How Shinsegae International enhances customer experience and prevents counterfeiting with Amazon QLDB

This is post is co-authored by BubKwan Lee, head of the e-commerce development team at Shinsegae International.

Like any other industry, the retail industry is rapidly accelerating its digital transformation to meet ever-changing consumer needs. In particular, the retail luxury industry, where online and second-hand transactions are increasing, is investing heavily in efforts to create an environment where consumers can purchase luxury goods with confidence by solving the problem of counterfeit goods, the biggest challenge in the luxury market. These efforts will eventually increase shopping satisfaction and enhance the customer experience of luxury buyers, and improve loyalty to the brand.

Shinsegae International, a large online and offline luxury retailer, sells a variety of clothing, cosmetics, and other luxury goods. Based on the increase in demand for luxury goods, its sales in the third quarter of 2021 reached KRW 350.2 billion in 2021. Shinsegae International has built a luxury online platform where customers can trust and purchase products, differentiating itself from other retailers. With a digital authenticity verification service based on Amazon Quantum Ledger Database (Amazon QLDB), Shinsegae International solved the problem of counterfeit goods and created a reliable luxury purchasing environment. By reducing the risk of forgery and falsification of digital authenticity certificates by using a database that can’t be forged or tampered with, they solved the industry’s long-standing challenge of a transparent luxury distribution environment.

In this post, we share how Shinsegae International built a digital authenticity verification service using Amazon QLDB to inform customers of the authenticity of luxury goods and provide purchase and distribution history of products.

The need for verifying authenticity of luxury goods and transparency in distribution

As the luxury market grows, the number of counterfeit goods also increases, and luxury retailers need to provide a transparent distribution process so that consumers can purchase with confidence. According to the 2019 report published by the Organization for Economic Cooperation and Development (OECD) and the EUIPO, the international trade in counterfeit and pirated products could have amounted to as much as $509 billion in 2016, estimated to be 3.3% of world trade—up from $461 billion in 2013, representing 2.5% of world trade.

In the retail luxury industry, new distribution channels such as pre-owned luxury goods resale or online purchase are already sizable. However, consumers have limited ability to verify a product’s authenticity. In the case of online purchases in particular, it’s difficult to confirm authenticity, so a fast and convenient method is needed to confirm whether the product is authentic. Furthermore, resale transactions on the second-hand market have also been skyrocketing, but it’s hard to check the history, condition, and authenticity of a product, so it’s important for luxury retailers to be transparent about the distribution of luxury goods.

Therefore, distributors and retailers are trying to provide more transparent product distribution information by improving product lifecycle management so that customers can verify authenticity, track ownership, and even track distribution routes after the sale of a product.

Authenticity verification service

A digital authenticity certificate, which luxury retailers can adopt as a new way to protect their products against counterfeit goods, is a kind of authenticity assurance certificate that certifies that the luxury product purchased by the customer is authentic. The digital authenticity certificate contains all information in the distribution process, such as manufacturer and product information, purchase history, and ownership change. The function to change ownership and transfer certificate is also provided. This ensures authenticity in second-hand transactions and prevents resale of stolen products.

Another reason for introducing a digital certificate of authenticity is that you don’t need to spend time and money on authenticity verification through a digital certificate-based authenticity assurance service.

The digital authenticity certificate is made of a unique encrypted digital code by combining the client’s ID, the product’s unique serial number, and the order number generated when purchasing the product. The generated certificate can’t be forged or duplicated after it’s created, and can be checked and managed through the authenticity verification platform. In addition to the unique digital code, the digital authenticity verification service can store and manage product information, purchase history, warranty period, ownership, and the entire distribution process, from product receipt to delivery, and provides history inquiry service to consumers.

The following figure illustrates a sample digital authenticity verification workflow.

The workflow for Shinsegae International’s digital certificate of authenticity service using Amazon QLDB is as follows:

