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The authenticity challenges faced by the Second-hand Luxury market

How can we give back trust to the shoppers who are still hesitating to make this market taking off further…?

Because the resale Luxury market is in very strong growth, it generates unfortunately the same growth on counterfeited items, impacting directly the Brand image. That’s why today, despite this growth, this market is limited by customer distrust and the inability to guarantee that the items they buy are not fake, but also by the loss of value of the articles for resale. So, above all the technology which all promise to be the “best solution”, what is the situation today, where are the real challenges, and is this situation irreversible and inevitable, or are there ways to fight this scourge on this new fast-growing market?

Blockchain is not the solution. It’s just a part of it…

In the continuous evolution of technology, there have always been “buzzwords” depending on the period. IoT, RFID, IA… and Blockchain is one of them. Having spent over 10 years in the authentication and traceability space in Luxury, of course know that, and we always warn that we have to be very careful when jumping onto a technology. Because there is no quick fix, and precisely because it is “only” a technology, which is nothing if it is not part of a global picture. Technology has to be a tool, used to serve a bigger project. In our case, fight against counterfeiting on the Luxury resale market, which is less and less under control.

Original uniqueness is crucial

Let’s go back to basics: Blockchain is a technology for storing and transmitting information without a control body. These information, sent by users and internal links, are checked and grouped at regular time intervals in blocks, thus forming a chain, secured by cryptography. Thus, the transmission of this information is secure. But it is still necessary that the information at the origin is correct! For that reason, and if we come back to our context of Luxury resale market, each item must be identified individually and securely, at the source.

In that sense, Blockchain is a good tool to transfer on a very safe way the information, if and only if this information is correct and secure from the beginning and from the Brand itself ! If not, it is useless, and can be even worse...

Public Blockchain vs Private Blockchain

We often oppose private blockchains to public blockchains. But actually, debate is not here. Each problem has a solution, and both can answer it, depending on the context. Business is driving the technology, and a good solution is the one which answer to Business issues. Regarding the Luxury resale market, two business elements are important:

  • Confidentiality is key. Brands cannot rely on non-fully decentralized solution as some of the information they will use are really sensitive and most of them do not want to take the risk to share it,

  • Business process cannot be affected or impacted. Transaction time for an exchange/transfer of information (certificate, data…) has to be immediate, as it could takes place during the Sales ceremony in the store, or in a face-to-face transaction on second-hand.

So, if we try to integrate these prerequisites into an “ideal” solution, we can summarize it by saying that it is key to have a real decentralized solution - to avoid any kind of dependency -, while having a high-speed transactions process, to avoid latency and business disturbances.

Regarding the security and the transparency of the information, comparison is quite simple, by definition.

  • With private Blockchain, the consensus system as a whole is centralized within a single entity. A network based on a private blockchain is therefore not strictly speaking decentralized.

  • Public blockchains are truly decentralized and information is immutable. No central unit is in control and security/transparency is optimum.

The answer to our first prerequisite on the resale Luxury market will be then: we need a public blockchain.

But problem of these public Blockchains was impacting our second business driver: the speed of transaction. That’s why several players have decided to move and to create private blockchains, to be able to control better this parameter and offer a faster speed. But the decentralized aspect then was not taken into consideration. An idea to get around this problem was to set up a notion of “consortium”, based on the own cryptocurrency provided by these private blockchains, so that each of the players become a contributor to the blockchain, with the idea to offer them a better control.

However, at the end of the day, even if the marketing around is nicely package, this remains a workaround, and it remains a private blockchain, without the notion of real decentralization. The notion of risk and opacity somewhere, will always remain.

Fortunately, this key issue regarding transaction speed has been solved by new generation of Blockchain, such as, created at the end of 2018. As an example, transactions today are 4,000 times faster than Ethereum, and allow to perform transactions in few seconds.

The answer to our second business prerequisite regarding the Luxury resale market will be then: the new generation of public blockchain can achieve the transaction time we required.

As a pragmatic conclusion to this typical question (public vs private blockchain), within our context of the resale Luxury market, a new generation Public Blockchain, such as, is able to answer to the key business drivers and requirements.

