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How Luxury Goods Brands Are Embracing Blockchain

Tuesday, June 21, 2022 5:10 p.m.

Lars Rensing, CEO of Protokol

by Lars Rensing, CEO of Protokol

There has recently been an explosion of interest in blockchain in the luxury industry. From Decentraland’s Metaverse Fashion Week to Gucci accepting crypto payments, technology is causing a stir.

Luxury goods brands are well positioned to use blockchain to their advantage, as the technology is particularly suited to brands where proof of ownership and authenticity is essential, and where a new digital native and eco-conscious audience is a challenge to achieve. Blockchain allows these brands to engage new and existing customers with exciting new offers. Not only that, but they can also use technology to address some of the key challenges facing the luxury industry.

One of these challenges is the growth of the resale market. The global second-hand market is estimated to reach $77 billion by 2025, with growth rates exceeding those of the broader luxury market. In fact, a recent study by Bain predicted that by 2030, resale could provide 20% of a modern luxury brand’s revenue, while reaching more customers and driving purchases of new items.

This growth is largely due to four main perceptions among increasingly conscious consumers, who see resale as: a practical and durable replacement for fast fashion; an opportunity to acquire luxury goods at more affordable prices; a way to nurture their interest in vintage styles; and a new form of investment. This is a challenge for luxury brands, as the majority have not been engaged in the resale market.

Previously, authenticating goods took so much time and resources that it made participating in resale markets a less viable option for brands. With the increase in resale, many luxury goods suppliers are looking for a solution that responds to this change in consumer habits without compromising the authenticity and traceability of their own products.

Brands can solve this problem by using blockchain to create digital “product passports”. These passports can address customer concerns by tracking a product’s enduring credentials, appealing to conscious consumers who want to ensure they are choosing the right products. Backing these passports with technology like blockchain means they can provide transparent records of a product’s origins and journey; blockchains act as digital ledgers, and transactions on a blockchain are visible to anyone who has access to them. This builds trust with customers, especially those looking to ensure that the products they buy are from ethical and sustainable sources.

In addition, for brands and consumers alike, product passports combat counterfeiting by proving the authenticity of an item. Being able to quickly and easily verify that an item is legitimate via an easy-to-use app reassures consumers and increases customer trust, engagement and loyalty. Meanwhile, solutions such as using digital passports to prove authenticity give luxury brands an opportunity to overcome challenges that previously hindered their expansion into resale markets and allow them to enter the increasingly profitable resale market.

Go native (digital)

Luxury brands must also deal with an increasingly digital native audience, made up of younger generations. Digital natives expect intuitive and modern online experiences. For example, 23% of Millennials collect NFTs – unique digital tokens or collectibles that cannot be duplicated, destroyed or tampered with.

NFTs, unique tokens stored on the blockchain, can be a key tool for luxury brands to improve customer experience, unlock new revenue streams and meet customers through their own platforms. We’re already seeing a number of household names announcing their own offerings. For example, Louis Vuitton launched a metaverse adventure game based on a tribute to its founder, where players could win one of 30 exclusive NFTs.

The Metaverse is also something luxury brands can seek out to engage new audiences – according to a Statistica survey, 74% of Metaverse gamers were between the ages of 10 and 35. Luxury brands can tap into this audience by offering exclusive experiences in the metaverse, paired with NFTs and digital collectibles. For example, Gucci launched its Gucci Garden in Roblox, attracting a new audience.

By using new technologies like blockchain, luxury brands have the opportunity to take their relationships with their customers to the next level. From digital experiences in the metaverse to tracking product sustainability, we’re only going to see more brands in the luxury space leveraging innovative technologies in the months ahead.

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