Brands are exploring new ways to secure trust due to burgeoning consumer concerns regarding product authenticity and sustainability, and blockchain provides a way to convince consumers of the authenticity of their luxury and other products. This mitigates the risk of counterfeit products and boosts marketplaces for everything from car parts to gemstones.
This is of particular interest for luxury goods brands as they see blockchain as a way to add value to products and boost brand equity by ensuring authenticity, especially for pre-owned items. Recently, three major luxury brands in Louis Vuitton Moet Hennessy (LVMH), PRADA and Cartier joined forces to create AURA , the first blockchain consortium focused on providing a platform for tracking product history and proof of the authenticity of luxury goods. Microsoft and the blockchain-native company Consensys are helping the luxury brands develop the technological infrastructure for the solution.
Fake goods are a trillion-dollar industry
Every industry rife with counterfeiting, from sports ticketing to drugs, is in a dire need of a secure and transparent ledger. The market for fake goods has boomed in recent years, with the global trade in counterfeits estimated to be a trillion-dollar industry. Luxury brands, where product authenticity is paramount, have been particularly affected by the surge in fake goods. The clientele for luxury products shows an above-average loyalty and an accompanying willingness to pay a premium for increased quality and status.
This is exactly what LVMH, Prada and Cartier hope to target with the Aura blockchain consortium. Providing authenticity and ownership of goods, accessing product history information and strengthening client relationship through enhanced transparency are its stated benefits of the consortium. As LVMH’s Managing Director Toni Belloni put it: ‘the Aura blockchain consortium is a great opportunity for our sector to strengthen our connection with customers by offering them simple solutions to get to know our products better.’
In October last year, GlobalData wrote an article saying the growing consumer awareness of blockchain will render it a ‘feature’ rather than a ‘function’ of luxury goods. Belloni highlighted exactly this fact for why he believes blockchain is the most suitable technology for addressing consumer concerns of authenticity within the luxury industry. While certificates of authenticity have long existed in the industry, the reputation of blockchain as a tamper-proof tool means that it is ideally placed to be widely accepted by highly conscious consumers.
Blockchain is a team sport
Blockchain consortia have become a low-risk way for enterprises to work together on blockchain technology. The value of blockchain lies in its participants and the extent to which they commit to the platform. Counterfeit products are an industry-wide problem and are, as such, best addressed using a unified approach to set an industry standard rather than have each brand develop their own disparate solution.
The platform provided by the Aura consortium is open to all luxury brands globally, regardless of the size of the company. However, it is a private permissioned blockchain, meaning participants are vetted and approved before they can join the network. It also means that the client data encrypted onto the blockchain will not be accessible by rivals.
Blockchain’s core value proposition in vogue
While blockchain is associated with several characteristics like encryption and decentralisation, its core value proposition is firmly centred around trust, something that echoes well with the luxury industry. Belloni himself said: ‘trust is the one key on which our industry is founded and one we really want to preserve,’ adding that all consumers, but especially younger ones, are showing rising concerns about the issue.
The Aura consortium is a perfect example of how blockchain is evolving, from technology without a clear use case to one that provides tangible benefits for consumers and business alike. Aura will help the luxury industry tackle the trillion-dollar counterfeit goods market, which, in turn, will also help with luxury product returns and boost second-hand and auction sales.