Trade in counterfeit luxury goods is steadily rising. In 2017, the amount of total counterfeiting reached $1.2 trillion and is projected to hit $1.82 trillion in 2020, according to the Global Brand Counterfeiting report. With trade in fake goods creating a profit for organised crime, companies are turning their attention to blockchain technology to tokenise their assets with a unique digital passport that verifies the origin of luxury goods such as art, designer items, and wine.
With knock-offs found in Gucci handbags and Rolex watches – to name a few examples – tarnishing the luxury goods market, customers want to know that what they are buying is the real deal. They also want assurance that their purchases are adhering to the highest ethical standards. On the flip side, brands don’t want to lose out on their market share while ensuring that their customers can have full confidence in the brand.
That’s why retailers are turning to blockchain technology, and more specifically non-fungible tokens (NFTs), to aid the creation of secure digital passports; giving luxury retail brands and customers alike confidence in the authenticity of luxury goods.
What are the benefits of blockchain in luxury goods?
While many people may associate blockchain technology with cryptocurrencies, the technology has a much wider application that can be applied to the luxury goods market. Providing a public ledger that is secure, unalterable, traceable, and distributed, blockchain in luxury goods is helping to verify and prove the origin and authenticity of luxury goods through the application of digital passports powered by blockchain technology. Supply chains, which connect a host of suppliers, manufacturers, retailers, consumers, and distributors, enable all parties involved to see what’s going on. By utilising a shared public ledger to track everything from raw materials to finished products, it streamlines the workflow, which, in turn, enables everyone to see all activity taking place along the chain.
Similar to how Bitcoin is traced via blockchain from the start of its existence to different users, consumers will have access to the source of the luxury goods they own through its unique digital passport. Whether it’s a new or second-hand item, a person can trace the origins of their purchase right through the supply chain, ensuring that their item is 100% authentic. This can be achieved by scanning a QR code, a chip, or linking the item through a serial number. When a product’s QR code has been scanned, it retrieves and validates the associated data.
According to a 2015 report from Nielsen, 66% of global consumers and 73% of millennials said they were willing to pay more for sustainable brands, an increase of 55% and 50% from 2014. This is important to brands who are turning their attention to more sustainable measures in the products they make and why they are considering solutions such as digital passports to prove sustainability and boost consumer confidence in their brand.
Typically seen in the gaming and collectable sectors, NFTs, which are a one-of-a-kind token that represents a unique good or asset, are also being applied in other industries where supply chains can be authenticated. Rather than relying on a physical certificate, which could be fraudulently produced, digital passports are becoming the chosen method for certifying a product’s existence. Within the luxury goods market, examples of NFTs can be seen in fine wines, art, and Breitling watches.
Through blockchain-based solutions, companies are realising the potential that NFTs have on their products. By using flexible and interoperable blockchain platforms, Protokol are helping to create secure, digital passports for luxury goods makers.
It is through these measures that retailers are helping to redefine the market by enhancing the customer’s experience and giving them better insight into the products they are buying. On top of that, if you want to resell a product, digital passports are proving helpful as they show an item’s authenticity to a new buyer. With ownership – and the digital passport – transferred through blockchain to the new owner, provenance is provable via a public ledger, mitigating the risk of a counterfeit product being purchased accidentally.
It’s also protecting manufacturers and brands. With the global luxury market projected to reach around $1.5 trillion by 2025, with millennials representing 50% of that market, luxury brands need to better manage their supply chain processes from start to finish. Those who can, could find themselves in a better position competitively.
Other areas NFTs can work in in supply chains and luxury goods include tracking diamonds, communicating with customers after a sale, recording and sharing supply chain information, and evaluating worker welfare.
Yet, despite advancements, more still needs to be done to improve the luxury goods market and combat fraud. To achieve this, retailers should seek the assistance of enterprise blockchain providers to see how the use of blockchain in luxury retail can reduce fraud, and streamline their supply chain.
As an enterprise blockchain provider, we at Protokol can help your company discover how it could benefit from digital passports underpinned by secure blockchain technology.
How Protokol can help
Protokol is an enterprise blockchain service provider that is helping retailers create secure, digital passports for their luxury products.
With the aid of flexible and adaptable blockchain platforms, we can create digital passports that are highly secure, interoperable, and user-friendly, which contain all that’s needed to authenticate the source of a product to its transfer history and more. We also help you to understand that this will bring greater trust and more transparency to your organisation, which, in turn, will increase consumer confidence in your brand and help drive revenue. With an efficient and unalterable way of ensuring a product’s authenticity, there are many advantages a digital passport can bring.
Our consulting and development services will help to bring your use case to life while our interoperable technology will work in conjunction with your existing IT infrastructure. Why not take the first step today and let Protokol help your team or organisation uncover the benefits of blockchain for your luxury goods. Book a free video consultation with our blockchain experts to discover your use case and learn about Protokol’s blockchain services.