Are all items categories equal against counterfeiting?

That’s another question and the answer is no. As mentioned previously, authentication of the item is one of the keys. But all the Luxury items are different, and some product families are much more difficult to authenticate in peer-to-peer without a mandatory expertise from the Brand. Especially when it is difficult to integrate the identifier inside the item. This is the case for watches or some high jewelry items.

Watch industry is one of the most mature regarding the second-hand market. But a unique number engraved on the housing or a certificate -digital or secured-, is not enough. Most of the value is coming from the inside (mechanism, pointer…), and nothing avoid a seller having an original certificate to change some of the key spare parts and resell it to a very high price. As a buyer, even if I get a genuine certificate, with or without Blockchain, I need to go back to the Brand if I want to be sure that it is 100% real.

Same problem occurs for some particular high jewelry items: synthesis diamonds are more and more difficult to identify, and almost impossible for a simple buyer on second-hand. And in regard to the price of these kind of items, in that case also it is mandatory to get an expertise from the Brand.

Credibility is key to get back trust from the second-hand customers, and that’s for this reason that we, at Trust-Place, have decided not to integrate as a start these two products family into our solution, to focus on Leather goods, small leather goods, accessories, ready-to-wear and shoes, for which identification can be integrated directly inside the item (NFC for instance), and where the peer-to-peer control can be realized directly by the customer, as soon as all the conditions of the Trust-Place solution are realized and checked.

The limits of the current resale ecosystem

So the problem is that the current resale ecosystem today doesn’t have the capability to ensure the consumer that items purchased are 100% authentic. This is a real issue, as most of the items on the Luxury resale market are above a certain price. Some marketplaces don’t even want to enter into that battle, not providing any authentication guaranty, preferring to focus on fast fashion with lower price, where counterfeiting is less an issue. But even the ones who tried to provide an expertise are not in capacity to achieve that goal. Authentication by visual inspection has a huge cost which impacts P&L and profitability of these marketplaces. At the end of the day, only Brands can do it for their items.

From their side, most of Luxury Brands does not want today to get exposed directly with these players. First of all because they are not in control and cannot commit that the items which can be found on resale marketplaces are real or fake, and most of them don’t even want to, as their level of information regarding the end-user, the price or the experience is very low. But most of them do not even want to create a dedicated resale items division neither. Indeed, even if it is proven that this is not the case, the fear of cannibalization is still present for some of them who prefer to wait and see. Some Brands have decided to move and to create their own second-hand channel, but then, they are facing another problem: the consumer wants to have the choice, in a cross-brand environment, to buy, use, resell, and maximize its value on a peer-to-peer open market.

New solutions and business model are emerging to reshape this market !

As a conclusion, despite the fact that second-hand luxury market is growing, it is still slowed down by some fears. Authenticity is one of them. Bricks of technology are existing, such as Blockchain, but the complete business environment has to be taken into consideration, for the Brands and for the consumers.

Existing resales marketplaces cannot guarantee the authenticity of all the items they propose today. On top of that, their commissions rates are against the mentality of the new generations which want to sell and maximize their rewards, to purchase something else. Regarding the Brands, they are still hesitating to display themselves on the secondhand market, being afraid of some sort of cannibalization of their primary market. And they do not want to rely on the existing resale players, as they want to control their image, their price, and the relationship with these new strange customers, that they don’t know today…

That is exactly to sweep away those fears that Trust-Place has been created. With a solution being created to answer to the business constraints faced by this market and using the most adapted technologies to solve these issues. Helping Luxury Brands to get in touch with their customers that they don’t know, directly or indirectly, while protecting the value and the transmission of Luxury items on the second-hand market for these new generations of consumers. Our mission at Trust-Place is to make these two universes meet, for the best of both worlds, by developing the circular economy in a unique way, and with a totally disruptive business model.

So, follow the wave, and come to surf with us!

If you want to have more details about Trust-Place solution, as well as a demo, or if you have any question, please contact us !



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