Can Luxury Brands Use Blockchain to Guarantee Authenticity?

When it comes to luxury goods, the perception of exclusivity and premierness are two very important elements. However, the truly paramount aspect of luxury items that allows for the high price point associated with them is their absolute authenticity. If the authenticity isn't absolute, then it's not luxury. Would it be OK if you were only 85 percent sure that your $40,000 designer bag was authentic? Or only 60 percent sure that it wasn't made out of forced labor? If there's even a shred of doubt of prior ownership, imitation materials or forced labor, then there’s no way the item will warrant the kind of high price point associated with it.

The challenge many luxury brands are facing today is that because there are so many parties involved in the making of luxury items, most of which are bespoke and located in remote corners of the world, many brands struggle to authenticate, track and provide a digital thread of authenticity. In fact, up to 80 percent of critical business data now lives outside a company’s four walls. This challenge has always existed for luxury brands, but it has been made increasingly harder over the last couple of years amid an ongoing pandemic that has led to global supply chain issues for brands across industries.

Luxury brands are desperate to find a solution to their data management and visibility needs across the many parties involved, and some have turned their eye to blockchain technology. Whether it’s a designer handbag or a luxury car, blockchain technology can provide easy data management across the many parties involved in creating luxury goods by keeping a digital ledger of all related activities. This is a critical step needed in maintaining the authenticity of luxury goods, and can also be used to improve operational efficiencies, compliance, product tracking, as well as privacy and security, which can all result in improved brand reputation and, in turn, customer loyalty.

And while some luxury brands start out by trialing traditional blockchain solutions like Ethereum and Hyperledger Fabric, many have quickly discovered that those first generation systems merely created a whole new set of problems across integration, scalability, performance and enterprise readiness.

Why are these traditional blockchains failing luxury brands? Because their designers made a crucial strategic mistake: they ignored the cloud. The implication of ignoring the cloud means luxury brands cannot connect to ALL their partners easily with legacy technology or connect to bespoke partners for whom a desktop PC is the only IT. Therefore there's no way for luxury brands to ascertain that the product is indeed authentic, not made of forced labor, etc.

Next-generation blockchains have adopted a different approach. By combining cloud and blockchain technology, businesses can deploy data-sharing solutions in minutes, instead of months, easily scaling to large numbers of transactions across the many parties involved in creating 100 percent authentic luxury goods. This perfect marriage of cloud and blockchain technology can allow luxury brands to reap all of the benefits of blockchain technology without sacrificing the time, money and talent that many traditional chains require to work effectively.

Shruthi Rao is the co-founder and chief business officer of Vendia, a multicloud distributed data platform.