Blockchain: Answer to Luxury Brand Tarnishing Brands’ Reputation?by Opinion Express June 25, 2018 0 comments
Although budding counterfiet markets have foiled the luxury goods market, the latest technology is bound to take over the growing menace.
Many luxury brands believe that India is poised to become the future of the luxury industry as it once was in the past during the pre-Independence era when there were princes and kings. But the entry of luxury consumer products is a double-edged sword. The counterfeiting market is also growing in sync with the growth of luxury products in India.
In the early 1900’s, 20 percent of the global sales of Rolls Royce came from India alone. In 1926, Cartier was commissioned by the Maharaja of Patiala to remodel his crown jewels, including a 234.69 carat De Beers diamond. The result was the magnificent Patiala necklace weighing 962.25 carats and 2930 diamonds. After almost a century, the growth of the market is phenomenal. According to ASSOCHAM, it is set to grow to USD 30 billion from USD 23.8 billion by the end of 2018 fueled by a stable economy coupled, young population and growing disposable incomes.
Problem of counterfeiting
Positive economic trends coupled with favourable regulations and policies of the government for the retail industry are great news for the entry of luxury brands but the growth of counterfeit goods has become a roadblock. According to a ASSOCHAM study in 2014, the counterfeit market is growing at a rate of 40-45 per cent annually, partly due to the growing penchant for e-commerce by the young Indian shoppers. Online shopping portals account for 25 per cent of the counterfeit luxury goods market alone.
Counterfeiters are able to recreate original websites and product photos of luxury goods to sell them as authentic products despite increasing sophistication of the e-commerce platforms. For consumers, apart from the obvious danger of being cheated, there is the danger of exposing their personal and financial information to malicious entities, which makes them vulnerable to misuse of this information. For brand owners, this means a direct decline in their revenues. The influx of counterfeit luxury products is also tarnishing brands’ reputation.
One solution to this problem can be blockchain technology, which gained popularity for being the underlying technology behind cryptocurrencies like Bitcoin. This technology provides users with a decentralised ledger that has the history of all the transactions and is shared across the database. All the data in the form of transactions is stored in blocks, which are linked to each other in a chain, and any change made to the data in any block would cause a change in all the subsequent blocks. It is further computationally inviable to tamper with the data, which makes blockchain immutable and tamper resistant. Users can access and verify this record from any location, which is an easy way to check for the authentication of goods. And any time the goods change hands or move from one location to another, this information is updated on the blockchain, allowing and authentication of the goods. While all the transactions are recorded on the public ledger, making it public information, the identity of the consumers is protected as it is only shown as a pseudonym. This makes the consumers in-charge of their own personal data and gives them the power to decide what to do with it and who to share it with.
One way of curbing the menace is to use open source protocol utilising the blockchain technology to transform the way branded goods are authenticated. The platform will provide benefits to all shareholders – the brands owners, the consumers and the third party retailers — involved in the process of sale, purchase and transfer of these goods.
This decentralised platform will help fight the growing menace through a number of features like an online repository where owners can register all of their products free-of-charge. The information by the users is stored on the blockchain and cannot be changed by a third party. While the blockchain is accessible to everyone, all the data in the user’s repository is protected using encryption methods.
Another way is the Smart-Link, which is a process that gives owners control over what to do with the data stored in their individual vaults. They can choose which data to share, with whom and under which conditions. They also decide which operations will be allowed once access is granted. It can be from a simple read access to delegation of authority. This also allows the brands to maintain an open channel of communication with the owner of the product as long as the authenticity is valid.
Goods registered on the blockchain are displayed as Smart-Assets, which lists proof of ownership, authenticity and other documentation, like warranties. Each Smart-Asset is unique, immutable and transferable between the repositories.
Through a Brand Data Hub, the brands can interact with the platform. It allows brands to manage authenticated products, reach out to product owners and interact with their distribution network.
With collaborations between advisors from both luxury brands and the blockchain community, blockchain companies can help tackle the problem of counterfeiting from the root and provide better quality of commerce. Once such a protocol is fully and developed, counterfeiting will truly be a problem of the past.
(Information Courtesy: Arianee, which is creating a blockchain platform to prevent counterfeiting.)
Writer and Courtesy: The Pioneer