by Lars Rensing, CEO of Protokol
There’s been an explosion of interest in blockchain from the luxury industry recently. From Decentraland’s Metaverse Fashion Week to Gucci accepting crypto payments, the technology is causing a real stir.
Luxury goods brands are well positioned to use blockchain to their advantage, as the technology is particularly suited to those brands where proof of ownership and authenticity is essential, and where a new, digital native and eco-conscious audience is a challenge to reach. Blockchain allows these brands to engage new and existing customers with exciting new offerings. Not only this, but they can also use the technology to tackle some of the key challenges facing the luxury goods industry.
One of these challenges is the growing resale market. The global second-hand market is estimated to reach $77 billion in 2025, with growth rates outpacing the wider luxury market. In fact, a recent study from Bain predicted that by 2030, resale could provide 20% of a modern luxury brand’s revenue, while reaching more customers and generating purchases of new items.
This growth is largely due to four main perceptions amongst increasingly conscious consumers, who see resale as: a convenient, sustainable replacement for fast fashion; an opportunity to acquire luxury goods at more affordable prices; a means to feed 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 with the resale market.
Previously, authenticating goods was so time consuming and resource-intensive that it made participating in resale markets seem like a less viable option for brands. With resale on the rise, though, many luxury goods providers are looking for a solution which caters to this change in consumer habits without compromising on their own product authenticity and traceability.
Brands can address this by using blockchain to create digital ‘product passports’. These passports can address customer concerns by tracking a product’s sustainable credentials, appealing to conscious consumers who want to make sure they’re choosing the right products. Underpinning these passports with technology like blockchain means they can provide transparent records of a product’s origins and journey; blockchains act like digital ledgers, and transactions on a blockchain are visible to anyone who has access to it. This builds trust with customers, especially those seeking to ensure that the goods they buy are ethically and sustainably sourced.
Plus, for brands and consumers alike, product passports tackle counterfeiting by proving authenticity of an item. Being able to quickly and easily verify that an item is indeed legitimate via an easy to use application gives consumers reassurance and increases customer trust, engagement, and loyalty. Meanwhile, solutions such as using digital passports to prove authenticity gives luxury brands an opportunity to overcome the challenges that previously hindered their expansion into resale markets, and enables them to enter the increasingly profitable resale market.
Going (digital) native
Luxury brands are also having to deal with an increasingly digital native audience, made up of younger generations. Digital natives expect intuitive and modern online experiences. For instance, 23% of Millennials collect NFTs – unique digital tokens or collectibles that cannot be replicated, destroyed or forged.
NFTs, unique tokens stored on blockchain, can be a key tool for luxury brands to enhance the customer experience, unlock new revenue streams and meet customers via their own platforms. We’re already seeing a number of household names announcing their own offerings. For example, Louis Vuitton launched an adventure game in the metaverse based on paying homage to its founder, where players could win one of 30 exclusive NFTs.
The metaverse is equally something luxury brands can look to to engage new audiences – according to a survey from Statistica, 74% of gamers in the metaverse were between the ages of 10-35. Luxury brands can harness this audience by offering exclusive experiences in the metaverse, paired with NFTs and digital collectibles. For instance, Gucci launched its Gucci Garden in Roblox, drawing in a new audience.
Using new technologies like blockchain, luxury brands have an opportunity to take their relationships with customers to the next level. From digital experiences in the metaverse to tracing product sustainability, we’re only going to see more brands in the luxury space harnessing innovative tech in the coming months.