There’s No Turning Back on the Road to Web3 in the Luxury Space
Today, almost every transaction happens through digital devices. What does that mean for the luxury sector?
Almost 80% of luxury sales now are digitally influenced in some way. Digital transformation is a strategic imperative for every luxury brand to survive and thrive in an increasingly competitive and volatile consumer world.
For luxury brands, digital presence is an incredibly important part of an omnichannel strategy. Digitalization helps optimize resources and makes each step of the value chain more efficient and cost-effective. Digital transformation is not an easy process and requires many operational changes and the willingness to shift the company’s mind-set. Many luxury companies stand only passively towards digitalization, but there are some taking an active role. According to the New York Times, Bulgari, Cartier, Hublot, Louis Vuitton, and Prada have already started digital transformation, and a number of other luxury brands are planning to join in.
Creating an immutable link between the product and its digital twin is the cornerstone to luxury brands’ successful digital transformation.
For the most part, the adoption of digital transformation by luxury companies is still in its early stages. The industry wants to maintain its exclusivity and prestige, hold precise control of brand image, but lack familiarity with technical components. The digital era offers new opportunities, but also increased risks. Luxury brands can fall prey to various scammers. For decades, brands have differentiated themselves through their physical product’s excellence, quality, and exclusivity. How can these brands keep their product as their core focus in a digital world?
1. Efficient solution against counterfeiting — without external components
The trade of counterfeit luxury products is growing at an alarming rate and is becoming a hot topic. According to the Harvard Business Review, the trading of fake luxury merchandise was estimated at over $3 trillion per year. How much does this issue impact your business, brand, and customers?
Counterfeit goods decrease companies’ profits and directly cannibalize products. Most current solutions to fight counterfeiting (NFC, RFIDs) are not efficient — they are easy to copy, tamper with, and can be removed. They are also invasive and can impact the manufacturing process.
With Veracity Protocol, any product can be the custodian of its own identity.
What if your luxury items could be the custodian of their own identity without external components? With our solution, you can create a tamper-proof and immutable digital twin of your product, and a simple picture from any smartphone can prove it authentic. This can be applied to various types of items such as apparel, art and collectibles, sports memorabilia, and much more.
Veracity Protocol’s solution allows brands, designers, and artists to get the most of their brand’s value throughout the product life cycle thanks to the developing Web3 economy. This provides buyers the trust and assurance they are looking for and allows brands to develop new services.
2. Safe return — eradication of return fraud
In today’s omnichannel world and the constant growth of online commerce, managing a company’s return policy is getting harder and often results in a number of pain-points for the customer experience. On average, 10% of products sold online are returned, and an incredible number of these products (6%) are fraudulent. How much does return fraud cost your company?
Veracity Protocol — with its vision, ecosystem, and journey — is the right partner to start with.
With Veracity Protocol’s non-invasive authentication solution, you can eradicate return fraud for good. We create a digital twin for any item and store it in the blockchain with the proof of purchase. Any return can be authenticated just with a smartphone camera.
3. Paperless experience — Certificates of Authenticity, eWarranty and Certificate of Origin
Many brands still use paper warranty cards or certificates of authenticity. Beyond the financial cost of such paper-based processes, there are significant environmental and labor costs of activating these cards as well as severe security risks. Customers can also lose or damage these physical certificates.
Veracity Protocol provides a better solution by authenticating each item using a smartphone camera, linking its unique fingerprint to an NFT and recording it in the blockchain with the associated proof of purchase. The product becomes the custodian of its own identity and the decentralized records enable it to validate the product’s full history including certificate of origin and warranty conditions.
4. Unique product identification — controlling the gray market
Even authentic products can be thrown into the wrong market. In 2021, the gray market was estimated to be worth up to 8% of the $257 billion personal luxury goods market. Similar issues exist in other industries such as pharmaceuticals, cosmetics, and tobacco.
Veracity Protocol can help control this. By creating a unique fingerprint to a luxury product at the manufacturing stage, each item is uniquely identified. When transferred to the distribution channel, each item can be connected to the official distributor. In case you find one of your items in an inappropriate channel, a simple picture of the item can help find the item’s identity and track its history, including the distributor it was assigned to. You’ll also be able to identify bottlenecks and pain points in the supply chain system.
