Valued at $450 billion, the counterfeit luxury goods industry continues to be a major problem for luxury brands and retailers. According to the 2018 Global Brand Counterfeit Report, the losses incurred due to online and offline counterfeiting was an estimated $98 billion, with luxury brands suffering a total loss of $30 billion because of the sale of counterfeits through the internet.
This widespread problem hasn’t just affected the financial income of luxury brands; it has also affected their consumers’ trust. The market has become alarmingly advanced, having reached major social media platforms like Facebook. The alarmingly large presence of counterfeit sales on these platforms, along with the fact that no one flags these offending sellers, makes it hard for e-commerce and social media platforms to put a stop to the problem.
A challenge to growth
The absence of transparency and authenticity within the luxury goods market makes it challenging for the industry to grow. This is especially true for the secondary luxury goods market. People are not willing to trust sellers — be it through formal or informal channels — because of the fear of being duped.
Despite all its potential, the secondary luxury goods market is heavily fragmented, with the cost of handbags, watches, belts and other fashion goods being sold at alarmingly different prices in outlets all over the world. A Gucci bag being resold, through a legitimate retail shop in Beijing, for example, could cost far more or less in another shop in Shanghai. This is deeply troubling to both customers and sellers for the following reasons: Customers never know if they are being ripped off or not, and sellers are unaware of the optimal price for the goods they are selling.
It’s clear that there is a serious need for a revamp on how the secondary luxury goods market is run and, from the looks of it, only advanced technology can provide a solution.
How digital assets can improve the market for goods and e-commerce in general
Simply defined, a Digital Asset is a portfolio that contains detailed information and history of a product. This information is secured on the blockchain to prevent the information from being altered. Digital Assets are associated with Digital Identities — a profile that tracks a user’s reputation and transaction history.
An example of a company that is utilizing Digital Assets to alleviate the counterfeit goods problem, within the luxury goods market is LUXCHAIN. Providing a Decentralized Verification Solution, the company seeks to solve the problem of product authenticity to combat the rising counterfeit goods market.
The platform’s users and authentication experts (also known as verifiers) would first authenticate the product, then upload the product information to create the product’s Digital Asset which becomes published and secured on the blockchain.
The use of Digital Assets in order to keep track of all the original personal luxury goods (e.g., handbags and watches) within circulation in the fashion and luxury ecosystem will greatly benefit everyone in the system — from the luxury brands, to the retailers and resellers, and the consumers too. Digital Asset information can also be shared across e-commerce sites or secondhand retailers to increase buyer trust.
Transparency makes it effective
For the Digital Asset solution to be successful, it needs to be as accessible as possible to all parties within the luxury ecosystem. The best way for this to happen is through the implementation of QR Code technology. QR codes are already a popular way of providing quick access to information that can be scanned through everyday devices like smartphones. An imaging platform, ScanTrust adds a layer of trust and security to QR codes, as it links each product to a Digital Asset through a unique, copy-proof QR code located associated to each luxury good sold on on the Luxchain network. Users will be able to scan the QR code with a smartphone or other device, and have access to the relevant information about the verified luxury good.
ScanTrust ensures that every QR code cannot be duplicated, fully confirming that every Digital Asset will have only one valid QR code. Shoppers can scan the unique QR code printed directly on the product’s Digital Asset Card to access personalised information on demand.
In the event that a QR code is damaged or lost, it would need to be replaced. It is only under these circumstances that a new unique code would be printed, while the old QR code would be deactivated or “burned”. No matter where the old QR code ends up (in the event that it is stolen), it will be deactivated to prevent misuse. This solution works because potentially “lost” or damaged QR codes cannot be placed on other goods — counterfeit ones, for example.
For luxury goods — both in the new and secondary markets — the system creates a seamless shopping experiencing that unlocks the ability to provide new insights that benefit consumers.
As a result of this partnership, the luxury industry can look forward to the following:
- QR code allows buyers to easily access product information to see data such as brand, collection, product category — as well as the item’s serial number and verification status. QR code, therefore supports product authenticity and this results in higher trust and transparency.
- This special QR technology also helps fight counterfeits via tracking of logistics. All personal luxury goods that have been sold can be tracked at any time, as they move along the supply chain.
The luxury industry will be able to look forward to greater transparency and security as the Decentralized Verification Solution becomes more prominent. Counterfeiters will find it hard to continue with their business, thus reducing the billions of dollars luxury brands lose to the illicit activity.
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