Blockchain in Luxury: Supply chain authenticity plays key role in creating trust, loyalty
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Blockchain in Luxury: Supply chain authenticity plays key role in creating trust, loyalty

Blockchain in Luxury: Supply chain authenticity plays key role in creating trust, loyalty

The luxury sector sees in Blockchain a perfect opportunity to create loyalty extending into second hand markets

  • In the fashion and luxury industry, authenticity and limited edition are very significant
  • Blockchain gives customers easy access and unforgeable appraisal to help with insurance records as well as provides a sense of ownership for custom made designs
  • Blockchain technology will help cut down counterfeit luxury goods in the second-hand market and introduce greater trust for both the brand and the consumer

People are today keenly aware of where their luxury products are originating from and show a willingness to pay a premium for products that enjoy an authentic record and ethical narrative.

Based on this, is the luxury sector ready for blockchain technology? 

Ahead of the June 12 & 13, 2019, Arab Luxury World conference at JW Marriott Marquis Dubai, organized by Mediaquest, a prominent regional publisher, AMEinfo asked four questions related to blockchain and its role on the next luxury revolution.

Topic: Blockchain in Luxury

1-     How can blockchain add value to premium luxury?

2-     Is the luxury sector ripe for utility-based tokenization to attract and retain a loyal audience?

3-     How effective and transparent are supply-chain processes and systems on blockchain-based luxury businesses?

4-     Can Blockchain in Luxury create an effective second-hand market for luxury items? 

Below are answers by new technology professionals.

1- How can blockchain add value to premium luxury?

 Charbel Ghostine, Co-Founder/Consultant at Blockchain consultants told AMEinfo that luxury brands were relatively late in embracing e-commerce and social media, but when it came to the blockchain revolution, they are considered among the pioneers to investigate the potentials of this technology. “Blockchain can offer the perfect platform to validate products authenticity and fight forgery. Already, LVMH, owner of the brand Louis Vuitton, has developed the Aurora platform, a blockchain system for authenticating luxury goods, in collaboration with Microsoft and the blockchain development company ConsenSys. 

In the fashion and luxury industry, authenticity and limited edition are very significant, said Ahmed Jacob, Managing Partner INVAO UAE.

He told AMEinfo that wearing a unique item for the first time is a big deal and blockchain creates a more effective and cost-efficient way to prove the authenticity of the product.

“Blockchain can maintain an owner’s privacy and security while monitoring and tracking any product with a decentralized, tamper-proof ledger which essentially authenticates luxury products and adds value to the luxury sector,” Jacob said. 

“Another significant point of how blockchain can add value to premium luxury is by eliminating counterfeit products. Luxury brands value their goods based off of quality and scarcity, while counterfeits are produced in large quantities and made with cheap materials.”

Rawane Madi, co-founder of Blocrecs, answered that since blockchain solves the issue of trust, “it is well suited to hold Certificate of Authenticity for the final luxurious products and Certificates of Production that delimit important phases in the manufacturing process.” 

2- Is the luxury sector ripe for utility-based tokenization to attract and retain a loyal audience?

Ghostine says utility tokens can play a major role in retaining clients’ loyalty. “Nevertheless, luxury retailers have managed to develop, during the past decade, impressive loyalty programs without relying on the blockchain,” he said.

“We have always to remember that blockchain is not a panacea for all problems. Thus, unless blockchain brings an added value to the existing loyalty programs, it will be difficult for this new technology to replace existing ones.”

He added that if we combine the utility tokenization with the authenticity validation of products and perhaps getting clients’ feedback on newly launched products, then the blockchain will overcome this challenge.

Read more: Blockchain could stop corrupt officials from stealing school lunches

Jacob says blockchain will give customers easy access and unforgeable appraisal which will help with insurance records as well as make their audience feel a sense of ownership for custom made designs. 

“Blockchain can help luxury brands strengthen their loyalty through tokenization and by authenticating the supply chain of luxury goods,” Jacob said.

“It can create a digital certification for any luxury item a customer buys. It builds trust between the customer and the luxury brand, clearly benefiting the consumer and there’s no reason why they can’t attract and retain a loyal audience,” Jacob added.

3- How effective and transparent are supply-chain processes and systems on blockchain-based luxury businesses?

Ghostine said transparency is one of the fundamentals of blockchain technology and it has proven to be an efficient solution capable of lowering transactions fees and time.

“Blockchain validates the origins of the raw material used in the production of high-end luxury products, tracks shipped items in near real-time peer-to-peer payments, and authenticates the goods. This technology can provide a full life cycle tracking system for any product, clamping down on counterfeiting issues,” explained Ghostine.

Blockchain can maintain an owner’s privacy and security while monitoring and tracking any product with a decentralized, tamper-proof ledger which essentially authenticates luxury products and adds value to the luxury sector, according to Jacob.

“Consumers need to understand that luxury brands that utilize blockchain technology will make it virtually impossible for the products to be replicated due to the high level of transparency provided… it creates a greater sense of trust between the customer and the brand,” said Jacob.

“For example, knowing that the luxury product has been hand-made by a world-renowned team and that each piece comes from a different country, the value of that product suddenly becomes more unique and desirable; and by using blockchain, authentication becomes much easier.” 

Madi emphasized that consumers need to stay updated on the transparency and efficiency that blockchain-based luxury businesses bring.

“They need to understand why these systems can be trusted and where the limit of trust is,” Madi said.

Read more: Exclusive: What the travel industry doesn’t want you to know about blockchain

4- Can Blockchain create an effective second-hand market for luxury items? 

Ghostine said blockchain can help luxury retailers lower their costs, “So yes definitely, blockchain can create an effective market for luxury items.”

Jacob said blockchain can easily create an effective second-hand market since sellers and customers can verify whether a product is authentic or not by comparing its digital signature to entries in the decentralized database. 

“This efficient way makes it easier for consumers to buy the goods from second-hand markets and trust their luxury items can be authenticated,” said Jacob. 

“Blockchain technology will help cut down counterfeit luxury goods in the second-hand market and introduce greater trust for both the brand and the consumer.” 

According to Madi, used luxurious items are sold in second-hand shops, not in the original brands’ shop. 

“Hence, this creates room for doubt around item authenticity on the buyers’ end. So, giving buyers the instant ability to trace, on the blockchain, the life of a luxurious item, it will resolve any such concerns,” Madi said.

Author
Hadi Khatib

Hadi Khatib is a business editor with more than 15 years' experience delivering news and copy of relevance to a wide range of audiences. If newsworthy and actionable, you will find this editor interested in hearing about your sector developments and writing about it. [email protected]

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