The luxury supply chain is quite complex. The number of players involved in the trade is quite vast. That requires the right tools to handle data, enhance operations and increase transparency. The luxury sector is also prone to fraud and counterfeits. Other issues are copycats and gray market practices.
Blockchain technology provides an effective solution to manage these challenges and more. In this article, we will show how the complexity of the luxury supply chain necessitates the aforementioned. But first, let’s start with understanding how blockchain technology works in the supply chain.
Blockchain in the Supply Chain
Let us look at diamond blockchain in the supply chain, let’s use the example of diamonds. The typical supply chain would look something like this.
What the diagram above does not reflect is the number of hands the stones will pass through. The mining company sells to many buyers. The stones go out as raw or cut diamonds before moving to the distributors. At this stage, there is further manipulation with cutting, polishing and more.
The last stage is the consumers/customers who may buy the diamonds as stones. Others will get the stones as diamond rings, diamond bracelets, and wedding sets.
At every stage of the supply chain is certification to ensure stone quality. You can only imagine how much data every single diamond generates. Right from the mines to the final customer.
Now, along the journey, documents could change. Unscrupulous individuals can tamper with the data for their own nefarious purposes. Diamonds can get lost, and tracing them can be an uphill task.
How Diamond Blockchain Works
However, blockchain technology has changed all that. As the name suggests, blockchain comprises a series of blocks. The blocks are each participant in the diamond supply chain.So if you go back to the supply chain in the station above, one block will consist of suppliers. Then it will be followed by producers, by distributors, and so on.
Within each block are participants who share the same interests. So if you go back to the supply chain in the station above, one block will consist of suppliers. Then it will be followed by producers, by distributors, and so on.
Each block connects to the next via cryptography. It also contains the previous block’s hash. The hash value makes it impossible to alter or manipulate the data. The result is higher transparency, traceability, compliance, and efficiency within the supply chain.
It is pretty clear how blockchain can be helpful in the luxury supply chain. Now lets explore some benefits of the technology a bit more.
● Product Traceability
Blockchain technology helps with product traceability. It starts from the beginning of the production process to the point at which it reaches the customer. Let’s go back to the diamond supply chain example above.
Let’s say a customer wants to trace the story of the diamond back to the mines or lab. The immutable information is available in the blockchain. A unique identifier on every diamond makes it easy to authenticate the stones. This is critical because the diamond industry has its share of fake stones scandals.
The same applies to the apparel industry. Imagine buying a Birkin bag, only to discover later that what you have is not a genuine product. With blockchain, the seller can prove to the customers that what they buy is not fake.
● Fighting Counterfeit Luxury Products with a Blockchain
As a customer, you buy based on Faith. Faith that whatever you’re buying is a genuine product. But the issue of counterfeits is one that keeps rearing its ugly head in the luxury goods sector. How do you know that the brand name you are wearing or carrying is an authentic product? It could be the result of some backstreet workshop.
Blockchain allows buyers to trace the item’s origin to the production line. The same applies to second-hand products. It is possible to find out who the previous owners were. You can also know of any alterations or repairs that happened within the product’s life cycle. The ability to confirm authenticity is critical. It provides an effective way to fight counterfeiting in the luxury sector.
De Beers, a leading diamond mining player, introduced Tracr in 2018. The blockchain and AI-backed technology provide immutable records of the diamond’s provenance. This provides greater assurance to retailers on the origin of the diamonds.
● Better Customer Service with Blockchain Technology
Any customer who spends money on high-value products wants top quality. The qualities should apply to the products and services. Product traceability within the supply chain means every player can keep a close watch on the products at every stage of the cycle.
Blockchain technology allows for real-time tracking of the products within the supply chain. The business can provide reliable, verifiable information to the customer at every stage. That can help build trust, which is critical in the luxury goods industry.
● Proof of Ethical Practices with Blockchain
The luxury industry has come under the limelight for some not very good reasons. Some companies have faced backlash for unfair treatment of workers and animals. Such concerns have come from customers or lobby groups.
There have also been cases of child labor and poor working conditions. Let’s also not forget the environmental destruction of some practices. Indeed, the diamond industry provides a perfect case study of many concerns as such.
Modern customers are more demanding of transparency in the production processes. The suppliers must practice or uphold high ethical values.
Sustainability has become the keyword and one of the strongest marketing tools. It could explain why products like lab-grown diamonds are becoming a popular alternative.
Everything happens in a lab, meaning zero impact on the environment. There is also no issue about unfair treatment of workers. Further, there are no hazardous working conditions or animal cruelty in the labs.
Blockchain allows suppliers and producers to prove ethical and sustainable practices. This is because the customer can trace the product’s journey from the very beginning.
The advantages of blockchain technology in the luxury supply chain are many. The technology allows for greater transparency in processes. Product traceability provides a fantastic way to fight counterfeiting. Further, it helps prove the provenance of the products.
Real-time access to data from anywhere means anyone who needs information can get it. It helps build customer trust and enhance the customer experience.
Finally, blockchain also helps with data management. Once the data enters the blockchain, no one can manipulate or alter it. Tamper-proof ledger records of all transactions provide a level of product security.