Blockchain in Luxury Goods

By utilising blockchain technology to both streamline and provide better oversight of the supply chain, luxury goods organisations can significantly improve the traceability and tracking of raw materials, components and products. For the organisation this improves efficiency, reduces costs and helps to combat supplier fraud — whilst benefits are passed onto the customer in terms of guaranteeing the provenance and authenticity of the materials and components used in their purchased products.

Along with raw material track & trace to prove provenance — blockchain technology in luxury goods is also enabling luxury brands to validate that the sourcing and manufacturing processes abide by ethical standards and that they meet sustainability criteria. This is particularly crucial for appealing to younger and more contentious customers who increasingly prefer brands who can provide proof for their CSR claims.

The immutability of the blockchain along with related innovations such as NFTs means that digital twins can be created on the blockchain to replicate a physical product. A commonly utilised solution here are digital product passports, such as the Protokol Digital Product Passport that acts as a real-time digital certificate to capture and securely store all data and events related to the product. This means that customers are able to view an accurate and verifiable historical digital record of a physical product including services, repairs and warranties etc – providing protection to the customer and authenticity for the brand.

By pairing a physical product with a digital twin and enabling customers to verify the authenticity of a product, the problematic luxury goods counterfeit market can be tackled, and customers can be protected. By using an immutable digital certificate and an embedded QR Code or RFID/NFC label within the physical product – customers can easily scan their product with a smartphone to view proof that their item is genuine. Customer trust in the brand is increased, and luxury organisations significantly improve revenue generation by both eliminating counterfeits and attracting new customers.

With the resale market significantly growing within the luxury goods industry, brands require a solution that enables customers to both prove the authenticity of their product, and to transfer ownership securely, quickly and easily. By utilising blockchain to create a digital product passport or certificate of the physical product, authenticity and ownership can be both proved by the seller, and ownership transfer of the digital twin can occur seamlessly after being initiated by the seller. This means that the new owner will have immutable proof that their item belongs to them — which is difficult to prove through the current resale process.

NFTs are opening up completely new markets and opportunities for luxury brands through categories such as digital collectibles and wearables including digital art pieces, avatars and other assets that can be utilised by customers to interact in a digital world. NFTs can also be viewed as keys to unlock digital experiences, perks and even rewards that can be redeemed in both physical and digital environments. With younger demographics increasingly utilising NFTs, these digital assets are providing countless opportunities for luxury brands to bridge the physical and digital world and unlock new avenues for building customer engagement, retention and monetisation.

Decentralised, digital worlds and the Metaverse are providing luxury brands with new opportunities for both building stronger relationships with current customers, and for generating new brand awareness and demand with entirely new audiences and communities. Virtual events, experiences and enhanced virtual ecommerce functionality are just a few opportunities that luxury brands now have access to through the Metaverse and NFT technology, all facilitated by blockchain.