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Some of the top names in the world of luxury brands just dropped big news for everyone in the world. On April 20, 2021, LVMH released a press release for introducing the first global luxury blockchain to the world. LVMH has collaborated with other forces in the luxury goods industry, such as Cartier and Prada, to pioneer a groundbreaking application of blockchain for luxury goods. The blockchain, known as Aura Blockchain Consortium, would offer a comprehensive solution for consumers to verify the authenticity of luxury goods.

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What is the Aura Blockchain Consortium?

The press release by LVMH elaborated on the characteristics of Aura Blockchain Consortium. Aura would serve as a singular and innovative solution for shared challenges involved in communicating information regarding authenticity, sustainability, and responsible sourcing in highly secure, digital formats. The basic objective of Aura is to make the best use of blockchain technology for offering the highest quality of transparency and traceability across the whole lifecycle of a product.

How Does Aura Blockchain Consortium Works?

The underlying technology in Aura basically relies on comparison of product ID with a client ID. As a result, customers could access information about product history as well as authenticity through tracking the manufacturing process beginning from the procurement of raw materials to the store shelves. The infrastructure of Aura shows the use of blockchain technology with its chain of non-reproducible and highly secure digital blocks.

Promises of Aura Blockchain Consortium

The Managing Director of LVMH, Toni Belloni, expressed positive opinions regarding Aura Blockchain Consortium in the press release. He stated that Aura would bring prolific opportunities for the luxury goods sector to establish better connections with their customers. Mr. Toni emphasized enabling customers with a simple solution to verify the authenticity of products from the luxury goods sector and know more about them. He also added that collaboration with other luxury brands in this initiative involving the application of blockchain for luxury goods would illustrate the luxury goods sector as a pioneer of traceability and transparency.

Blockchain uses public, distributed ledger technology with the benefits of traceability, security, and immutability. It finds applications in cryptocurrencies, primarily for secure registration of transactions, which are visible to all participants in the network. However, blockchain technology can also find applications in recording documentation of a wide variety of information eligible for public sharing. Therefore, Aura Blockchain Consortium is being perceived as a promising answer to one of the most critical troubles for the luxury goods sector, i.e., counterfeit goods.

Luxury brands have been incurring huge losses in terms of sales and brand reputation due to fake copies of their products. Aura would let luxury brands leverage the use of blockchain technology to help their customers know more about their products. The transparency offered by blockchain technology could help customers travel through the journey of products through manufacturing and the supply chain. As a result, luxury brands could look at better prospects of earning the trust of customers and strengthening their brand image with the applications of blockchain.

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A Strong Initiative for Blockchain Uses in Luxury Goods Sector

Presently, the Aura Blockchain Consortium has notable luxury brands such as Bulgari, Prada, Hublot, Cartier, and Louis Vuitton on board. With such prominent names already active on Aura, many other luxury goods manufacturers are also likely to join the initiative. As the leading luxury group of the world, LVMH brings some of the biggest brands such as Kenzo, Bulgari, Tiffany and Company, Givenchy, and Christian Dior under one roof.

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The initiative of LVMH in introducing Aura is perceived as the best use of blockchain technology for dealing with many other conventional industry challenges apart from lowering the risks of counterfeit goods. For example, blockchain technology could help in improving supply chain operations and data management tools for improving operational efficiency.

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The Three Core Capabilities

The different aspects of the announcement by LVMH definitely present reliable prospects for the luxury goods sector with blockchain uses. However, it is reasonable to ask- “Would blockchain serve as a perfect fit for the luxury goods sector?” and the answer is evident in the benefits of blockchain for supply chain management in the luxury goods sector. Blockchain can deliver transparency, tradability, and traceability, which are the foundations of Aura Blockchain Consortium.

Transparency helps companies in the luxury goods sector to communicate verifiable claims with customers for improving authenticity and customer trust.

Tradability, on the other hand, allows customers to convert their luxury goods into non-fungible tokens with the flexibility of holding the tokens, purchasing, exchanging, or trading them at any location, at any time.

Traceability is also another profound benefit of using blockchain for luxury goods sector as it helps companies in tracking the ownership of their products alongside the underlying elements from sourcing to sale.

Promising Benefit of Blockchain for Luxury Goods Sector

Rather than considering these three aspects as benefits of blockchain, it is reasonable to refer to them as core capabilities. The core capabilities are capable of extending additional benefits to different stakeholders throughout the luxury goods industry. So, what are the additional benefits that showcase the best use of blockchain technology for luxury goods?

The application of blockchain in the luxury goods sector could improve advocacy for sustainable practices. Blockchain presents a formidable ability for tracking digital or physical products throughout their lifecycle. Manufacturers could get the perfect vantage point for observing their value chain with the transparency in supply chain traceability. As a result, manufacturers could easily ensure final product labelling and follow the best practices for third-party goods handoff.

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Blockchain could also provide efficient tracking of the movement of assets alongside documenting the associated information and showcasing the prior records of the asset. Furthermore, blockchain also presents formidable capabilities for widening the scope for sustainable and ethical practices in production and consumption of commodities on a global scale.

  • Delivering a New Form of Customer Experience

The use of blockchain technology for supporting sustainable practices in manufacturing luxury goods also leads to another prominent benefit. Sustainability is no more an optional requirement for brands all over the world. According to reports by Nielsen, almost 73% of Millennials and 66% of customers all over the world have expressed willingness to pay additional costs for sustainable products. Retailers could leverage blockchain technology for tokenization of physical assets and enable customers to view information about the location of sourcing the products. This new approach could facilitate a radically positive transformation of customer experience with luxury goods.

