Italian Purse Company Finds a Discreet Way to Prevent Gray Market

By Claire Swedberg

Braccialini is using Tertium Technology's BlueBerry keyfob readers to inconspicuously determine if unauthorized outlets are selling its goods, and to investigate the history of such diversions.

When inspectors working for Italian leather goods manufacturer Braccialini enter a store searching for gray-market products, they cannot afford to attract attention. The inspectors approach a Braccialini purse or wallet on a store shelf, and quickly pass a tiny RFID reader over that item's RFID tag before the store's staff can notice what they are doing, after which they make a hasty retreat.

"These inspectors are risking their lives," says Alvise Mariuzzo, the IT manager at Braccialini, which sells its leather handbags, sandals, jewelry and other merchandise worldwide at brick-and-mortar stores, as well as online. The company seeks products being sold at unauthorized venues, and then researches where those goods were diverted to, and by whom. But the unauthorized stores' management is often not very receptive to such efforts, so Braccialini's inspectors must be discreet. The solution chosen for this activity, provided by Temera, consists of a Tertium Technology ultrahigh-frequency (UHF) RFID BlueBerry reader to interrogate tags sewn into the goods, and then forward that data to a server via a Bluetooth connection to a smartphone, according to Francesco Pieri, Temera's cofounder. The Temera software manages the RFID read data and stores details regarding each product and its expected supply chain route, thereby helping Braccialini to discover at what point a particular item may have been diverted to an unauthorized channel.

Braccialini's Alvise Mariuzzo

Braccialini initially began attaching RFID tags to products to identify any that are counterfeit, Mariuzzo explains. In 2010, the company chose to also use the tags to identify its bad customers versus good. A bad customer, he says, is one that sells Braccialini products via the gray market, in which typically high-value goods are diverted from a brand's approved sales channels to other, unofficial entities, such as Web sites or stores that may sell products at lower prices. The process is not illegal, but can affect the product's value. In addition, manufacturers may not honor the warranty of an item purchased from the gray market, so it can be detrimental to consumers as well.

Braccialini's management had suspicions about who its bad customers might be, but it needed proof before it could take action to rectify the problem. If a product was intended for sale in Italy but was found at a store in Russia, for example, the leather goods manufacturer wanted to know who was responsible for its diversion.

With an RFID tag incorporated into every piece of merchandise, an inspector equipped with an RFID reader can walk into any store selling gray-market merchandise and, with a tap of the device against a product's sewn-in tag, quickly determine the item's intended recipient, as well as the point along the supply chain at which it was diverted.

To enable this functionality, workers at Braccialini's warehouse sew a variety of Lab ID EPC Gen 2 passive UHF RFID inlays with Impinj Monza 4 chips into the products. Each tag's unique ID number is then linked to that item's details, including its stock-keeping unit (SKU), in the company's management system. When the goods are prepared for shipping, the intended receiving party is input into the Temera software—data that is also linked to the tag ID number.

The company employs inspectors native to nations such as Russia, China and Japan, who periodically examine goods at stores operating within those countries and determine if any are selling Braccialini goods via unofficial channels. Each inspector is equipped with a battery-operated BlueBerry reader, measuring 6.8 centimeters by 4.2 centimeters by 1.8 centimeters (2.7 inches by 1.7 inches by 0.7 inch)—small enough to fit in the palm of a hand, says Alessandro Zocchi, Tertium Technology's sales and marketing manager. The device's small size enables an inspector to discreetly read a garment's RFID tag and forward its ID number to the phone via a Bluetooth connection. An application running on the phone transmits the tag ID directly to the Temera software residing on Braccialini's server, in order to identify the item's SKU and intended chain of custody, including the shop at which it should be sold. The company can then address the problem with the store selling the product, as well as with the firm that diverted it to the unofficial seller.

Since its adoption of Temera's software and Tertium Technology's RFID readers in 2010, Zocchi says, Braccialini has noticed a drop in the gray-market diversion of its goods, in part because the businesses that have been causing the problem are easier to uncover. Mariuzzo says the company is less concerned with measuring a monetary gain from reducing the gray-market diversions, and more with identifying bad customers—and that, he says, it has done well thanks to RFID.