High-end luxury brands deal with a number of unique challenges, requiring creative solutions. From tracing provenance to fraud prevention, there is a need for full transparency and security while offering an outstanding customer experience. Real World Assets (RWA) on the blockchain may be the answer. Here’s how RWA could actually solve some of the industry’s most pressing problems, and transform everything in the process:   

Blockchain Technology is Commonly Being Used for Fraud Prevention

Consumers all over the world are being bombarded with counterfeit versions of luxury goods. This severely harms brand reputation and profitability. Blockchain technology has the ability to authenticate luxury goods to ensure that only bona fide items get into circulation. For example, blockchain can be used to track and authenticate all products, which significantly lowers the likelihood of counterfeiting.

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With this technology, luxury brands can easily authenticate their products by issuing digital certificates as ERC-20 tokens, which are kept in digital wallets. Because they are linked to the actual item they provide a unchangeable permanent record of authenticity. So, when an item is being sold, this certificate is simultaneously transferred to the buyer’s digital wallet, making this transaction both secure and transparent. 

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Making sure that all transactions are secure is especially important when they involve high-ticket items. For luxury brands every sale must be tamper proof. Blockchain’s permanent ledger provides a record that is both transparent and secure. These records cannot be tampered with or changed in any way, which creates trust between buyers and sellers, which is crucial when expensive luxury goods are changing hands. 

The Provenance of a Product Traces its Full History, Which Builds Trust

Tracking the provenance of a product gives you a complete history of the item, including where and when it was made, all owners, as well as any changes or modifications, increasing trust and value. A permanent record of an item’s journey from when it was manufactured to its current owner is provided with blockchain technology. This degree of transparency is especially appealing to people purchasing luxury goods, who not only value authenticity, but exclusivity as well. Blockchain technology provider Venly can help you create the infrastructure needed to track the provenance of luxury items in your inventory, so that your customers are assured of full transparency. 

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You can use tokenization tools to create digital copies of the luxury items you are selling, recording each item’s complete history or provenance on the blockchain. Each digital copy or twin is in the form of an NFT, which tracks its history starting with the type of materials and craftsmanship used to manufacture it. Digital wallets can be used to access these NFTs, so potential customers can verify an item’s unique history. 

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By offering customers the ability to verify an item’s journey, you build customer trust. This is vital in the world of high-end luxury brands. This allows consumers access to details about the item they’re buying, including whether the materials were ethically sourced, and its craftsmanship. This level of transparency increases the item’s value while enhancing the brand’s reputation. 

Showcasing a Product’s Origin, Sourcing of Materials, and Craftsmanship

Having the ability to verify and showcase that the materials a luxury item is made of have been ethically sourced has increasingly become important to the wealthy consumers of luxury brands. Blockchain can be used to track and authenticate the origin of an item’s materials to ensure that ethical standards were complied with. Diamond brand De Beers uses the blockchain to trace each diamond’s history from where and how it was mined to its retail store, assuring customers that their diamonds are ethically sourced. 

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High-end brands are increasingly turning to tokenization tools to provide digital certificates, which verify that the materials were ethically sourced. These certificates give consumers the proof they need that their products have ethical origins. 

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Showcasing an item’s craftsmanship and unique features enhances its appeal and exclusivity and with blockchain consumers can get detailed information on the artisans who created the item and the techniques they used, enhancing the item’s prestige. These details can easily be stored on the blockchain, which consumers can access to fully appreciate the item’s value.

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Luxury Fractional Tokenization Makes High-Value Items More Accessible 

Making access to high-end luxury goods can be achieved by allowing people to own a fractional piece without physically taking possession of the item. Fractional investments increase access and liquidity. The ability to purchase shares in top tier brands via luxury fashion tokenization lets more people invest in the luxury goods market. 

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Luxury brands can use asset tokenization to sell fractional shares of high-ticket items by issuing digital tokens that represent the value of the investment. Investors can trade these digital tokens, so investors are buying and selling shares in luxury items. These tokens are stored in digital wallets, allowing people to easily manage their investments. 

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Fractional investors can generate an income off the items they own shares in from rental fees and/or the item’s appreciated value. For example, people will pay to rent designer handbags and luxury watches. So, fractional owners earn an income when their items get rented out. Luxury fashion tokenization allows luxury goods to be more accessible while making money for the fractional owners. 

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Luxury brands have a chance to earn royalties when an item is being sold on the secondary market, creating another income stream. Blockchain tracks the resale of items, and royalties can automatically be paid via smart contracts to the original creator. This model is frequently utilized with NFT luxury brands, which allows these brands to keep making money off their creations years after they first sold the item. Accounting firm Deloitte estimates that by structuring royalty payments in the secondary market luxury brands can increase revenues by as much as 20% a year. 

Authenticity Verification Assures Consumers That a Product is Genuine

Verifying that a luxury item is authentic and not a fake is important to consumers. This is easily done via the blockchain where a permanent record can be provided of its authenticity. Each item is issued its own digital certificate and kept on the blockchain for anyone to verify. This lowers the risk of counterfeit knockoffs while assuring customers that the product is genuine.   

