Blockchain Disrupting Fashion and Luxury 2.0: Transparency, Authenticity, Ethics.

Blockchain Disrupting Fashion and Luxury: Transparency, Authenticity, Ethics.

“In fashion, authenticity is important, limited edition is important, being the first to wear or discover something is important — and it’s impossible to prove the authenticity of a digital thing without blockchain.”

– Roham Gharegozlou, CEO of Dapper Labs and creator of the $140k-worth CryptoKitty.

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Six ways blockchain can help Fashion & Luxury

Blockchain is one of the fastest-growing disruptive technologies, and the Fashion & Luxury industry is determined to explore all way that it can benefit from such technology:

• Tracing of unique valuable products (e.g., diamonds, unique fashion items), from production to the final buyer;
• Proof of authenticity of Made in Italy products and incontrovertible certification of their origin and changes of ownership – elimination of fakes and no more trafficking of stolen goods;
• Personalized communication with customers, even after the sale;
• Transparency on information regarding the supply chain and greater efficiency of processes along the chain;
• Evaluation of the well-being of workers and sharing of information with the end customer, thus avoiding exploitation scandals that would otherwise be harmful to the luxury brand’s reputation;
• Immediate transfer without geographical limits of the property, now also digitally (when represented by tokens), of fashion and luxury goods.

Focus on supply chain transparency

In short, blockchain can be used to record different types of data: from transactions to events and information, without relying on a middleman or having to interact with other users.

The technology is already being used by the food industry to track shipments of products or verify their origins. In the fashion industry, blockchain, when paired with tracking tags, can also trace products through the entire supply chain, from the raw material to the factory and even to the consumers, who are increasingly interested in the sourcing of the clothing they are buying, for both ethical and environmental reasons.

By integrating blockchain technology, it is possible for consumers to be confident in the claims that companies make, being able to view and interact with every part of the supply chain of a product, whether that be the sheep farmer who produced the wool or the factory owner. Near-field communication (NFC) chips can be used to to physically verify items, proving their origin and journey as well as granting access to related media, all of which are registered on the blockchain. The immutability of the blockchain, integrated with other kinds of technology, offers a degree of security and transparency that was previously impossible to achieve.

Focus on the “Made in Italy” certification

Blockchain also improves brand storytelling. In fact, in addition to increasing public awareness about the damaging effects of buying counterfeit products, brands need to think creatively about building brand identity and they need to prioritize creating innovative ways to guarantee their products are genuine. The consumers’ sense of “belonging” to brands must be directly linked to a desire to own a genuine product. To do this effectively, brands must offer tools that allow customer to check if the products they are buying are original, protecting them from buying a counterfeit item.

MISE – Italian Ministry of Economic Development – has recently launched a pilot project focusing on blockchain as a key tool for the protection of Made in Italy products. The project has been entrusted to IBM, and the American IT company is currently carrying on a feasibility study intended to develop a reference model for Made in Italy textile products, which, after careful screening, has come to the conclusion that the most effective way of protecting Made in Italy products is through traceability.

As the Italian IBM Blockchain Leader, Pietro Lanza, declared:

“Thanks to Blockchain technology, every step of the production and supply chain can be registered in a scalable, tamper-resistant, and permanent universal ledger.”

Focus on the ethical aspects – United Nations SDG n. 12: Ensure sustainable consumption and production patterns

When Fast Fashion started developing around the 1990s, the pressure for retailers to cut down prices for consumers and costs for the brands grew tremendously. Companies relocated their once-local factories abroad in search of lower labour costs and cut corners to source and produce raw materials cheaply. This led to vast, complex and opaque supply chains, which relied upon unhealthy practices, such as underpayment, child labour, and unsafe working conditions.

It is not a surprise that the 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in 2015, includes as one of its 17 goals that of ensuring sustainable consumption and production patterns (SDG n. 12).

With regards to this, the benefits of using blockchain arise from the fact that organic or Fair Trade certifications can’t be faked, brands can’t deny having worked with factories after news of human rights abuses at those factories surface and auditors can essentially trace any claim about a product back to the entity who first made that claim. And it can do all of this while keeping certain sensitive details — like someone’s salary — private, which is a major concern for those looking to create radically transparent supply chains without violating individuals’ privacy.

New ways to do marketing in the disruption era

All this, however, requires that Fashion & Luxury companies adapt to a new way of doing marketing, so-called unconventional, that adapts without problems to the field of disruptive innovations and that is able to exploit the new technologies, often seen as problematic, to the benefit of such companies, helping them in the promotion and sale of products / services.

“Unconventional – or “black” – marketing is what in specific terms we call Growth Hacking, i.e., ethical hacking techniques applied to marketing. I guess, now, you understand why I only wear black.”

Such is the definition given by Giacomo Arcaro, CEO of Black Marketing Guru, but, before all, the first one to test these techniques. Growth Hacking involves high levels of data monitoring, needed to demonstrate results coming from certain attempts, and high levels of algorithmic automation, needed to reiterate the whole process and fine-tune it from time to time. This form of marketing focuses on personal brands of the company leaders and corporate brand of the business itself to create valuable connections with potential customers and other targeted figures, but even before, indirectly and in a minimally invasive way, improving brand awareness indices.

Pitfalls of the technology

With all the excitement surrounding blockchain, it’s easy to forget that the technology is still largely unproven and unregulated. For the time being, there are no particular standards governing blockchain applications or developers. The few fashion companies that have adopted blockchain have employed developers to write their own applications, which only work with their products and suppliers. An industry-wide standard, or even a single platform, would make the technology more effective and less costly but would require a level of cooperation that may be hard to achieve.

In short, blockchain has the huge potential to transform the fashion industry, but companies need to think carefully before adopting the new technology on the block.

Eloisa Marchesoni.

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