Many luxury brands have partnered with blockchain technology to track the provenance of products and materials from manufacture 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 adds trust and integrity to the process.
“The same technology is able to guarantee the authenticity of products, which is vital for retaining value or for supporting a buoyant second-hand market, as well as for spotting counterfeit models. Many luxury brands have also chosen to launch limited edition NFTs in order to satisfy the consumer hunger for the next trend: an ironic twist for an industry that promotes tangible goods at its core to drive market appetite,” said 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 industries.
“Their supply chains will seek comprehensive shifts in agility, which will translate into more speed, more predictability, and even more accuracy. As a result, there will be significant investments in new-age technologies to achieve the objectives of comprehensive agility. Blockchain will be one of those investments amongst few others. Blockchain allows retailers to enhance their operational efficiencies in multi-party exchanges, improve product traceability, tracking 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 such as stronger customer satisfaction, reduced disruption time, enhanced brand value, and stronger data protection. Blockchain, however, is not without its risks such as the risk of improper key management leading to unauthorized access. Successful blockchain implementations will be based on careful management and execution,” said Karmesh Vaswani, EVP & Global Head of Consumer, Retail & Logistics at Infosys.
Brands get creative
Brands like Gucci, but also newer brands across the spectrum such as Prada have both recently dived deep into web3 and blockchain. In May 2022, Prada released several NFTs on the Ethereum blockchain and recently Gucci 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 the crypto and web3 communities. Finally, McLaren, a luxury car brand, also recently released the MSO lab exclusive digital NFT pass bringing about their foray into the Web3 industry.
“The basic gist of these brands jumping into blockchain are all associated with future direct to consumer marketing (D2C) and business to consumer marketing (B2C). What it allows the brands to do is to engage market direct sales, along with second market trading using an existing infrastructure – Ether
Luxury brands could choose multiple routes to embrace DLT as the next step of their business operations: by developing expertise in-house and driving organic growth, by working in partnership with established start-ups / emerging technologies designed to accommodate 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 financial product world with the launch of INFS (Independent Non-Fungible Security). INFS is a trading platform that merges blockchain technology with real-world, customizable guarantees in the form of unique precious stone decorated 24-karat gold coins.
“INFS is our vision to evolve how blockchain financial products can serve investors in any company or project,” said Eliaz Gabay, CEO of Yvel.
Whether a designer handbag or a luxury piece of jewelry, next generation blockchain technology can provide easy data management across the many parties involved in creating luxury goods.
“From mending problems across data silos, aiding real-time partner communication, and supporting supply chain tracking — next-gen blockchain technology can provide a digital thread of authenticity, which is so critical when it comes to luxury items. There are use cases where having 70-80% accurate data is good enough. But knowing that your $40,000 Hermes bag is only 80% authentic? That likely would not fly with most luxury brand consumers,” said Vendia co-founder and CBO, Shruthi Rao.
Another recent blockchain use case is wine. Crurated, a member- and blockchain-based membership wine community, is leveraging the blockchain and NFTs with each and 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, varietal, and other key details. The NFTs are easily accessible by tapping on an NFC or RFID enabled phone. The bottle history is also updated via a new blockchain recording anytime the wine is resold and the token moves from one client to another,” said Alfonso de Gaetano, founder of Crurated.
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.