Counterfeits in fashion industry are on the rise
The global luxury resale market in 2021 was valued at US$32.61 billion and is likely to reach US$51.77 billion by 2026. In the past few years, the sale of pre-owned luxury goods has been increasing rapidly, and the stigma associated with the consumption of second-hand luxury has been disappearing. According to the Global Luxury Resale Market Report 2022, the luxury resale market is projected to grow at a CAGR of 9.68% during the forecast period of 2022-2026 [1]. Despite the sustainability associated with this trend, the rise of secondhand fashion goes hand-in-hand with the surge in the counterfeit market.
According to data from the Global Trade in Fakes report by the OECD and EUIPO, trading with counterfeit goods amounted to roughly $449 billion in 2019. The same report indicates that the trade with counterfeit or pirated goods made up 2.5 percent of the world trade and roughly six percent of imports into the European Union in 2019. Although some luxury brands have embraced the resale industry as an evolving luxury retailer in the fashion industry, some brands choose to remain cautious and take immediate action upon potential counterfeiting. Read about trademark infringement disputes brought by fashion giants Chanel and Tiffany against online marketplaces such as The RealReal Inc. and eBay in this article.
In order to combat counterfeiting, multiple brands are trying to develop more efficient luxury resale authentication strategies to make sure that consumers are getting the real product. One of the most promising solutions currently lies in blockchain technology.
What is Blockchain?
A blockchain is a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems. Blockchain is a perfect way of delivering that information because it provides immediate, shared, and completely transparent information stored on an immutable ledger that can be accessed only with the permission of network members. The innovation of a blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party. Blockchains are best known for their crucial role in cryptocurrency systems, such as Bitcoin, for maintaining a secure and decentralized record of transactions.
How does Blockchain work?
The main concept behind blockchain is to create a single database to be spread out among several network nodes at various locations. This database contains and preserves the exact and transparent order of events that cannot be altered or deleted. Such a record could be a list of transactions, but it also is possible for a blockchain to hold a variety of other information like legal contracts, state identifications, or a company’s product inventory.
Once a new transaction is registered it is then transmitted to a network of computers scattered across the world. This network then confirms the legitimacy of the transaction, after which clusters it with other transactions into a separate “block”. The type of data stored in a block differs based on the blockchain. If the data is about Bitcoin, the blockchain maintains information about a transaction such as the sender, receiver, and transaction amount. These blocks appear in the same chain and each additional block strengthens the verification of the previous block and hence the entire blockchain. This process creates an accessible history of all registered transactions and prevents any unregistered alterations in the system.
How can blockchain help brands resist counterfeits?
Because blockchain gives a product a unique identifier, it allows it to trace its whole history from raw material to the point of sale and eventually to secondhand markets. In this way, brands and consumers have access to digital proof of the product’s authenticity. Smart tags are used by companies to implement blockchain provenance identification. They’re attached to products to identify the place of manufacture, track real-time location, and assign specific information at various stages. When a smart tag is attached to a product, data of every new transaction is sent to the blockchain along with the corresponding time stamp, creating a trust layer for the data by rendering it immutable. This makes it easy for concerned parties to track a shipment and view history right from the onset.
Many well-known luxury brands like Louis Vuitton, Prada, and Christian Dior are already implementing advanced blockchain technology to battle counterfeiters. Louis Vuitton Moet Hennessy (LVMH), Prada, and Cartier joined forces to create Aura, the first blockchain system focused on providing a platform for tracking product history and proof of the authenticity of luxury goods. Microsoft and the blockchain-native company ConsenSys are providing assistance in developing the technological infrastructure for this platform.
The emergence of blockchain technology offers great potential for platforms that provide customized tools to businesses for tackling counterfeiting. They draw on distributed ledger technology to create a digital footprint for the entire supply chain. Platforms streamline the flow of money and services in the supply chain with automation, eliminating the possibility of fraud. Blockchain-powered solutions designed for fighting counterfeiting can be easily integrated with legacy systems. This makes blockchain technology a cost-effective solution for the fashion industry to resist counterfeiting.