One of the promising instances of the applications of blockchain for luxury goods to redefine customer experience is the Preloved Pop-Up Sale hosted by LUXARITY every year. The sale primarily deals with slightly used luxury retail items. Customers could receive information regarding the items by scanning a QR code on each item. The background information such as ownership, places of use, and the environmental impact associated with the purchase is easily accessible through the QR code. In addition, the code also includes handwritten digital notes from original owners of concerned items.

  • Simpler Approaches for Verifying Authenticity

Among the many blockchain uses discussed with respect to the luxury goods sector, the use of blockchain for authenticity is a formidable advantage. Blockchain technology helps brands in tokenization of non-fungible assets. Therefore, it is possible to use blockchain for holding, purchasing, exchanging, and trading your luxury goods as digital assets with ease. Customers could easily log into the website of a specific brand for creating and proving their provenance as a luxury asset.

The ownership of the asset could be verified and is also transferable to other consumers. Labeling luxury goods with one-to-one counterfeit-proof functionality and enabling traceability through digital twin technology shows the promising use of blockchain. For example, Treum presents different solutions such as RFID and machine learning solutions for image recognition for guiding customers.

  • Taking Customer Trust to Next Level

The next important contribution of blockchain for luxury goods is evident in the form of enhancing customer trust. Blockchain can help luxury brands in digitalization, tracking, and tracing the whole lifecycle of a luxury good. Blockchain enables brands to create immutable records of all stages of the supply chain while capturing particular data points, especially sustainability claims and certifications.

In addition, blockchain also enables companies to offer open access to the data. Around 62% of consumers all over the world emphasize brand trust as one of the formidable sustainability factors driving their purchasing decisions. The transparency in supply chain could offer better improvements in customer trust scores that improve client experiences alongside brand engagement. In the long term, higher levels of customer trust could lead to better customer loyalty and longevity for a brand.

  • Better Data Management and Cost Reduction

The best use of blockchain in the luxury goods sector with Aura can also enable improved data management and cost-efficiency. The traditional approaches for data management in silos could easily result in suboptimal processes alongside critical reconciliation issues. It is possible to apprehend critical information easily on blockchain while sharing it securely throughout business lines, partners, and operations. Presently, blockchain is the trustworthy technology for information exchanges where trust is the most important requirement.

The facility of better data management tools and improvements in supply chain management with blockchain in luxury goods sector could help in reducing costs. For example, better trust in outsourcing alongside innovative Just-In-Time inventory management solutions could result in promising cost savings. Furthermore, blockchain also offers a profoundly easier and lightweight approach for integrating data reconciliation layers throughout service lines and operations.

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Prominent Use Cases of Blockchain for Luxury Goods

The prominent blockchain uses in the luxury goods sector also include loyalty programs, digitalization of assets, and product traceability.

  • Countering Counterfeit Goods

The sale of counterfeits accounted for almost 3.3% of the global trade in 2016 at a whopping $590 billion. Therefore, the use of IoT, QR codes, RFID tags, and photography helps in creating digital representatives or twins of physical assets on blockchain. Therefore, brands could easily resolve the concerns of counterfeit products through tracking products digitally across the supply chain as well as after the sale. Tokenization helps stakeholders access the tracking data easily. In addition, it also helps in carrying out real-time transactions without compromising the safety and integrity of any sensitive information.

The use cases of blockchain for luxury goods could not skip on the impact of product traceability. The worldwide luxury goods market could reach almost $1.5 trillion by 2025, with Millennials poised to occupy 50% of total target audience. Millennials and Generation Z consumers are responsible for achieving growth levels of around 85% in global luxury sales.

Therefore, it is important for luxury brands to look for opportunities to align with the values of their target audience. Blockchain helps brands in efficient supply chain management from raw material procurement to the customer’s possession. It also offers the benefit of managing large data sets with improved efficiency and transparency. Brands could then communicate the information about supply chain management to customers and achieve improved competitive advantage.

Another promising application of blockchain in the luxury goods sector would refer largely to loyalty programs. “Digital influence” is also one of the prominent factors for driving almost 80% of luxury sales in present times. However, the value associated with loyalty programs is limited to specific jurisdictions only.

Blockchain can offer the benefit of seamless global transactions, thereby enabling customers to adopt a global lifestyle with luxury goods. Tokenization employs the best use of blockchain for presenting a completely new loyalty program approach. The new loyalty program approach can enable luxury shoppers to carry out transactions with other partners external to the brand.

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The Future of Blockchain in Luxury Goods Industry

Many consumers perceive luxury goods as a symbol of a specific lifestyle of social status. The applications of enterprise blockchain technology in unison with IoT devices and sensors have revolutionized supply chain transparency. The members of a specific community could access a shared, real-time record of truth about specific facts or transactions with blockchain. The evolution of blockchain has empowered it to verify the authenticity of products with ease.

At the same time, blockchain can also help in diving deeper into the origins and manufacturing of the product. The global counterfeit goods market is growing faster than ever, and customers are unsure about purchasing luxury goods. No one wants to invest a huge amount of money only to land up with fake products. So, the new Aura Blockchain Consortium initiative by LVMH can encourage new blockchain-based product provenance and authenticity solutions in future.



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