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.
At the June 12 & 13, 2019, Arab Luxury World conference at JW Marriott Marquis Dubai, organized by Mediaquest, a prominent regional publisher, a session entitled “Blockchain: Is it the next luxury revolution?” asked among others whether the industry was ready for another disruption and if blockchain was ready to go from use-cases to scaled implementation in premium luxury?
"The fact that blockchain is decentralized and distributed, which means that multiple versions of the same information can be accessed from different computers. And the fact that it is immutable means that the records can never be changed. Blockchain can impact the entire value chain in luxury. Blockchain enables digital trust," said Dr. Petar Stojanov, Managing Partner, EBTIKAAR
How can blockchain add value to premium luxury?
ConsenSys, in partnership with LVMH and Microsoft, announced AURA, a platform that aims to serve the entire luxury industry with powerful product tracking and tracing services, based on Ethereum blockchain technology and utilizing Microsoft Azure. AURA makes it possible for consumers to access the product history and proof of authenticity of luxury goods — from raw materials to the point of sale, all the way to second-hand markets. Several brands of the LVMH Group, such as Louis Vuitton and Parfums Christian Dior, are currently involved, and advanced discussions are underway to onboard additional brands from the LVMH Group, and other luxury groups globally. The AURA team chose to implement a consortium model, where any luxury brand can become a full member. This model ensures that the possibilities of the technology can be made accessible to all, while maintaining the flexibility to address the specific needs of each luxury brand.
AURA has been specifically developed by luxury brands, for luxury brands, offering a wide range of services specific to this industry. Brands have flexibility in designing the capabilities of AURA; some may choose to focus on the sourcing of raw materials, whereas others may focus on providing tailored services and strengthening consumer loyalty.
Charbel Ghostine, Co-Founder/Consultant at Blockchain consultantstold 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.
Is the luxury sector ripe for utility-based tokenization to attract and retain a loyal audience?
“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,” Ghostine says
“Blockchain can create a digital certification for any luxury item and help luxury brands strengthen their loyalty through tokenization and by authenticating the supply chain of luxury goods,” Jacob said.
How effective and transparent are supply-chain processes and systems on blockchain-based luxury businesses?
"Blockchain application in the luxury industry can stop the counterfeiting trade, which is a $1.2 trillion problem in the Blockchain application in the luxury industry can stop the counterfeiting trade, which is close to a $1.2 trillion problem in the industry," said Dr. Petar Stojanov.
Ghostine explained. “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,”
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.
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.
“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,” he said.