5. Unlocking the full potential in the secondary market — get the most of your brand value
The global secondhand luxury goods market reached a value of $33 billion in 2021. Experts expect the market to grow at a CAGR of 10.3% from 2021 to 2026. We see more and more cases where a luxury bag, watch, or sneaker in the secondary market is more expensive than retail. Brands should ask themselves if they are getting the most of their brand’s value.
This is where Veracity Protocol can help, and enable brands to act. In the Web3 economy, our technology serves as the trust agent for luxury products in primary and secondary markets as well as enabling ownership transfer of the items and their associated NFTs.
NFTs convert digital images into unique, verifiable assets that can be bought and sold through the blockchain. Their growth this year captured the attention of both luxury shoppers and the media, with sales of memes, videos, and other digital art raking in hundreds of thousands of dollars. Some luxury brands have begun to sell branded digital art to collectors. For example, luxury watch brand, Jacob & Co, auctioned its first-ever NFT luxury watch. The highest bidder won the digital watch for $100,000.
6. Staying relevant in the next decade — Generation Z
Millennials and Gen Z are now the most affluent luxury brand consumers and are the ones who are driving global luxury trends and sales growth. These consumers live and breathe digital, and have manifested strong preferences for personalized and seamless experiences integrated both online and offline. As a result, this tech-savvy generation will continue to force luxury brands to become dramatically more digital. By 2035, Generation Z will make up 40% of global luxury spending. Top luxury brands have started leveraging Gen Z habits and trends to reinvent and future-proof their businesses. According to one study from 2021, more than 94% of people who own crypto are millennials or members of Gen Z. They are also the metaverse generation.
Brands should embrace the Crypto / NFT and Augmented Reality / Metaverse worlds that the Gen Z are engaging in. As some businesses are embracing an omnichannel strategy and digital experience over recent years, they’ll have to expand to the Web3 world and create value for their consumers if they want to stay relevant in the decade to come.
Luxury on the road to Web3 economy
Web3 is an idea for a new iteration of the World Wide Web based on blockchain technology, which incorporates concepts such as decentralization and token-based economics. Some technologists and journalists have contrasted it with Web 2.0, wherein they say data and content are centralized in a small group of companies, sometimes referred to as “Big Tech”.
According to the NY Times, ‘’proponents envision Web3 taking many forms, including decentralized social networks, play-to-earn video games that reward players with crypto tokens, and NFT platforms that allow people to buy and sell fragments of digital culture. The more idealistic ones say that web3 will transform the internet as we know it, upending traditional gatekeepers and ushering in a new, middleman-free digital economy.”
The previous pages have shown examples where Web3 is already being implemented in the luxury world and where it can bring value to brands and consumers. It is time for traditional companies to realize the power of digital transformation and keep up with change, as only technological innovators can survive. Technology makes a business more efficient and unlocks new opportunities that empower the unique experiences that luxury provides. Focusing on only Web2 practices will lead brands to become irrelevant to their growing markets and obsolete compared to their innovative and disruptive competitors. It is now time for every luxury brand to start their Web3 journey.
But where to start and more importantly, how to make sure that the new digital reality is connected to your brand’s value, know-how, history and physical product?
Imagine every product is the custodian of its own identity, simply because its microstructure could act as an immutable “fingerprint” linked to its digital identity and available in a decentralized manner.
With Veracity Protocol’s pNFT solution, every product sold through a brand’s channels can be associated with a tamper-proof identity in the blockchain, enabling a trustable decentralized circular economy guaranteed by your brand. Everyone would know the good’s origin, compliance with fair trade and sustainable production practices, and carbon footprint. We can also see what markets and channels this product is authorized and distributed across. Web3 enabled trade will provide full transparency and integrity.
This future is now and the technology is proven. Stay ahead of the game! Veracity Protocol is always here to discuss this, so don’t hesitate to reach out at hello@veracityprotocol.org.
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Veracity Protocol is an award-winning startup that builds a Vision AI Standard to protect people and products in the digital world. The standard guarantees the highest level of trust and security for verifying the identity, authenticity, and integrity of physical objects using a smartphone.
