On a recent day, new sneaker boxes were seen stacked on silver-colored racks on a large floor in a warehouse in a Tokyo neighborhood lined with small factories.

Last fall, the Japanese arm of StockX, a leading U.S. reseller, set up an authentication center on the third floor of this distribution warehouse.

A 20-something authenticator showed how authentication of high-priced sneakers was done.

The appraiser picked up a box of Nike Dunk shoes to check for dents and scratches.

Then, the authenticator carefully took the sneakers out of the box and put the soles of the shoes together to examine the sides, and put them side by side to quickly inspect the top, the back and the opposite sides.

The inspector also checked the sticker on the box and the tags inside the shoes, before attaching a tag to certify their authenticity.

"When a new popular product comes out, counterfeits also come out," the authenticator said on the day in April. "We always must keep our information up to date."

The authentication center is a necessity as some sneakers fetch high prices for their rarity, becoming investable assets.

But the resale market is rampant with counterfeits so sophisticatedly crafted that it is difficult to distinguish them from authentic ones.

According to StockX, fake sneakers it has detected through its authentication process over the past seven years would have been worth at least $70 million (9.55 billion yen) if they had been authentic products.

Founded in Detroit in 2016, StockX is a unicorn, or a startup company worth at least $1 billion. It expanded its business to Japan in 2020.

Pitching itself as a "stock market for things," StockX serves as a mediator between people who want to sell sneakers, clothing, trading cards and other items and those who want to buy them. 

Price movements and trends can be checked like stock prices.

All products traded at the marketplace are new and unused items authenticated to be genuine.

When a deal is agreed upon, the seller sends the product to StockX for evaluation at its authentication center before it is delivered to the buyer.

WEEDING OUT THE FAKES

Using a fake pair of Air Jordan 1, the StockX employee explained how to spot counterfeits.

Developed in collaboration between rapper Travis Scott and Nike Inc., the model retails for about 20,000 yen ($147) in Japan. But it is valued at least 200,000 yen on the resale market.

As soon as the authenticator picked up the box, the expert pointed out that the green color on it was slightly different from the original.

Then the authenticator took out the shoes from the box and said that the logo on the footwear was also different in size, before sniffing the inside of the shoe.

"An authentic one and a counterfeit even smell differently," the appraiser continued. "At this level, no one can see whether they are fake when they see someone wearing them on the street."

Duy Doan, senior manager at StockX's Japanese arm, said that there are more than 100 steps in its authentication process and that the company also uses artificial intelligence to detect fakes.

He added that the company is trying its best to protect sellers and buyers to ensure safe and honest transactions.

StockX operates 13 authentication centers around the world, inspecting at least 1 million items a month on average.

It has more than 300 authenticators who started working after undergoing several months of training.

The company rejected more than 330,000 products in 2022 because they had manufacturing defects, came in damaged boxes or were counterfeits. Otherwise, those rejected products would have been worth nearly $100 million.

Meanwhile, since 2016, StockX has uncovered fake sneakers that would have been worth at least $70 million.

Doan said the resale platform has an advantage in operating globally because its authentication centers around the world can work together to perform appraisals if necessary.

The distribution of counterfeit products is regarded as a global challenge.

According to a report released in 2021 by the Organization for Economic Cooperation and Development (OECD) and other entities, the estimated global trade value of counterfeit products in 2019 was $464 billion, or 2.5 percent of world trade.

Broken down by product, shoes topped the list at more than 20 percent, followed by clothing and leather goods.

MORE THAN 30% ARE FAKE

When Tokyo-based IVA Co., which offers the Fakebusters authentication service, verified the legitimacy of sneakers sold on a leading flea market app between August 2020 and February 2023 at the request of customers, it concluded that 34 percent of them were fake.

Although it was buyers who asked for the service after they suspected their purchases were fake, the ratio of counterfeits is considerably high, according to President Yoshio Aihara.

Founded in 2019, IVA evaluates the authenticity of sneakers, clothing and accessories.

In April, the company expanded the range of products to cover luxury brand items. It has 46 appraisers, six of whom are in charge of sneakers.

Fakebusters performs a quick evaluation based on about 10 photos sent by a client, including a full view of the shoe and close-ups of the insole and the sewing seams on the footbed.

It uses AI that has processed data on more than 1.5 million pieces of genuine and fake items for preliminary evaluation of the product. 

The six appraisers also verify all the products, checking on more than 100 inspection points. The service has so far detected counterfeits with a 99.99996-percent accuracy rate, IVA said.

The company also provides the authentication service for 17 corporate customers including the operator of a leading second-hand store chain.

While store operators want to expand their lineup of products, sneaker authentication is not an easy task.

For one, counterfeits are so sophisticated that it is difficult to detect if they are fake. Fake sneakers can be categorized into grades N, S, A and B.

Illegal copies that are difficult to distinguish from authentic products because of their legitimate-looking materials and shapes are classified into the top N-grade.

There are also "clones" believed to have been made using materials purchased from authorized factories.

What makes authentication even more difficult is the fact that even authentic sneakers can be inconsistent in terms of quality.

"If it is a luxury watch worth several hundreds of thousands or several millions of yen, there is a clear standard that differentiates authentic pieces from fake ones. But some sneakers, which cost less than 20,000 yen, can be of low quality even though they are authentic," Aihara said.

"In some cases, authentic ones are lower in quality than sophisticated imitations, making it difficult to detect," he added. "It is important for appraisers to have experience in examining many counterfeits."