Problem overview

Counterfeit luxury goods are one of the biggest problems in the luxury industry.

Luxury goods market

The global luxury goods industry, which includes fashion, cosmetics, fragrances, jewelry, luggage, handbags and etc., has been on an upward climb for many years. The value of the global personal luxury goods market was US$ 341 billion in 2022 and is estimated to be worth US$ 350 billion in 2022.

Luxury goods manufacturers meet consumer demand by focusing on brand, aesthetics, quality materials, superior craftsmanship and pricing to transform everyday objects into status symbols. The industry rises and falls with the gross domestic product (GDP), seeing demand climb in times of economic stability and plummeting in unfavorable economic climates.

Louis Vuitton was the most valuable luxury brand in the world, with a brand value of about 41 billion U.S. dollars. New markets and segments are giving the industry growth points. One challenge for luxury companies is to maintain brand equity and cultivate their customer relationships. As luxury expands into more industries, expect a more mature segmented market. As a result, consumers should also become more rational. The personal luxury goods industry is expected to continue to grow, especially in the Middle East, the market is expected to increase by 20 percent in 2023 to total about US$ 10 billion.

US$ 336 billion with market growth rate 2%

The biggest industrial problem – Counterfeits

Counterfeit luxury goods are one of the biggest problems in the luxury industry. According to a report by the Organization for Economic Co-operation and Development and the European Union’s Intellectual Property Office, the market for counterfeit goods is worth an astonishing $461 billion. The negative impacts of counterfeiting and piracy are projected to drain $4.2 trillion from the global economy and put 5.4 million legitimate jobs at risk by 2022.

For comparison, just 26 countries in the world have a gross domestic product (GDP) more than $461 billion, according to the International Monetary Fund World Economic Outlook. The counterfeit goods market makes more money than the likes of Norway, Pakistan, Greece, Denmark, Portugal, and New Zealand.
Brands like Louis Vuitton and Chanel have been ranked the most counterfeited handbag companies with Gucci, Hermes and YSL coming right behind. These luxury brands and several others have had more to deal with, in combating this problem of counterfeiting. Not only does it affect sales, but also the brand image of these brands as consumers become more weary in purchasing them for fear of counterfeits.

Most of the sales of fake luxury handbags are done mostly online, making it even harder to detect their status of authenticity until delivered.

The moment a shopper realizes they’ve purchased a counterfeit is more than just frustrating or even mildly disappointing. It destroys their trust and faith in the luxury goods market. They think to themselves, ‘shouldn’t the authorities be doing something about this?’ or ‘why weren’t the authorities able to realize that these goods aren’t legitimate?’ and ‘how can these sellers and manufacturers of fakes keep getting away with it?’ Unable to find answers, they avoid the luxury goods market for fear of being conned out their money again.

Luxury goods brands like Louis Vuitton, Chanel as mentioned earlier, suffer greatly due to this lack of trust. For instance, if the quality of a fake handbag isn’t up to scratch and the owner didn’t realize it was a poor-quality fake, they’ll think that the real brand just makes poor-quality products that break easily and won’t want to buy that brand’s products again. Alternatively, if they want to resell those “luxury” bags in the future, either selling them to another retailer of second-hand luxury goods, they will be unable to, because of the product’s counterfeit status. Likewise, purchasers of second-hand luxury goods will be reluctant too if they are concerned about being tricked by a fake.

We are confident that blockchain technologies will be effective in the fight against the counterfeit epidemic, considering the current traditional centralized setup hasn’t achieved much in bringing the situation under control.

We strongly believe that the Global Proof System is the solution to luxury goods counterfeits problem.