1. Issuance of digital authenticity certificate – When a customer purchases a product, a digital authenticity certificate is issued with information such as product serial number, customer information, date of purchase, and seller. The digital authenticity certificate is stored in the Amazon QLDB ledger, which is called the document, which is organized into a block and appended to the journal. Amazon QLDB also calculates and stores the cryptographic hash for the document when the document is written into the ledger. The Amazon QLDB ledger is built on the journal, which is a sequence of blocks where each block represents a transaction in the database. The journal is append-only. Changes are made by appending new revisions of data to the journal. If the product is resold, the document including the transfer history of the product is stored in Amazon QLDB. Blocks in the journal are chained together with cryptographic hashes, allowing the integrity of the journal to be verified with cryptography. Data from the journal is accessed through a document database interface that offers a SQL-like query language called PartiQL. Data stored in the journal is additionally stored in the current table and history table.
2. History inquiry – When a customer or seller sends a product serial number, Amazon QLDB searches by product serial number and delivers information such as the purchase history, resale, and after-sales service history of the product. When inquiring on the change history of data stored in the Amazon QLDB ledger, you can quickly read the history table from which the contents of the journal are transferred with PartiQL, which is compatible with familiar SQL.
3. Authenticity history verification – When a digital authenticity certificate is sent to verify the validity of the issued certificate, the verification result compared with the digital authenticity certificate stored in Amazon QLDB is delivered. The method to prove that the digital authenticity certificate has not been forged in Amazon QLDB is as follows:
   1. Amazon QLDB uses the SHA-256 hash function with a Merkle tree-based model to generate a cryptographic representation of your journal, known as a digest.
   2. The digest acts as a unique signature of your data’s entire change history as of a point in time. It enables you to look back and verify the integrity of your document revisions relative to that signature.
   3. Not all hash values ​​of the Merkle tree are used for verification, but only the minimum hash values ​​required for verification are selected and a new digest value is created and compared to the existing digest.

For a more detailed validation process, refer to Real-world cryptographic verification with Amazon QLDB.

Blockchain vs. Amazon QLDB

In a blockchain, multiple untrusted stakeholders intervene to solve problems through consensus protocol, and the consensus is stored as a decentralized distributed data structure or ledger. Amazon QLDB, on the other hand, is not a decentralized blockchain technology, but a centralized ledger database. If the application requires decentralization and involves multiple untrusted parties, then blockchain technology may be appropriate. However, if your application requires integrity and verifiable history of all changes, but doesn’t involve multiple untrusted parties, then Amazon QLDB is for you.

In the case of blockchain, transaction processing is relatively slow due to decentralization and complex consensus mechanism, but because Amazon QLDB is designed to be centralized and can process data without multi-party agreement, it’s much faster than general blockchain ledgers, and is equivalent to a fully managed AWS database in regards to ease of use and scalability. For more information about blockchain services, see Amazon Managed Blockchain.

Shinsegae International required a ledger database technology that transparently manages all data changes, can’t be forged or tampered with in the digital certificate service, and officially imports products with exclusive distribution rights. In addition, because the company is in charge of direct sales of imported products to customers, a decentralized design wasn’t necessary. Therefore, Shinsegae International was able to quickly implement a digital authentication service using Amazon QLDB.

Serverless architecture

Shinsegae International’s digital authenticity verification service was designed to minimize the operational burden while responding to rapidly changing business needs based on the latest serverless technology. Therefore, it was built on a serverless-based architecture using Amazon API Gateway, AWS Lambda, and Amazon QLDB. Amazon QLDB is a fully managed database that automatically scales to meet the demands of your application without servers to manage, and there is no need to provision capacity or configure read and write limits while meeting your expected level of reliability and scalability.

The following diagram illustrates the architecture for Shinsegae International’s digital authenticity verification service.

In the digital authenticity verification service, information required for issuing and verifying a digital certificate is transmitted in a secure encrypted tunnel, issued and verified by Lambda through API Gateway, and all transaction results such as issuance and change are stored in Amazon QLDB.

Conclusion

In this post, I explained how to build a reliable digital warranty service based on Amazon QLDB’s encryption verification technology and immutable database to store information such as authenticity verification and purchase history.

Upon purchase, the customer receives a digital certificate of product ownership from an authorized luxury retailer, which can be used for verification of authenticity and proof of ownership if necessary. In the case of resale, customers can inquire about the provenance of the product, thereby enhancing the transparency of product ownership. Vendors provide convenient online authenticity verification services to customers and can solve problems with counterfeit products in the second-hand market.

Luxury retailers such as Shinsegae International can use AWS’s serverless services to enhance their customers’ luxury shopping experience by providing reliability and convenience in their products while improving agility and operational efficiency. Refer to Amazon Quantum Ledger Database for more information on serverless application development using Amazon QLDB and related products.

About the author

BubKwan Lee is head of the e-commerce development team at Shinsegae International who is interested in architecture including microservice architecture and always dreams of making legacy systems more efficient. He is contemplating and striving for self-growth in a development area, creating an environment where talented people can grow.

Hyungil Kim is a Senior Solutions Architect at AWS working with Enterprise Retail customers in Korea. He has over 20 years of experience helping organizations achieve their business outcomes with technology.

Hye Young Park is a Principal Solutions Architect at AWS. She has experience in search engine, messaging, and big data at Yahoo, Samsung, and SKT.