Alibaba Invests in Smartrac, Takes a Seat on the Board

The retail giant is investing in RFID technology company Smartrac Group with an eye on NFC solutions for brand authentication and engagement.
Published: July 27, 2018

Global retail, e-commerce and technology conglomerate Alibaba Group has invested in RFID technology to provide brand protection by acquiring a share of Smartrac Technology Group. While Smartrac has declined to disclose the percentage of shares the China-based company has acquired, JP Morgan remains the majority shareholder. With its interest in Smartrac products and solutions, Alibaba’s president, Michael Evans, will become the vice-chairman of Smartrac’s supervisory board.

Alibaba’s investment in Smartrac began about a year ago as a discussion regarding brand protection and consumer engagement, says Christian Uhl, Smartrac’s CEO. Alibaba is the world’s largest retailer and one of the largest Internet-based companies. In fact, the firm has outperformed Amazon, Microsoft and Google in public cloud revenue growth, according to a 2017 Gartner study. The company serves brands and manufacturers in Asia and around the world as a commerce service, as well as with a variety of solutions.

Smartrac’s Christian Uhl

Brands in Asia, and beyond, that sell high-value or luxury goods continue to struggle with the challenge of preventing counterfeits of their products going to stores or consumers, as well as with finding ways to engage with consumers to improve loyalty and secure further sales. Alibaba has been exploring ways to provide technology-based solutions. While that could, in the future, consist of an RFID tag built into products that might comply with both NFC and UHF RFID standards—for inventory management, as well as authentication—the best solution for consumer engagement is initially NFC technology, Uhl says. “The infrastructure is already in the hands of the consumers,” he states, in the form of NFC-enabled smartphones.

Smartrac offers its Smart Cosmos solutions that include RFID and NFC inlays and tags, a product data platform to create digital identifies for products, and a cloud-based system to manage digital identities. Alibaba plans to offer NFC-based solutions to brands that sell products through the online-based conglomerate, to make it possible for retailers and consumers alike to easily confirm a product’s authenticity. Companies could build Smart Cosmos tags into their product packaging, with a unique ID number encoded on each tag that can be linked to the product’s brand, type and stock-keeping unit (SKU).

A retailer or consumer can tap an Android- or iOS-based device against the tag to view content about that product. If the item is a counterfeit, the user will not receive a tag read. In the case of consumers, the tag offers engagement opportunities as well. If the brand chooses, it can link each tag ID to content about the corresponding product, as well as other offerings for the product owner, such as reordering options or discounts on related goods.

The investment by Alibaba could lead to significant NFC growth in Asia, Uhl speculates. To this point, he says, brands and retailers on the continent have employed QR codes for many of the functions NFC provides throughout Europe and North America. However, NFC technology provides benefits that QR codes are unable to offer, he says, such as enabling a simple tap of a phone to access data, and the ability to be built into packaging without being seen. Luxury brands would be unlikely to put a QR code on a label, for instance, due to the poor aesthetics.

Smartrac already has a presence in Asia, Uhl says, with pilots or early deployments under way in the food industry to ensure the freshness and safety of food products. Scandals involving food safety, such as the discovery of tainted baby formula in China a decade ago, have prompted brands to seek a technological solution to track the supply chain of consumable products.

Alibaba’s investment in Smartrac serves as a confirmation of what the technology company offers, Uhl says. “We see this as an accelerator” to NFC adoption in Asia and worldwide, he states.