Luxury Brands Discover Blockchain
Many luxury brands have partnered with blockchain technology to track the origin of products and materials from production to delivery. The key value of distributed ledger technology is its tamper-proof nature and the speed at which transactions can be processed: its decentralized approach and immutability add trust and integrity to the process.
“The same technology is able to guarantee the authenticity of the products, which is essential to retain value or to support a vibrant second-hand market, as well as to detect counterfeit models. Many luxury brands have also chosen to launch limited edition NFTs to satisfy consumers’ hunger for the next trend: an ironic twist for an industry that promotes material goods at its core to drive market appetite, says Sarah (SJ) Beaumont, a lawyer at Baker Botts.
The pandemic has driven fundamental changes in consumer behavior, which has had a significant impact on extended supply chains in the luxury and prestige fashion industry.
“Their supply chains will seek sweeping changes in agility, which will lead to more speed, more predictability and even more accuracy. As a result, there will be significant investment in new-age technologies to achieve the goals of sweeping agility. Blockchain will be one of these investments among few others. Blockchain allows retailers to improve their operational efficiency in multi-party exchanges, improve product traceability, track details affecting risk, compliance and penalties, and revenue streams while providing consumers with the authentic provenance information of luxury products. These lead to benefits for luxury brands as stronger customer satisfaction, reduced downtime, increased brand value and stronger data protection. Blockchain is not without risks, however, such as the risk of improper key management leading to unauthorized access. Successful blockchain implementations will be based on careful governance and execution,” said Karmesh Vaswani, EVP & Globa l Head of Consumer, Retail & Logistics at Infosys.
Brands are getting creative
Brands like Gucci, but also newer brands across the spectrum like Prada have both recently dived deep into web3 and blockchain. In May 2022, Prada released several NFTs on the Ethereum blockchain, and recently, Guicci became the first major brand to accept ApeCoin, a newer but extremely high-visibility cryptocurrency associated with the Bored Ape luxury brand that grew out of crypto and web3- the communities. Finally, McLaren, a luxury car brand, also recently released the exclusive digital NFT passport for the MSO lab, leading to their foray into the web3 industry.
“The fundamental core of these brands jumping into blockchain is all associated with the future of direct to consumer marketing (D2C) and business to consumer marketing (B2C). What it allows brands to do is to engage direct selling in the market, along with secondary market trading using an existing infrastructure – Ether
Luxury brands can choose several paths to embrace DLT as the next step in their business operations: by developing expertise in-house and driving organic growth, by partnering with established startups/emerging technologies designed to address their needs, or by acquiring a business or technology directly.
New innovations are popping up everywhere. Recently. Israel-based Yvel, a fine jewelry house, expanded into the world of financial products with the launch of INFS (Independent Non-Fungible Security). INFS is a trading platform that fuses blockchain technology with real-life, customizable guarantees in the form of unique gem-encrusted 24-karat gold coins.
“INFS is our vision to develop how blockchain financial products can serve investors in any company or project,” said Eliaz Gabay, CEO of Yvel.
Whether it’s a designer bag or a piece of luxury jewelry, next-generation blockchain technology can provide easy data management across the many parties involved in creating luxury goods.
“From repairing issues across data silos, aiding real-time partner communication and supporting supply chain tracking – next-generation blockchain technology can provide a digital thread of authenticity, which is so critical when it comes to luxury goods. There are use cases where it’s good enough to have 70-80% accurate data. But knowing that your $40K Hermes bag is only 80% authentic? That probably won’t fly with most luxury brand consumers,” said Vendia’s co-founder and CBO, Shruthi Rao.
Another new blockchain use case is wine. Crurated, a membership and blockchain-based wine community, leverages blockchain and NFTs with every bottle of wine that enters their warehouse.
“Each bottle that enters the Crurated warehouse is assigned an NFT. Recorded forever on the blockchain, the NFT verifies the authenticity of the bottle and provides other important details, including ownership history, vintage, vineyard location, variety and other important details. The NFTs are easily accessible by tapping an NFC or RFID enabled phone. The bottle history is also updated via a new blockchain record when the wine is resold and the token is moved from one client to another, a PR representative for the company said.
There is going to be increased pressure from all sectors of the market to rethink business strategies, and the luxury goods industry is no different.
