High Stakes for Fakes: Authentication in the second-hand market for luxury goods

21 April 2023. Published by Eleanor Harley , Senior Associate and Karolina Lewicki, Associate

Pre-owned luxury items remain a hot topic in 2023. The online second-hand market for luxury goods has been growing over the course of the last decade and is currently estimated to be worth more than $30 billion with further surges predicted in years to come.

While the trend for luxury second-hand shopping is on the rise, the market is facing its own set of challenges which it needs to address. At the forefront of these, are issues relating to the authentication of luxury goods, as buyers are concerned about the authenticity of the highly priced, pre-owned items they seek to acquire. Retailers are also cautious due to reputational risks that come with unintentionally putting a non-authentic product up for sale.  

The growing concerns relating to authenticity are largely linked to the increase in high-quality counterfeit products, putting pressure on authentication experts to identify ‘real’ items in a sea of near-identical ‘fakes’. Authentication experts need to assess more sophisticated replicas than ever before, which requires great skill and expertise. At the same time, human authenticators with expert-training are few and far between, making them a scarce and expensive resource.

To tackle this challenge the luxury resale market is now implementing technology solutions to aid experts on their quest to detect knockoffs. In pursuit of this goal, businesses have started to embrace the vast potential of applying AI-powered technology and blockchain to the authentication process of second-hand luxury goods. 

Several companies have developed algorithms to assess the authenticity of items based on huge databases containing information about luxury brands. Such AI is being developed to be able to analyse and compare the data to flag any differences, no matter how small, to ensure authenticity. 

This technique is being used by luxury sneaker reseller GOAT, which has logged hundreds of thousands of data points relating to premium footwear to help authenticate its goods. GOAT’s authentication process first requires a human expert to appraise a photo of the sneaker for resale, and then calls for additional AI verification. Entrupy, a company specialising in the authentication of a variety of luxury items, serves as another example. Entrupy developed a complex detection algorithm that has the ability to differentiate between various materials. Authentication can be carried out via an iOS app through which photos are sent for detailed AI assessment. 

Blockchain is another innovative solution which has been, and will likely continue to be, adopted by consumer brands, retailers and resellers. The benefits of blockchain’s traceability are significant for luxury resale, as it enables the tracking and recording of an item’s journey before it arrives at the resale marketplace. Notably, Louis Vuitton’s parent company, LVMH, has recognised this opportunity and launched a blockchain-based authentication platform called AURA in collaboration with Microsoft and blockchain technology software ConsenSys. Through AURA, newly manufactured goods are given a unique identifier which acts as an online certificate that is signed by the item’s custodians every time it is resold. This way authenticity can easily be verified based on the traceability of the goods on the blockchain.

More developments in the authentication field are to be expected as the market for luxury resale continues to grow and with the issue of counterfeits continuing to pervade the market. The reliability of tech-driven solutions will certainly remain under the microscope as new technologies emerge in the future, but the promising scope for innovation to protect consumer brands and retailers' market space, will be of increasing importance.

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