LVMH, Richemont's Cartier and Prada SpA are joining forces to offer a blockchain solution to their customers seeking an extra seal of authenticity for the goods they're buying.
The alliance of the world's largest luxury-goods makers plans to make a blockchain-enabled solution available to all luxury brands to provide shoppers with assurance what they're buying is authentic, the companies said in a joint statement Tuesday. Plus it will make the products traceable in a transparent way.
Blockchain technology is a digital way to certify a transaction. This solution will enable consumers to know whether a product is counterfeit or not by providing an encrypted certificate of guarantee, LVMH Managing Director Antonio Belloni said in an interview. Such certificates have long existed in the industry but blockchain's reputation as a so far unhackable tool means this project, called Aura Blockchain, may work better.
Billions in lost revenue
At stake for luxury brands are billions of dollars worth of lost revenue to counterfeits. The global trade in counterfeits will balloon to $991 billion by 2022, almost double the level of 2013, according to research firm Frontier Economics. That estimate includes luxury goods, consumer products and several other categories like pharmaceuticals.
Aura Blockchain is likely to evolve since it's still a young technology, Cartier Chief Executive Officer Cyrille Vigneron said. Cartier has already tested one feature with online product returns, which allows shoppers to take a photo and upload it on the blockchain to prove that the condition of the product they're returning hasn't been altered between the moment they've received it at home and the moment they've shipped it back to the brand.
"It's something simple, but it means the trust between the two parties is enhanced," Vigneron said. He added that the auction houses might be interested in using such products when they sell fine art.
LVMH's Belloni said the consortium is a way to set an industry standard rather than have each brand develop their own solutions separately. He said that Aura Blockchain is in contact with other luxury groups but declined to say which brand may join next. The client data encrypted onto the blockchain won't be accessible by rivals, he added. Within LVMH, Louis Vuitton, Bulgari and Hublot have already tried the technology, while Tiffany & Co. is the next "obvious" candidate, he said.
"Trust is the one key on which our industry is founded and one we really want to preserve," Belloni said, adding that all clients, but particularly younger ones, are concerned about the issue.
Such solutions may also allow people to resell luxury goods on the secondary market with more ease.
While the technology is enabled by blockchain, there are no plans to accept payments for such goods in cryptocurrencies, both executives said. Microsoft Corp. and ConsenSys are helping the luxury groups develop the technological infrastructure for this solution.