Luxury Brands Are Still Embracing Blockchain For Loyalty and Product Authentication Programs

Despite ongoing scandals surrounding NFTs and crypto platforms, companies in the luxury goods industry are still utilizing blockchain technology for product tracing and authentication.

Luxury Brands Are Still Embracing Blockchain For Loyalty and Product Authentication Programs

Despite ongoing scandals surrounding NFTs and crypto platforms, companies in the luxury goods industry are still utilizing blockchain technology for product tracing and authentication, as well as for revamping loyalty and rewards programs. Examples of companies using blockchain for their loyalty programs include Christian Dior, Rebag, and Starbucks. Consumer interest in web3 technology and products has declined due to the crypto crash, the failure of crypto trading platforms like FTX, and undisclosed endorsements by influencers. Additionally, the lack of sophistication in metaverse platforms has contributed to this decrease in interest, leading many companies to hesitate in fully investing in metaverse and art-linked NFT ventures.

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Even with a potential shift away from digital art-associated NFT projects, web3 and its various aspects are still seeing enthusiasm in the luxury industry. According to Deloitte's annual Global Powers of Luxury Goods report, the digital revolution of web3 is still creating opportunities for innovation and disruption in fashion. The consultancy notes that companies are looking to implement web3-centric endeavors, including the use of blockchain technology for product tracing and authentication.

Deloitte specifically highlights the Aura Blockchain Consortium, a partnership between LVMH, Prada Group, and Cartier, and the Sustainable Markets Initiative Fashion Taskforce. The consultancy particularly mentions the Digital ID system, a solution developed by the Fashion Taskforce, which tags luxury products and records information about their manufacturing and sustainability credentials.

The rise in fake products and secondary market transactions has prompted companies to search for solutions, including the use of digital passports or digital IDs, which utilize blockchain technology to help identify the origin of luxury goods. In addition to their use in authenticating products, blockchain technology is also being utilized by companies in their loyalty programs. Christian Dior, for example, has implemented a multi-tier loyalty program in conjunction with its Beauty division that rewards members' engagement with the brand.

Reseller Rebag has introduced "Premium Payouts" and "Spending Bonus" features to enhance brand loyalty by significantly rewarding clients who remain within the Rebag ecosystem and reinvest their payouts. These efforts are in line with market trends, as a recent Oracle report found that 71% of US consumers are active in at least one loyalty program per month, 56% have a loyalty rewards program app on their phone, and 62% are willing to choose a brand over another because of its loyalty program.

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In 2023, it is expected that loyalty programs will continue to be a focus for brands, and blockchain technology is expected to play a role in enhancing these programs and improving operational efficiency. Software development company Itransition believes that blockchain-based, multi-channel networks can eliminate inefficiencies in loyalty program management and provide new opportunities for companies to engage with customers, such as through the use of a single e-wallet for redeeming all loyalty rewards and the ability to trace and target loyalty points more accurately. Additionally, blockchain-based systems can record and allow access to loyalty-specific transactions in near real-time, protect against fraud and manipulation, and potentially offer a seamless experience for consumers, according to Deloitte.

Starbucks has recently integrated web3 technology and NFTs with its loyalty program. Last month, the coffee chain launched a beta version of Starbucks Odyssey, which combines its existing Starbucks Rewards loyalty program (which has nearly 30 million active users and drives around 50% of the company's order volume) with a Nifty Gateway platform to allow consumers to earn and purchase digital "stamps" and unlock access to special benefits and experiences. A Q&A section acknoledges the inherent cringe involved with adopting a blockchain wallet for a coffee rewards, and attempts to illuminate why Starbucks would go to the trouble, when they've already offered a wildly successful (4.3% of its net income comes from unclaimed gift cards) rewards loyalty program, using more traditional web technlologies, for years:

Starbucks Odyssey will eliminate the barrier to entry to a traditional Web3 marketplace by allowing members to purchase limited-edition Stamps directly with a credit card. No crypto wallet or cryptocurrency will be required - making the Starbucks Odyssey experience an engaging and easy way for members to access this new technology and claim an ownership stake in their loyalty to Starbucks.

Other companies, such as American Express, BMW, and Singapore Air, are also considering using blockchain-based systems for their own loyalty and rewards programs. Starbucks CMO Brady Brewer stated that integrating web3 technology into their established rewards program will allow members to access experiences and ownership that were previously unavailable and are "uniquely Starbucks." Deloitte states is the primary goal of most brands utilizing the metaverse and related  technologies is to "to reinforce their brand equity and drive traffic to their websites and stores." Neither of these positions seem to provide more than a weak argument for blockchain's unique utility. Companies are looking to web3 to deepen consumers' connection with their brand, but rarely seem to outline what utility these technologies actually offer that couldn't be achieved with a standard mobile application.