Japan’s beauty industry fights online fakes with blockchain

Smart packaging helps ensure that consumers are buying the real thing.

Cosmetics companies in Japan are turning to intelligent packaging technologies such as quick response (QR) codes, near field communication (NFC) tags, and blockchain to combat counterfeiting especially in online marketplaces.

Fake cosmetics are rampant in e-commerce sites, where consumers can’t physically verify what they are buying, Ahmad Khan, a senior analyst at GlobalData, told Retail Asia.

Counterfeiters use cheap ingredients, copycat packaging, and fake websites to deceive buyers, who also fall prey to quick promos on YouTube, Instagram and TikTok, he pointed out. Khan said 37% of Japanese consumers are influenced by social media ads.

Aside from QR codes and NFC tags that protect consumers from fake products, interactive features such as augmented reality (AR) and product tutorials let brands engage consumers  to increase brand loyalty, Khan said.

Japan’s beauty industry is projected to grow 5% to 7% annually through 2028, with online shopping expected to account for 21% of the market, according to GlobalData. As a result, manufacturers are under pressure to adopt anti-counterfeiting technologies such as blockchain.

The shift has also made Japanese consumers more discerning, with 72% prioritising product safety, leading brands to provide detailed product information and reviews online, he added.

“As a result, brands hoping to position themselves for strength in the Japanese market often provide consumers with detailed product descriptions, reviews, and certifications on online channels,” Khan said.

But Aya Suzuki, a senior analyst at Euromonitor International, said online shopping has barely made a dent, particularly for toiletries.

“With abundant physical stores and a preference for testing beauty products in person, online shopping is more common for high-value items like premium skincare, whilst added costs deter the purchase of everyday toiletries,” she told Retail Asia.

Whilst intelligent packaging has its benefits, its high cost is a barrier for smaller brands. Khan noted that whilst simple technologies such as QR codes are affordable, more advanced options such as NFC and blockchain need substantial investments in infrastructure.

Suzuki cited the limited adoption of these expensive technologies, with many choosing to rely on retail channels they have come to trust.

"Scalability is challenging for smaller brands due to high costs and technical requirements for solutions like NFC or blockchain,” she said. “QR codes provide a more accessible alternative with similar functionalities."

To overcome these challenges, smaller brands should focus on low-cost alternatives such as website verifications or partner with tech providers to share the costs, Khan said.

Khan also cited limited consumer awareness, privacy concerns, and environmental impacts as  key barriers to intelligent packaging.

"Barriers to adoption include high costs, limited consumer demand, and difficulty justifying the return on investment, particularly for lower-priced products,” Suzuki said.

Still, Khan expects intelligent packaging to evolve with the use of artificial intelligence to personalise consumer experience, wider adoption of blockchain to trace products, and demand for eco-friendly materials.

Suzuki said significant advancements would be limited to premium products.

"Significant advancements in intelligent packaging are unlikely in the next three years,” she said. “It is likely to be limited to niche segments like premium beauty and luxury products.”