Does Blockchain can help luxurious brands towards sustainability and counterfeiting ?

I wrote my thesis on sustainable development issues in luxury and how blockchain could be a major asset. 

Over the past few years, consumer behaviour has changed and become more rational and responsible.

Consumers are aware of the impact of their consumption and are trying to take more and more positive actions towards society. Unlike the past, where consumers did not realize the danger on the earth or health and did not think about it when consuming.

Today, we talk more about responsible consumption, more environmentally friendly, social and economic fair consumption trends. However, the term “responsible” has caused much controversy.

Chinese consumers are in love with Luxury but are reluctant about sustainable development.

Luxury brands (mainly Western brands) tend to become more and more sustainable. The purpose is to know how to convince Chinese consumers that Sustainable development and Luxury can coexist and go together. You have to prove to them that it doesn’t affect the quality of a product. To this end, you must educate them on this topic, but also avoid any « greenwashing ». The blockchain will be there to prove pieces of information to consumers and continue to educate them on the subject. Consumers will then be able to discover in-depth the heritage of a brand, which they hold dear.

This process will make it easier to understand the entire story of precious products through the blockchain, and make the purchase process transparent, safe and meaningful. For many people (especially Chinese consumers), buying luxury goods has emotional meaning, and understanding the history of the product and other key information is very valuable. This is particularly important when consumers are buying luxury goods for investment. When properly developed, blockchain can help increase and reinforce trust in the brand and its reputation. This will also enable brands to catch missed opportunities in communication and branding. Consumers are looking to buy items that are prestigious, valuable and not just expensive.

Customers increasingly like to communicate through their clothes and through a network.

Blockchain is an incredible technology to adopt, which has its costs but it will also be used for another very important reason: counterfeiting, especially now that second hand and vintage luxury are trendy! It would be a dual-use solution: to ensure certification in a time of the increase in the resale of luxury items (and therefore second-hand purchases), but also to oppose counterfeiting.

This technology can revolutionize the way fashion products are viewed and purchased. Customers want to get in touch with the story that a product can tell, its manufacturing, traditions or its universe. Each product can present its unique character with its background story to customers in a digital platform. This is where sustainable development will work best and will be able to convince Chinese consumers that it even favours luxury and not vice versa. The product will speak for itself. By reinventing the customer journey and its access to real-time information, we open the field for new possibilities towards sustainability.

Counterfeiting consists of the reproduction and imitation of a product without having the right to do so. The luxury industry is one of the business sectors most affected by counterfeiting.

The second-hand market is expected to reach $36 billion in 2021 (source: La Réclame). If the attractiveness of low prices is acclaimed, « the environmental dimension counts as much, if not more, for these young generations », as revealed by the study carried out by the Boston Consulting Group in partnership with Vestiaire Collective. Vestiaire Collective (startup operating a marketplace of the pre-owned luxury items) recently raised €59 million to expand its presence across the world. Blockchain could be a huge strength for this emerging sector and will play an authenticity role as well as tracking the history of each article around the world. It could also benefit brands, as they will be able to « keep an eye » on products they are not selling directly. Chinese consumers love second-hand luxury goods as they are less expensive and sometimes they can’t find products that are not sold in their country, sold-out or from the previous collection.

Luxury is a sector subject to the constraints of rarity and desirability.

The problem of counterfeiting increase every year and second-hand does not help. In addition to the purely financial consequences, there is also a deterioration in the brands’ image, as well as a loss of user confidence. Which is all the opposite of what brands are looking for, especially with Chinese consumers. Because of their rarity and their value, luxury products are particularly exposed to theft. The brands that distribute them must, therefore, be equipped accordingly: security guards, surveillance systems, insurance … An extremely high cost, which could possibly be compared to the move to integrate the Blockchain within the company. As for customers, they can be slowed down in the purchase of this type of luxury goods if their purchase is not sufficiently secure and can doubt about the authenticity of vintage or second-hand products sold by individuals (even in known-platforms as Vestiaire Collective).

Luxury brands are redoubling their efforts to deal with this problem of counterfeiting.

To date, their strategies essentially consist of differentiating the original models from their copies by using holograms, special labels and or unique packaging. They do not attack the heart of the problem. These solutions are only fleeting since the counterfeiters eventually manage to reproduce these labels 99% identically for their own counterfeits. This is where the blockchain could be a comprehensive solution. We can’t cheat with blockchain. Thus, it would be beneficial both for the brand and for the consumer.

Image : Provenance

As this technology would make it possible to record the identity of the manufacturer of a luxury good and to guarantee that it remains “tamper-proof”, this would prove the true origin of this good. With a simple application, a customer could make sure that the handbag, for example, that they want to buy is indeed authentic. Blockchain allows recording each transfer of ownership from the moment of its creation (ie storytelling).

Adding to this all what we already have seen above, using the blockchain to trace the entire manufacturing process, companies will prove the authenticity of the good but also of its manufacture, from the materials used to people who made them and all the ethical process, to ensure that they respect certain environmental standards. As well as the history of the product as we mentioned before.

The blockchain would protect customers in the event of loss or theft, but also be able to put them in touch with brands, even if the product was acquired in second hand or offered to them as a gift. But also, blockchain could close this gap between luxury and technological innovation.

As a conclusion, if luxury relies on the blockchain, it could finally put behind it the problems of counterfeiting, recover transparency in its production processes and reconnect brands and consumers (including Chinese consumers) with storytelling.




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