How technology might change the value proposition of luxury brands

 How technology might change the value proposition of luxury brands

Technology is being used by luxury firms more and more to eliminate ambiguity and improve the client experience.

As consumers become more careful about the products they buy, transparency has become essential. Before making a purchase, it is essential to understand a product's origin and manufacturing process. Industry-wide repercussions of this change in customer behaviour have forced firms to reevaluate their value propositions in the face of increased scrutiny.

Meeting consumer needs for openness presents a particular difficulty for the luxury industry. Indeed, it can be challenging to evaluate how luxurious a product is in terms of taste, tradition, or prestige. As a result, it is unclear how value is created in the luxury markets, how it moves through different manufacturing and distribution phases, and how it is finally communicated to customers. A situation like this creates ideal conditions for fake goods to flood the market, destroying consumer confidence and brand reputation.

Luxury firms have started using blockchain technology to ensure the authenticity of high-end products in order to address this issue. Customers can get a digital certificate of authenticity and comprehensive information about each stage of production from this unchangeable digital ledger.

The Aura Blockchain Consortium, a partnership of luxury companies that includes LVMH, Richemont, Prada Group, OTB, and Mercedes-Benz, is a notable example. This partnership seeks to provide customers with complete transparency and traceability by embracing a uniform global blockchain solution.

The fine wine market, worth US$18 billion, is another sector that faces authenticity issues. Ambiguity infuses every step of the process, from the wine's production to its marketing via drip-feed distribution. Even taste is influenced by intricate social relations and professional judgement. Due to the difficulty in tracking bottles once they leave the producers, counterfeiting problems in wine and spirits continue. The industry has a minimum yearly cost of US$1.3 billion due to this. Luxury wine manufacturers are taking steps to identify their bottles to fight this problem, such putting covert images on their labels.

An e-commerce site for high-end customers called Crurated went one step farther. The start-up enables locals to interact with and buy wine directly from renowned winemakers, as I detailed in my most recent case study. Through a distinctive NFC tag on each bottle that ensures its validity and contains comprehensive information on its history, including geo-localization and storage conditions, blockchain technology offers complete transparency from point of manufacturing to point of sale. Additionally, Crurated gives its customers the option of storing their wine in a temperature- and humidity-controlled facility in Burgundy.

Engagement and personalization go beyond authenticity

However, problems with storage and validity aren't the only ones that bother customers. High-net-worth buyers who are discerning seek for more in-depth information and want to connect with other wine collectors and winemakers. They seek premium services like customised wine tastings, special access to rare or limited-edition wines, and even unique blends.

The wine industry has seen a rush of tech-driven developments as a result of these new consumer demands. Businesses are coming up with creative methods to educate and engage customers, from community wine review platforms like Vivino to augmented reality animations that bring wine labels to life.

Brands have embraced blockchain's peer-to-peer features to engage with customers directly in the broader luxury business. They promote a closer consumer-brand relationship by offering individualised experiences like exclusive event invitations and early access to discounts. Similar to this, Crurated gives members access to winemakers, online networking opportunities with other enthusiasts, and exclusive opportunities to meet artisan winemakers in person.

Crurated combines three different technologies - social technology, tracking technology, and selling technology - to solve a wide range of consumer, product, and distribution issues. While brands typically focus on combining technologies techniques that solve customer issues surrounding authenticity and production or promotion and engagement.

Uncertainty presents chances for value generation

The luxury industry is currently equipped with a wide range of technology, including blockchain, artificial intelligence, and augmented reality. However, how these technologies are coupled to offer novel proposals represents the ultimate competitive advantage.

In the past, innovative businesses might have incorporated a feature, like Facebook's photo-sharing capability, only to see rivals copy it later. In today's complex world, combining different technologies to solve consumer challenges globally could lead to a breakthrough.

From this perspective, Crurated eliminates ambiguity and provides a richer experience across the product lifecycle. Through blockchain, product uncertainty is eliminated. Through social media and an auction-like purchasing option, it also increases transparency and interaction in the transaction. Finally, it provides a better, more individualised experience by connecting customers with winemakers through clever social media use.

Luxury brands and enterprises must similarly develop a distinctive technical mix to adapt to changing consumer preferences and provide value across the product lifecycle and customer journey in a developing market. By combining innovation with customer centricity, openness, fairness, and fascinating experiences, luxury brands may effectively create the most valuable relationships in the market of tomorrow.