{"id":3381,"date":"2018-10-23T16:21:41","date_gmt":"2018-10-23T10:51:41","guid":{"rendered":"https:\/\/www.dilx.co\/insights\/?p=3381"},"modified":"2021-06-21T17:40:34","modified_gmt":"2021-06-21T12:10:34","slug":"how-luxury-retailers-are-using-blockchain-to-tackle-counterfeits-in-the-supply-chain","status":"publish","type":"post","link":"https:\/\/www.dilx.co\/insights\/how-luxury-retailers-are-using-blockchain-to-tackle-counterfeits-in-the-supply-chain\/","title":{"rendered":"How luxury retailers are using blockchain to tackle counterfeits in the supply chain"},"content":{"rendered":"

The standard economic argument goes that increasing prices dampen demand, but in the realm of luxury, this argument falls short. In the case of goods such as the coveted Birkin Bag by Herm\u00e8s, the higher the price the more people can\u2019t seem to get enough of it.<\/strong><\/p>\n

Most intriguingly though, while manufacturers like to claim that the higher quality workmanship and materials are an explanation for dazzling price tags, equity analysts in Exane BNP Paribas have estimated that only around 10% of the Birkin\u2019s price, starting at around \u00a36000 for the very basic model, can be attributed to these elements.<\/p>\n

Thorstein Veblen, a twentieth-century American economist first attempted to explain this phenomenon in his work \u201cTheory of the leisure class\u201d. He claimed that the motivation for purchasing expensive goods can be better explained by their ability to signal prosperity and prestige rather than better craftsmanship. In other words, a Birkin, be it of better quality, primarily buys you a ticket up the social ladder.<\/p>\n

How do you differentiate between the real thing and the counterfeit?<\/strong><\/p>\n

How, as a consumer, can you be confident in claims of an artisanal origin? In short, how do you know you get what you are paying for? These, amongst many others, are supply chain questions that far predate my interest in the economics of the Birkin bag but have allowed for a long and complex relationship with counterfeiting. A little is good \u2013 serving as a testament to an item\u2019s desirability; too much is a problem and, as Bernard Arnault of Louis Vuitton can attest, can erode a brand\u2019s appeal almost to the brink of collapse.<\/p>\n

Technology to the rescue<\/strong><\/p>\n

It is here that blockchain can come to the rescue. While most individuals would associate the technology with cryptocurrencies, the distributed ledger technology (DLT) has a much wider application and can lend a helping hand to high-end brands in meeting consumer\u2019s expectations.<\/p>\n

In practice, similar to the way ownership of a Bitcoin is traceable as it moves between different users from current owner back to the very creation of the coin, the consumer would have access to the entire life story of their luxury purchase. This could be applied for new and pre-loved items. Should an owner be interested they would be able to trace the delicate cowhide back to the farm where the animal was raised and ensure the welfare standards, confirm the design is authentic and find out more about the experience and personal style of the craftsman or woman who completed the stitching of their bag.<\/p>\n

Similarly, they can find any previous ownership and repairs history. The information, distributed across a multi-node system, would be accessible anytime, from anywhere, by anyone and cannot be edited. Immutable provenance records and increased transparency move the perceived differentiation of luxury brands into something more tangible. In short, blockchain allows brands to have more control over market saturation and authenticity,making counterfeiting, theft, and forgery more easily preventable. <\/p>\n

Breaking counterfeit: Validating supply chains using blockchain<\/a><\/p>\n

Proctor & Gamble partners with CBP to eliminate counterfeits from US supply chain<\/a><\/p>\n

The revolutionaries:<\/strong><\/p>\n

The London based start-up Everledger is one of the first solutions to truly capitalize on merging the production and consumption cycles. The company is firstly focusing on the supply chain in the diamond industry \u2013 by using dozens of attributes for each diamond, including the 4 Cs: a certificate number that can be inscribed by laser on the crown or girdle, detailing every individual involved in the gem\u2019s journey from the mine to the shop window. The digital twin is then recorded on the Everledger blockchain and updated after every change of ownership or other significant \u201clife event\u201d of the precious stone. Above all, it helps eliminate the market in window dressed conflict gems.<\/p>\n

Art, fine wines, jewellery, antiques and luxury fashion are all targets of forgery; Everledger has started to add new asset classes to their portfolio, with similar solutions hitting the market as we speak. One example is VeChain who are looking to offer an app which allows on-the-spot authenticity checks to track item ownership. J\u00e9r\u00f4me Grill\u00e8res, CEO, also claims it will allow brands opportunities to share the inside stories of product lifecycles and give more control over brand positioning.<\/p>\n

A brave new world<\/strong><\/p>\n

Most interestingly, the importance of this innovation lies not so much in what it can do for proving the provenance of your designer bag or diamond ring. Instead, consider for a moment what crystal clear provenance can do for improving working conditions in third world sweatshops and imported food standards. While luxury brands seem to be the early adopters due to their predisposition to differentiation, it is mass adopters that will change the world of retail. And a truly marvelous world it will be indeed. <\/p>\n

Author \u2013\u00a0LILLY PENCHEVA, ASSOCIATE CONSULTANT, CUSTOMER EXPERIENCE PRACTICE AT CAPGEMINI
\nCourtesy of\u00a0https:\/\/www.supplychaindigital.com\/technology\/how-luxury-retailers-are-using-blockchain-tackle-counterfeits-supply-chain<\/a>\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

The standard economic argument goes that increasing prices dampen demand, but in the realm of luxury, this argument falls short. In the case of goods such as the coveted Birkin Bag by Herm\u00e8s, the higher the price the more people can\u2019t seem to get enough of it. Most intriguingly though, while manufacturers like to claim <\/p>\n

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