What Happened: The strategic competition between LVMH Moët Hennessy Louis Vuitton, Prada Group and Compagnie Financière Richemont has been paused temporarily because the European luxury giants have entered into an “unprecedented collaboration” to help consumers trace and verify the provenance and authenticity of luxury items. The three luxury players will join forces in the “Aura Blockchain Consortium, which will promote the use of a single blockchain solution open to all luxury brands worldwide.”
The participating brands will offer consumers direct access to a product’s historical data, proof of ownership, warranty, and maintenance service record. “The Consortium is open to all luxury brands, no matter the sub-sector or geography they operate in,” states an Aura blockchain press release. “It also offers flexibility to support companies of varying sizes and to adapt to individual needs.” The “multinodal private blockchain” will register the information “in a secure and non-reproducible manner” and develop an exclusive certificate for its owner.
The Jing Take: This is a ground-breaking partnership that signals the beginning of a collaborative era in which hostile rivals can finally work together. It could also be the end of China’s daigou shopping model and perhaps the annihilation of the “counterfeit goods” world. Identity verification for luxury goods can help consumers make more informed decisions, as well as offering them visibility into the brand’s supply chain, but at a minimum, the technology will protect buyers and luxury brands from fakes and illegal counterfeit groups. But what makes the Aura Blockchain Consortium so revolutionary is its potential to obstruct the “fake goods” supply chain, combat the traffic of counterfeits, and block pirated goods from reaching the consumers.
Sales of fake goods and counterfeits has generated a loss of $323 billion USD in 2017. And a 2019 article by the Harvard Business Review emphasized that “LVMH alone employs at least 60 lawyers and spends $17 million annually on anti-counterfeiting legal action.” Lastly, Aura will also help luxury brands create a seamless retail experience. Instead of a complex and time-consuming physical retail experience where consumers must wait until sales associates fill out their personal information and verify the customers’ shopping history, luxury buyers will get transparency, privacy, accessibility, and convenience with the click of a mouse button.
Considering that the technology is open even for independent and premium brands, Aura will create value for the entire luxury industry. Small designer brands with limited financial means have a harder time fighting fakes and the illicit trafficking of counterfeits; thus, Aura represents a convenient and affordable solution. Moreover, the technology will help China clean up its image because despite public-private partnerships and significant efforts from Beijing, the country still hasn’t tackled its rampant counterfeit and pirate goods problem. For too long, modern China was a leader in the counterfeit industry, but this could soon come to an end.