Earlier in my career I was heavily involved with an RFID project for a Fortune 500 company, one of the top brands and retailers in North America, to physically chip all of their inventory and move to a real-time tracking model that integrated with the company's inventory management system. Fast forward to today and I'm seeing web 3.0 native brands using similar NFC chips to tag their physical merchandise and create digital twins on-chain - originally with the promise of bringing those products to avatars in the metaverse. Surveying both experiences, I've identified a unique product solution to improve the experience and customer management journey for both brands and customers in the luxury goods market.
Executive Summary
There is a technology gap for token-compatible luxury goods ecommerce and secondary marketplaces. There are two complementary use cases that could provide an enhanced purchase and sale experience in the luxury goods and collectible/streetwear markets that Solana is uniquely positioned to address.
Initial mint/pairing of digital/physical versions of a product to create on-chain certificates of authenticity and tie a digital fingerprint (token) to a a real world asset (RWA)
Token-gated secondary market sales to enable much better CRM capabilities and more importantly, the ability to prove authenticity of secondary sales without the use of physical authentication at an auction house or appraiser
Allowing traditional companies to provide digital experiences and ownership of goods to their customers would be a massive value unlock that Solana could build infrastructure for. This would in turn create multiple opportunities for businesses and project teams to create services to enable legacy brands and retailers to adopt this technology, successfully implement it in their supply chain and go-to-market processes and provide creative studio services to support their customers to engage in the digital space. In short, this could be a massive onboarding activity for retail consumers to Solana.
The Opportunity — Luxury Goods Resale Platform via Solana Blockchain
The secondary luxury goods market was estimated to be $34B globally in 2023 growing to $72B by 2032 (imarc). The process to certify authenticity of products sold online for sale typically involves a 3rd party authenticator like an appraiser or marketplace that needs to physically assess the goods to determine their provenance. Even these in-person assessments are imperfect and can sometimes result in fakes being passed as real luxury goods. This is in addition to the time, effort and cost that goes into managing this secondary marketplace flow of inventory. The cost and carbon footprint of shipping products to a central warehouse or appraiser as well as additional support resources are overhead that could be removed from the system.
Customer Relationship Management (CRM) is the practice of maintaining customer profiles and building relationships with a brand’s customer base to promote future sales and mutual sharing of value (like providing exclusive event invites, etc.). Maintaining a good record of a brand’s fanbase after goods have been sold through a secondary marketplace is near impossible with today’s tech and relies on human engagement or sharing of data between separate entities (like email lists from a secondary marketplace with authorized dealers). Tokenized goods changes this by creating the opportunity for secondary buyers of products to authenticate their ownership digitally and opt-into any potential rewards and recognition programs that a brand might run.
A huge benefit to luxury brands is that they can continue to offer post-sales experiences to their entire customer base — whether they bought items at retail from the brands directly, or via a secondary market and validated ownership on the Solana blockchain. This unlocks value for all parties — for the brand by improving their CRM efforts and capturing lifetime value (LTV) of their customers; for the original retail customers by minimizing cost and time required to authenticate their original ownership of luxury goods, improve trust and reduce friction in the secondary sale; and for the secondary purchaser by increasing trust in the purchase process and earning them loyalty recognition by the luxury brands they support.
Secondary benefits of this model include rich data sets for brands that might not otherwise understand the entire demographics of their customer base (unless through 3rd party data purchase). This lets them access the complete after market sales data and ultimately creates new value generation opportunities for customers. Additionally, it creates an option for brands to capture some royalties on secondary sales if they create their own branded and authenticated workflows to manage these secondhand product sales. This could be something as simple as a listing fee of 1–2% that would allow brands to participate in downstream sales revenue — if done properly, a brand-owned marketplace would inspire greater trust than a completely independent 3rd party.
Tokenizing products at the original point of sale creates a new value offering for brands to reward customers. Participants in the web3 NFT space have enjoyed creative mint experiences, traditional retailers could offer equivalent digital experiences to coincide with the sale of their luxury items. This experience could even be replayed for secondary purchasers of the products as another way for brands to strengthen their relationships with customers. A good example would be RTFKT’s forging events for the Nike x RTFKT apparel and shoes using the world merging chips.
This model creates multiple avenues for revenue capture by participants in the Solana blockchain ecosystem. These include:
Subscription to tech infrastructure platform — a possible business model that is common in the web2 space is software-as-a-service (SaaS) where technology is licensed on an annual or monthly basis for recurring fee. Providing the technology necessary to create a user-friendly interface for brands to build on top of is an avenue for developers to monetize this tech.
Transaction fees on sales could be leveraged in addition to or in place of underlying tech licensing. This would create value on the Solana chain and be an opportunity for developers contributing to this specific use case with an avenue to monetize their work.
Creative studio services for digital brand activations would be a fee-for-service approach to support creative and brand-oriented professionals in the Solana ecosystem.
Why Solana?
