How luxury retailers are using blockchain to tackle counterfeits in the supply chain
The standard economic argument goes that increasing prices dampen demand, but in the realm of luxury, this argument falls short. In the case of goods such as the coveted Birkin Bag by Hermès, the higher the price the more people can’t seem to get enough of it.
Most intriguingly though, while manufacturers like to claim that the higher quality workmanship and materials are an explanation for dazzling price tags, equity analysts in Exane BNP Paribas have estimated that only around 10% of the Birkin’s price, starting at around £6000 for the very basic model, can be attributed to these elements.
Thorstein Veblen, a twentieth-century American economist first attempted to explain this phenomenon in his work “Theory of the leisure class”. He claimed that the motivation for purchasing expensive goods can be better explained by their ability to signal prosperity and prestige rather than better craftsmanship. In other words, a Birkin, be it of better quality, primarily buys you a ticket up the social ladder.
How do you differentiate between the real thing and the counterfeit?
How, as a consumer, can you be confident in claims of an artisanal origin? In short, how do you know you get what you are paying for? These, amongst many others, are supply chain questions that far predate my interest in the economics of the Birkin bag but have allowed for a long and complex relationship with counterfeiting. A little is good – serving as a testament to an item’s desirability; too much is a problem and, as Bernard Arnault of Louis Vuitton can attest, can erode a brand’s appeal almost to the brink of collapse.
Technology to the rescue
It is here that blockchain can come to the rescue. While most individuals would associate the technology with cryptocurrencies, the distributed ledger technology (DLT) has a much wider application and can lend a helping hand to high-end brands in meeting consumer’s expectations.
In practice, similar to the way ownership of a Bitcoin is traceable as it moves between different users from current owner back to the very creation of the coin, the consumer would have access to the entire life story of their luxury purchase. This could be applied for new and pre-loved items. Should an owner be interested they would be able to trace the delicate cowhide back to the farm where the animal was raised and ensure the welfare standards, confirm the design is authentic and find out more about the experience and personal style of the craftsman or woman who completed the stitching of their bag.
Similarly, they can find any previous ownership and repairs history. The information, distributed across a multi-node system, would be accessible anytime, from anywhere, by anyone and cannot be edited. Immutable provenance records and increased transparency move the perceived differentiation of luxury brands into something more tangible. In short, blockchain allows brands to have more control over market saturation and authenticity,making counterfeiting, theft, and forgery more easily preventable.
The London based start-up Everledger is one of the first solutions to truly capitalize on merging the production and consumption cycles. The company is firstly focusing on the supply chain in the diamond industry – by using dozens of attributes for each diamond, including the 4 Cs: a certificate number that can be inscribed by laser on the crown or girdle, detailing every individual involved in the gem’s journey from the mine to the shop window. The digital twin is then recorded on the Everledger blockchain and updated after every change of ownership or other significant “life event” of the precious stone. Above all, it helps eliminate the market in window dressed conflict gems.
Art, fine wines, jewellery, antiques and luxury fashion are all targets of forgery; Everledger has started to add new asset classes to their portfolio, with similar solutions hitting the market as we speak. One example is VeChain who are looking to offer an app which allows on-the-spot authenticity checks to track item ownership. Jérôme Grillères, CEO, also claims it will allow brands opportunities to share the inside stories of product lifecycles and give more control over brand positioning.
A brave new world
Most interestingly, the importance of this innovation lies not so much in what it can do for proving the provenance of your designer bag or diamond ring. Instead, consider for a moment what crystal clear provenance can do for improving working conditions in third world sweatshops and imported food standards. While luxury brands seem to be the early adopters due to their predisposition to differentiation, it is mass adopters that will change the world of retail. And a truly marvelous world it will be indeed.
RAIN RFID, IoT and AI are key to a proactive supply chain
Across supply chains around the world, we have seen leading companies rely heavily on technologies like AI and IoT during the pandemic. These digital solutions have enabled businesses to accurately capture and ultimately use their own first-party data to drive efficiencies and protect increasingly fragile bottom lines.