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Digital product passports in the form of tokens can be created. These are kept in digital wallets, or these passports can essentially be smart contracts. In either case, they are linked to the actual item. These passports offer verifiable proof that the item is authentic, so customers know for sure that what they are buying is genuine.

Digital Twins are Virtual Representations that Can Increase Engagement

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Creating digital twins or copies of luxury items allows you to conduct virtual auctions, showings, and launch them into the metaverse because they’re a virtual representation of the item. This way people, whether a potential investor or buyer, can interact with the item before they decide to move forward. This certainly improves the shopping experience while expanding your market reach. 

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These digital copies can be NFTs that represent the virtual counterpart of the actual luxury item. NFT luxury brands are now being displayed in marketing campaigns using virtual showrooms, which allow potential customers to digitally engage with and/or inspect these high-end products. 

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When potential customers or investors have the ability to examine a product in virtual reality, interest and engagement is going to increase. Digital twins or copies are currently being used in marketing campaigns for luxury items, virtual reality showrooms, and on auction sites, offering people a uniquely immersive shopping experience. The tech-savvy consumer of today will appreciate such an innovative approach as it differentiates your brand from other luxury brands in a highly competitive marketplace. 

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Blockchain Technology Makes Buying and Selling Easy Across the World

The digital age has enabled people all over the world to conveniently shop online without ever having to enter a brick and mortar retail store. Blockchain offers comprehensive information on products being bought and sold and all transactions are secure. This especially helps overseas customers who cannot travel to shop in person. 

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With blockchain technology and the use of digital wallets, global transactions can be facilitated that are both secure and transparent. A complete record of the provenance and authenticity of the item being sold can easily be accessed on the blockchain. This allows buyers from all over the world to buy luxury goods with confidence. 

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Luxury brands can certainly benefit from the ability to assure potential customers of an honest and transparent transaction, especially when those customers are located across the world. Because blockchain maintains a complete record of every transaction, which lowers any risk of fraud, both buyer and seller can certainly trust the process. This makes global transactions very easy for luxury brands while expanding their reach. 

Evolving Customer Behaviors Requires Adjusting Channel Strategies 

Even though digital shopping has been on the rise, in-store shopping experiences are still very important for luxury brands. Now that the pandemic is over, in-person shopping is back in full force, especially when it comes to single-brand boutiques. To improve the experience, brands are finding ways to incorporate digital elements. These could be things like interactive dressing rooms and/or personal recommendations.

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Blockchain can seamlessly effectuate your multi-channel strategies by integrating your online with your offline experiences. Digital copies of luxury items in the form of NFTs can improve your in-person interactions with customers while offering personalized recommendations by checking preferences stored on the blockchain. Using this approach you can consistently provide an engaging experience for customers across all sales channels. 

Using Tokenization Tools Blockchain Can Offer Supply Chain Traceability 

Luxury brands are increasingly vulnerable to changes in supply and demand. To mitigate fluctuations in demand and disruptions in supply they need the ability to trace and control their products across supply chains. 

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Blockchain can provide exceptional supply chain traceability and transparency by tokenizing every aspect of the manufacturing process. Starting with the procurement of raw materials and ending up with the finished product, brands can not only ensure their ethical sourcing but the authenticity of their goods as well. Local artisans who collaborate with brands are documented on the blockchain, enabling verification of the diversity of sources, and improving supply chain resilience.

Technology is Playing a Major Role with Luxury Fashion Tokenization

Artificial intelligence, machine learning, along with blockchain technology are driving innovation in the luxury fashion industry. These advanced technologies have applications that can forecast fashion trends, offer personalized shopping experiences, streamline supply chains, battle with counterfeit products, and more. 

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With asset tokenization high-end luxury brands can use the power of these technologies to their advantage. Blockchain can effectively fight counterfeiting by its ability to provide absolute proof of the authenticity of luxury goods. These records can be kept in digital wallets, so that buyers can easily authenticate their purchases. Moreover, blockchain technology streamlines supply chains by offering real-time information on production and logistics, improving efficiency as well as sustainability. 

Recent Reports on Global Growth in the Luxury Goods Market

Statista recently reported that growth in the luxury goods sector is expected to hit $296.9 billion globally by 2026, emphasizing the huge potential of this industry. The PwC Report on a recent study says that with blockchain technology, up to 50% of the counterfeiting being done in the luxury goods market can be reduced. This would save these brands a tremendous amount of money while safeguarding their reputations. According to a report by Deloitte, if brands would incorporate royalty structures in their resale market, annual revenues could grow by up to 20%. 

Conclusion

With the use of blockchain technology, high-end luxury brands can find solutions to many of the problems they face in the today’s marketplace. Real World Assets is able to help with fraud prevention, provide transparency, verify authenticity, and enhance customer engagement, all while providing a superior shopping experience for their customers. The global luxury market is always evolving but incorporating RWA solutions using tokenization tools like luxury fashion tokenization, and asset tokenization will be vital to staying competitive and offering customers the value they are seeking and deserve. 

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For more information on how RWA can transform your luxury brand, click here.

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