Solana is the optimal solution for this product use case for several reasons. This blockchain is scalable and has very efficient transaction costs so won't add extensive cost to brands and retailers adopting this tech. Solana itself has good brand recognition and in my professional opinion will have an easier time branding itself as a solution for luxury brands than a layer 2 rollup on Ethereum will, which is a much more technically-oriented solution. "Powered by Sol" conveys images of the sun, which already has mythological references to deities - something that would work well with luxury brand positioning. Trust will be paramount for early adopters at scale and Solana might just be the right chain at the right time to lead here.
The Workflow
In order for this to become a reality, there are workflows both in the digital and physical flow of information and goods. Retailers have complex supply chains and it is easiest to control chipping of products at the source before products are shipped to regional distribution centers.
There are two main workflows I've considered for this model. The first is the initial mint or pairing of the physical NFC chip with the on-chain token. The second is how the movement of goods digitally and physically would allow for a marketplace offering to make trustless peer-to-peer transactions of authentic luxury goods a reality.
Pitfalls to Avoid and Success Factors
In order to carry this out successfully, here are my recommendations from experience managing physical chip operations in retail.
Getting assets loaded initially is one of the biggest hurdles - source tagging physicals at factory directly is much more controlled than after-market by consumers or even in retail stores. The number of distribution points grows quickly the more times product is moved from factory.
Inventory and logistics - how intuitive the UI is and requirements for distribution of the technology (app-enabled vs. hardware needed to maintain on-chain inventory lineage of ownership/location) will dictate complexity of an individual brand/retail rollout.
After-market authentication by a human is significantly more labour and time intensive than relying on direct brand authentication as the initial supply leaves the factory - the key here is maintaining an effective zero trust model. Putting the appropriate controls in place to ensure product is chipped properly and validated on-chain is a prerequisite for this entire model to work effectively. There is also an embedded assumption here that secondary sales without a corresponding chipped/tokenized Certificate of Authenticity (COA) are more likely to be fraudulent so should dissuade market volume and improve trust with secondary buyers.
Some unique web3 challenges to address:
How to manage stolen/lost tokens since future secondary sales will require token-gate. There are solutions like Chiru Labs Physical Backed Token (PBT) that maintain private keys within the chip itself - maintaining evidence on-chain of purchase by a specific buyer with a uniquely identified chip will help with cases of theft and preventing stolen goods being sold through a secondary marketplace.
How to ensure validity of physical pairing to digital (e.g., QR code, NFC/RFID). This process only works if digital and physical pairings are accurate - good controls at the point of chipping and QA tests at the end of the supply chain will support accuracy here.
In today's corporate ESG discussion, environmental considerations of garments and physical products are top of mind. NFC chips create an additional variable in the end of life management for product-based supply chains. Many brands and retailers will want to understand the implications and find solutions for effective end of life management.
There is also a longer-term opportunity to power the entire inventory and point-of-sale (POS) systems for brands in the retail and ecommerce space. Since this solution would already be dealing directly in their supply chain, a potential extension would be to own the entire financial transaction and lineage.
Summary
By targeting luxury goods brands, the Solana chain and relevant participants in the Solana ecosystem are uniquely positioned to offer tech and services to power the next generation of luxury goods management and digital experiences. The Millennial and Gen Z generations are increasingly moving their lives online so a digital-first and trustless model makes sense here. The benefits to brands are multiple.
Appendix - Web 2.0 Companies Playing in this White Space
StockX
Model
Stockx maintains warehouse space (“vault”) and allows customers to purchase NFT versions of their shoes, etc. and hold the token rather than take physical shipment of the deadstock
Relies on authenticators employed by Stockx to ensure validity of goods
Advantages
Workflow is in line with existing business model, Stockx controls the flow of goods and authentication process
Existing brand customers have a new way of engaging and buying goods with the intention of price/value speculation
Risk factors and gaps
Physical infrastructure is a bottleneck to scale
Currently only offered within the categories that Stockx is in - could scale, but tied to a streetwear brand so unlikely to grow into categories like luxury watches
Assumptions
Intention of Stockx NFT offering is to be an extension of existing brand, not a whitelabel offering to other brands
Shopify
Model
Shopify provides back-end API and workflows tied to their ecommerce platform to enable companies/brands with NFTs to use tokens in a variety of token-gated experiences (e.g., tokens to unlock exclusive gear)
Creates ability for brands to mint their own NFTs on a variety of blockchains
Currently in beta version and not yet widely available
Advantages
Shopify able to tap into existing scale and customer base with add-on functionality that enables blockchain minting and ownership of NFT verification
Partnerships with some prominent web3 projects - Doodles, Stapleverse, Invisible Friends, WoW, Cool Cats
Risk factors and gaps
Shopify’s business is a SaaS model aimed at low-touch customer service and focused on white label offerings to support companies standing up the infrastructure to run their business - it is not a marketplace or heavily invested in resale markets (outside of offering ecom solutions to companies that might occupy that space)
The NFT offering is currently an extension to a built-out ecommerce engine, so likely won’t be a primary driver of strategic growth for some time