However, what is less commonly known is the increasing role of RAIN RFID technology in supporting IoT solutions. By using RAIN RFID to capture item data and then feed that data into AI systems, businesses can identify inefficiencies within the supply chain and make informed decisions.
What is RAIN RFID?
In short, RAIN RFID is a powerful IoT technology that enables itemised data collection. By applying small, battery-free tags to items, organisations can identify, locate, and authenticate each of those items, scanning up to thousands of items simultaneously with a variety of devices, including hand-held, fixed and wearable readers.
RAIN RFID solutions dramatically improve the operational capabilities of an organisation by ensuring they have exactly the right items, in the right quantities, at the right locations, at the right time. During the pandemic, RAIN RFID solutions have been key to limiting disruptions in retail and manufacturing supply chains, most notably by increasing inventory and asset visibility and improving the management and flow of goods.
Three ways RAIN RFID helps solve supply chain concerns
RAIN RFID is used to streamline processes, maintain real-time inventory, increase productivity, and help manage labour shortages. We see three key ways RAIN RFID helps solve supply chain concerns:
- Automate shipment verification: Today, significant labour is required for multiple, manual barcode scans during the shipment process. RAIN RFID tags can be read automatically without a direct line of sight, erasing the need for workers to pause, locate a barcode, and scan it. By using RAIN RFID, supply chain leaders can automate their shipment verification process and improve warehouse efficiencies by up to 25%.
- Deliver real-time visibility: Retail Systems Research says that 76% of supply chain survey respondents reported that real-time inventory visibility was their leading focus for improving performance. When supply chain managers lack information about the status of assets and shipments moving into and out of warehouses, confidence and productivity suffer. By using RAIN RFID, supply chain leaders gain real-time visibility into an item’s identity, usage, and location. With this information, they can quickly find inventory and assets, and reduce the cost of asset investments.
- Improve order accuracy: Today, companies rely on redundant manual checks to verify that the right cartons are loaded onto the correct pallets. By using RAIN RFID, supply chain leaders can automate pallet build verification to streamline the process and increase order accuracy. In fact, a recent study by Auburn University found that RAIN RFID can help an organisation achieve up to 100% order accuracy, eliminating claims costs and unhappy customers.
RAIN RFID can increase value of AI-powered analytics
In today’s AI-driven, rapid decision-making business environment, RAIN RFID is uniquely capable of making systems more effective. This is because it provides item identifiers for tracking and locating billions of items, from clothing to food, pharmaceuticals, tools, packages, pallets, and more.
It also works without line-of-sight, providing visibility into places and processes not previously available. The data provided by a RAIN RFID system can give AI-powered solutions the ability to see individual items throughout the supply chain, understand how the entire supply chain is functioning and identify which areas can be improved.
As companies accelerate digital transformation, we expect to see a rise in interconnected data as investments into new technologies and IoT surge. But as the volume of real-time and accurate data about the movement of goods rises, so too do the demands on operations teams to make sound business decisions quickly and with confidence, often using AI-powered systems that thrive on improved data to make better decisions.
As an example, over the past several years, Delta Airlines transformed its customer experience by investing in technology including real-time RAIN RFID bag tracking and automatic check-in via the Fly Delta mobile app. Delta is now leveraging this set of investments in their implementation of an AI-driven platform that analyses millions of operational data points, from luggage movement to aircraft positions to flight crew restrictions to airport conditions. This system simulates operating challenges and creates hypothetical scenarios that help Delta’s professionals make critical operational decisions that improve the overall customer experience.
The need to drive digital transformation rapidly during the pandemic has made supply chain and logistics professionals increasingly tech savvy. As we prepare for a post-pandemic era, companies’ increased know-how and awareness of solutions like RAIN RFID, IoT and AI will play a key role in evolving the industry’s approach to solving supply chain issues from reactive to proactive, setting them up for future success.