Counterfeiting is one of the biggest threats to the fashion industry, deceiving unwary consumers and diluting brands’ values and hard-earned reputations. Counterfeiting costs brands over $450 billion in lost sales each year, and it is predicted to put 5.4 million jobs at risk by 2022.¹ Despite efforts by enforcement agencies to crack down on fake goods, counterfeit products continue to flood the market. As a result, more and more brands are looking to technology as a way to gain back control of their products. Enter: blockchain.

The first thing you might think of when you hear the word “blockchain” is bitcoin, the virtual currency. But in addition to being used by the financial sector, blockchain can be used in myriad other industries, including fashion. At its core, blockchain decentralizes information recording and storage. Because blockchain is shared and maintained by a public network of users, any information stored on a blockchain is transparent. Blockchain technology has already begun to penetrate the fashion world. With its ability to help authenticate products, trace supply chains, and unravel ethical issues, it is no surprise that this technology has been earmarked as a potential solution to save the luxury goods market.

Authenticating Luxury Goods

The concern over authenticity is prevalent as the counterfeiter industry continues to gain momentum. Blockchain gives consumers the ability to verify information about the origin and identity of their purchase, which can reveal whether or not the product is authentic. Some companies are already starting to take advantage of this feature. Bonafi,² a blockchain company based in Los Angeles, has developed a “crypto-tag,” which automatically authenticates products. The “crypto-tag” logs an item’s history, allowing consumers to trace exactly where their product came from without relying on the retailer or the brand. Luxochain³ is another company capitalizing on blockchain’s unique benefits. This service tackles authentication at the source by fitting luxury products with an invisible and encrypted serial number, which brands can then register on the blockchain. This way, consumers can be assured that their product is authentic at the point of sale.

Managing a Product’s Lifecycle

Most retailers lack leverage over their manufacturers because their supply chains aren’t vertically integrated.⁴ Blockchain can offer a solution. In addition to tracing the origin of a product, blockchain can also track a product’s lifecycle by following where a product has been and where it is going. This will make it easier for brands and consumers to spot the place and moment a counterfeit product slipped into the supply chain or the point an authentic product fell out.⁵ Take Arianee,⁶ for example, a brand devoted to developing an open source and decentralized market for luxury goods, including watches, handbags, and clothing. While still in its early stages, brands can use Arianee’s platform to register their products, and, in turn, consumers can register their purchases. The service assigns a unique digital representation to each product, which can be used to track events such as cleaning, repairs, or even changes in ownership. This will benefit not only consumers but also brands, allowing them to learn more about their customer base and better understand who is using their products.

Achieving Transparency

In addition to offering solutions for authentication and supply chain management, blockchain also helps brands achieve transparency – which is crucial, as consumers are increasingly demanding ethically sourced and sustainable products. Many companies already devote their entire brand strategy to sustainability. Reformation started selling upcycled vintage clothing in 2009, aiming to bring sustainable fashion to everyone. The brand even manages its own sustainable sewing factory in Los Angeles, where it can control its waste and water usage, in addition to managing recycling.⁷ Last May, the diamond company De Beers launched a blockchain tool called “Tracr,” which monitors the journey of diamonds to ensure they are not being used to support violence.⁸ Also, fashion designer Martine Jarlgaard, in collaboration with Provenance, uses blockchain to track and trace sustainable alpaca fleece all the way from the farm to the knitting factory.⁹ As consumers become more cognizant of where their purchases are coming from and who is making them, this knowledge will encourage other brands to be mindful of their manufacturing practices.

Is Change Possible?

While blockchain can provide an answer to solve many of the issues currently plaguing the fashion industry, consumers must be part of the solution for change to be effective. This will be a challenge in the case of luxury goods, where demand is high, but not always accessibility. For those consumers who cannot afford the hefty price tag of a designer handbag, a replica might be a good option. Blockchain technology, coupled with consumer action, is bound to bring positive change, but this might not be as easy as it sounds.