment, recently won an industry award for an outstanding achievement in counterfeit deterrence for a product it created with AlpVision as partner.
It also has an agreement with Adobe to integrate AlpVision's Cryptoglyph technology into Adobe Illustrator and Adobe Acrobat. Trueb SA, a Swiss company signed an agreement to use the technology to personalize and protect value documents, as did the Banqe de France last year.
The security printing market that AlpVision targets is said to be $1.5 billion in 2002. According to the company the market is split between "Security Documents", such as passports, stocks, and ID cards, and "Brand Authentication", representing $650 million and $850 million, respectively.
The AlpVision business
AlpVision aims to license its technology to leaders in security printing and brand protection. It's founders are Martin Kutter and Fred Jordan, both experts in image, video and document watermarking. Individual investors, not venture capitalists, back it.
The two year old company employs 14 people, only 3 of whom work in Lausanne. The rest are working in Monaco and Singapore where its customers are located. It plans a significant increase in workers in 2003.
It is a spinoff of the Signal Processing Laboratory, Swiss Federal Institute of Technology (the LTS lab at the EPFL) in Lausanne -- a lab that is gaining an international reputation for its digital signal processing work thanks to its involvement in setting industry compression standards.
It is has spun off a number of startup companies, such as Fastcom, SnowieGroup SA (formerly Oasya SA), and VisioWave, all of whom are considered to be promising startups and are creating new jobs.
The laboratory is run by Prof. Murat Kunt and Prof. Touradj Ebrahimi.
By Valery Thompson
AlpVision sells digital watermarking software, developed at the LST lab at the EPFL.
It's business model is to license software.
Demand is driven by the brand owners' need to protect trademarks.