Profit or prestige? Strategies for luxury brands to navigate the second-hand market using blockchain technology

Umang Varshney, Amit Karamchandani, Tanmoy Kundu and Rohit Kapoor

Transportation Research Part E: Logistics and Transportation Review, 2024, vol. 191, issue C

Abstract: Luxury brands are increasingly adopting blockchain technology to combat counterfeiting, yet they face a dilemma in addressing the market of second-hand luxury products. While a luxury brand’s involvement in second-hand sales could diminish its exclusivity, it could also increase the brand’s profits. Motivated by luxury brands’ concerns about venturing into the second-hand market while preserving their brand exclusivity, this study presents an analytical model to investigate how blockchain authentication impacts their strategies in the second-hand market. A distinctive feature of this study is the conceptualisation of aspirational value associated with the luxury brand. Our analysis reveals that premium and mass-market brands can improve brand exclusivity by enhancing second-hand product quality. However, luxury brands may diminish brand exclusivity if the quality of second-hand products is high. Additionally, luxury brands can maintain exclusivity by avoiding the second-hand market when using blockchain for authentication, provided that the authentication cost is below a threshold. Furthermore, our research sheds light on the strategies of various fashion brands (mass-market, premium, and luxury brands), contingent upon their aspirational values, to combat counterfeit products by deploying a blockchain-based authentication mechanism for the second-hand market.

Keywords: Retail operations; Blockchain; Luxury brand; Second-hand market; Counterfeits; Game theory (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1016/j.tre.2024.103726

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