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March 7, 2024

How Lifestyle & Luxury Brands Leverage Blockchain to Grow Direct Customer Relationships

By Michael Johnson, Chief Sales Officer at Aventus

The TL:DR
There are three main challenges facing lifestyle & luxury brands' ability to connect directly with their customers:
1. While direct-to-consumer is growing, the wholesale channel is still significant at $10T+ and growing
2. Regulations – privacy and impending cookie deprecation
3. Second-hand market sales growth
By tokenizing every product, there is a digital representation of the product (similar to a car’s VIN), which is recorded on a blockchain – a secure, transparent ledger. This record persists everywhere the product travels, from manufacturer to second-hand buyer
Every owner of your product, regardless of where it was purchased (direct, wholesale or second-hand) becomes a direct registered customer and can share their data with you (permission-based in a wallet) to unlock rewards and brand experiences.
The impact of this is:
1. Build direct access to customers regardless of sales channel
2. Direct access to new customers from the second hand market
3. Second-hand market data – the fastest growing segment of the market
4. Zero party data – highly reliable permissioned access to customer data
6. Traceability – fully transparent, secure and trusted for better brand experience and regulatory compliance
5. Authenticity – transferable, digital certificates of authenticity

In today's data-driven landscape, organizations that harness the power of data are significantly more likely to acquire and retain customers while also achieving profitability. According to the McKinsey Global Institute, data-driven organizations are 23x more likely to acquire customers, 6x as likely to retain customers, and 19x as likely to be profitable as a result. This isn’t new news. Consumer brands have been at the forefront of using buyer data and insights since the direct mail days of the 1980s.

However, for B2C brands and manufacturers operating within the wholesale channel, there are distinct challenges that hinder their ability to leverage customer data and build direct relationships. Despite the rise of direct-to-consumer (DTC) revenue models, wholesale trade remains a dominant force in the market, representing a substantial portion of sales for most major players. Yet, the wholesale model often lacks direct contact or relationships with end customers, making it nearly impossible for brands to capture direct customer relationships and insights while maintaining some level of control over the brand experience.

Moreover, regulatory hurdles such as privacy laws (e.g., GDPR, CCPA) and new EU regulations on traceability (ESPR DPP) pose additional challenges for brands seeking to comply while also accessing and utilizing customer data effectively. Finally, the burgeoning second-hand market presents both opportunities and complexities for brands, with some analysts predicting it to become as high as 40% of the overall market, rivaling primary sales channels (due in large part to gen Z and Alpha’s values around sustainability and social impact – but that’s an entire subject on its own).

To address these challenges and unlock the full access to direct customer relationships, brands and manufacturers are turning to innovative solutions like blockchain and tokenization. By leveraging blockchain technology, every product can have a digital token representing its unique identity, similar to a VIN for a car. This tokenization enables the tracking of products throughout their lifecycle, from manufacturing to resale in the second-hand market.

The primary buyer of a product registers their purchase, unlocking the token and recording the transaction on the blockchain. While this concept is not entirely new – you may have scanned a QR code on a box before to register your product for a warranty – with blockchain, this registration process can incentivize buyers through far more attractive rewards like authenticity certificates, immersive experiences and information on product origin data – all while ensuring their privacy, as data is stored securely on the blockchain and permissioned for sharing. Subsequent second-hand buyers are similarly incentivized to register as the new owners, creating a seamless transfer of ownership and unlocking direct relationships with customers in the second-hand market.

The benefits of this approach are manifold. Manufacturers gain access to user accounts and valuable customer data from both primary and secondary buyers, even if the initial purchase was made through wholesale channels. The immutable and transparent nature of blockchain technology ensures privacy compliance, traceability, and the integrity of customer data, while also providing brands with direct access to new customers in the second-hand market. Most crucially, within a landscape where brands face challenges in maintaining trust and relevance, this Web3 capability, rooted in trustworthiness, transparency and ownership, remains beyond the reach of legacy Web2 technologies.

In conclusion, blockchain and tokenization offer a transformative solution for brands and manufacturers seeking to navigate the challenges of wholesale trade, regulatory compliance, and evolving consumer preferences. By embracing these technologies, brands can unlock the full potential of customer relationships, build and maintain trust, drive revenue growth & margin expansion, and differentiate themselves in an increasingly competitive market landscape.

If you’d like to learn more about how you can get started with Aventus click here.

Michael Johnson is Chief Sales Officer at Aventus and started his career in consumer brand marketing before venturing into online marketplaces, enterprise SaaS applications, blockchain and Web3.

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