17 May LVMH Launches a Blockchain Service as Authenticity – Partic…
The value of the counterfeit market reached $1.2 trillion in 2017, nearly $100 billion of which was directly linked the fake luxury goods. Since the brands that fall under the umbrella of LVMH Moët Hennessy Louis Vuitton, including Louis Vuitton, Dior, Celine, Loewe, and Givenchy, among others, are routinely some of the hardest hit by the black market, the Paris-based conglomerate has taken matters into its own hands in an attempt to assist consumers in determining the authenticity of products – or the lack thereof.
By way of a partnership with blockchain company ConsenSys and Microsoft, LVMH has launched AURA, a platform that it says “aims to serve the entire luxury industry with powerful product tracking and tracing services, based on Ethereum blockchain technology and utilizing Microsoft’s [cloud computing service] Azure.” In short: the blockchain-based service will make it possible for consumers to access the product history and proof of authenticity of luxury goods — from raw materials to the point of sale, all the way to second-hand markets.
While such measures will not serve to eradicate the fake trade by consumers intentionally in search of fakes (neither LVMH nor any other luxury group or brand can eliminate consumer desire to buy counterfeits), what such a service stands to do is to ensure that consumers in search of authentic goods are not duped by fakes, and thus, enables brands to protect both consumers and their brand reputations from potentially low-quality counterfeits. That is significant, as the likelihood that consumers can be tricked into buying fakes is – by nearly all accounts – greater than ever before.
In addition to the increased sophistication of many counterfeit products, the methods for accessing these goods have similarly improved. As Levi’s noted in a lawsuit in 2017, counterfeit-selling defendants routinely make use of “content and images that make it very difficult for consumers to distinguish [between] such stores and authorized retailers,” as well as “unauthorized search engine optimization tactics and social media spamming so that [their website] listings show up at or near the top of relevant search results and misdirect consumers searching for [authentic] Levi’s brand products.”
More than that, though, if a couple of recent Chanel lawsuits are any indication, counterfeit goods of varying quality-levels have seeped into the burgeoning $25 billion luxury resale market, concerns about which are almost certainly one of the drivers behind the recent launch of LVMH’s authentication service.
As for how the AURA system words: newly-made products will be “recorded on the shared ledger, irreproducible and containing unique information.” Then, “at the time of purchase, a consumer can use the brand’s application to receive the AURA certificate containing all product information.” This information will carry over to seasons – or years – later when a product, such as a bag, is off-loaded with a resale site and purchased thereafter.
To date, LVMH says that “several brands from the Group, such as Louis Vuitton and Christian Dior, are currently involved, and advanced discussions are underway to onboard additional brands from the LVMH Group, and other luxury groups globally.”
The issue of luxury authentication has been one of increased discussion and scrutiny particularly as resale companies have grown in size and influence. As recently as this past February, Chanel argued that despite boasting about its “team of luxury ‘experts,’” who ensure that “every item [that The RealReal sells] is 100% authentic,” none of The RealReal’s staff “is, in fact, properly qualified or trained in authentication of Chanel products to support [TRR’s] claims as to the genuineness of the products it resells.”
This he said-she said over the authentication of luxury goods for resale is far from an issue that is exclusive to the Chanel lawsuits. In reality, the ability of resellers to properly authenticate products (every single time) and thus, build consumer trust is at the core of pre-owned luxury market, meaning that such a service will be of enormous benefit to them. Still yet, since luxury brands have – to a large extent – conceded the ability to completely control the market for their (pre-owned) products and the distributions chains associated therewith, as a result of the sweeping rise of the resale market.
With that in mind, LVMH’s recently-launched authenticity effort (and others like it) give its brands the ability to ensure that consumers are protected from fakes and that their reputations are protected, as well. In a business where handbags cost upwards of $1,500 and t-shirts are going for hundreds, the reputation (or goodwill) associated with a brand and its name is an highly valuable asset, and one in need to careful protection.