Blockchain Equals Trust in Today’s China

The world of luxury fashion has a thing for Silicon Valley. From the recent Moncler and Fendi hackathons to the Brunello Cucinelli symposium held at the fashion brand’s lush Solomeo, Italy, headquarters (where a Silicon Valley luminaries gathered with the stated goal of engaging in conversation about making the world a better place) luxury brands have a passion for the California dream and the state’s new tech royalty. And while luxury brands have been quick to borrow some of Silicon Valley’s inspiring processes, most have been reluctant to adopt its latest, most disruptive technologies that could help them raise their prestige and reputation in the eyes of highly sought-after Chinese luxury customers, with blockchain technology being at the forefront. In March 2019, LVMH, the world’s first luxury group and owner of such brands like Louis Vuitton and Christian Dior, confirmed that it’s developing a blockchain aimed at tracking the authenticity of the group’s products. Chinese customers, who are so passionate about luxury goods, will finally be able to rely on blockchain technology, not only to make sure a product isn’t counterfeit but also for gathering more information on the product itself. To be sure, having a tool to authenticate a luxury item is a praiseworthy goal, but luxury brands could also use this technology to deliver added value to the customer. Matteo Panzavolta, founder and CEO of Acatena, a Swiss start-up focused on implementing blockchain for luxury brands, agrees that blockchain technology can provide so much more than simply certifying the authenticity of a product. Using luxury wines as an example, Panzavolta states that “the fine wine lover will not just taste a good glass of Bordeaux, he will experience the entire process from grape to glass,” thanks to all the information encrypted in a bottle. “By placing a smartphone close to the bottle,” he adds, “it would be possible to get the history of the wine, the grapes, the process, when it has been unsealed, the whole product ID” — and it will work in a very user-friendly way, without a QR or barcode. It’s just a tag in the product, and, more importantly, all the information is encrypted and cannot be altered thanks to the blockchain. The same process could be applied to luxury watches, which would make it easier for collectors — via blockchain — to know the entire story of a precious product and make the purchasing process transparent, safe, and rewarding. For many people, purchasing a luxury item has an emotional element to it, and knowing the product’s history and other key pieces of information is invaluable. And this is even more important if the luxury product is being purchased for investment. If properly developed, blockchain could help reinforce a sense of trust for a brand and its reputation. It will also allow the brand to catch missed opportunities in terms of communication and branding. For example, high-end jewelry would include the entire production process as well as the buyer’s history. This full transparency together with the product’s DNA and authenticity would be fully available to the buyer. This could be extremely important for luxury customers who are looking to purchase items that are prestigious and valuable, and not just expensive. If implemented, this would very likely change the management of luxury brands, because it would require a different mindset and a different process in terms of product creation and distribution. On the other side, as blockchain technology is still at a very early stage, the legal perspectives are still unclear, and the procedures to establish them are still a work in progress. As Daniela Della Rosa, founder of Milan based DDR Lawfirm and former Worldwide General Counsel of Gucci, confirmed to Jing Daily, “Certain pitfalls come with employing blockchain because it is still largely untested, unregulated, and there are no particular standards governing blockchain applications or developers.” The solution is clearly to rely on experts in the industry and “companies should select providers that already have a track record in the fashion industry and ideally select the soon-to-be technology standard along the fashion value chain.” In terms of benefits, Della Rosa adds, “in the opaque, highly competitive world of luxury fashion, blockchain has the potential to connect all stakeholders along the value chain to ultimately benefit conscious customers. An industry-wide standard, or even a single platform, would make the technology more effective and less costly but would require a level of public-private cooperation that may be hard to achieve in the short term.” Even if blockchain technology is still at the beginning of its life cycle, the opportunity for its development in terms of supporting brand awareness and strengthening brand equity is remarkable. The question is — are luxury brands ready to be truly authentic and transparent toward its precious customers all over the world and, most of all, in China, a country that’s already so advanced in terms of digital technology?

Blockchain Equals Trust in Today’s China

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Published September 03, 2019

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Blockchain Equals Trust in Today’s China