At VOICES 2023, BoF’s annual event where global changemakers gather to discuss the industry’s future and critical innovation, Pierre-Nicolas Hurstel, CEO and co-founder of blockchain-based digital product passport infrastructure Arianee, spoke on the mainstage about the positive impacts of tighter supply chain regulation and digital product passports (DPPs).

Arianee launched in 2018 to enable direct and continuous relationships between brands and their end consumers, placing the ownership of data in the hands of consumers with a focus on openness and decentralisation. Arianee creates DPPs as non-fungible tokens (NFTs) backed by blockchain technology, which can be displayed on smartphones or web browsers, creating a digital link between object and user. Arianee works with over 40 brands, such as Richemont, Moncler, Mugler and YSL Beauty and has distributed more than 1.6 million digital product passports.

This is about “intelligence that is not artificial,” said Hurstel. “We have learnt about the damages of user personal data exploitation by big tech and social media. The incentive of social media is the race for engagement — but what about the business model? Selling user data to advertisers to sell more products? And even though we have learnt about the urgent need for circularity and the incredible potential of second hand, not much has changed.”

DPPs can more easily allow customers to authenticate products, transfer ownership and access services like resale and repair. As a result, the digital passport can unlock new means of income for brands, allowing them to explore user data in a safe and effective manner. This can enable lower client acquisition costs and higher customer engagement.

This gives rise to what Hurstel calls “ownership intelligence”, so that “when someone buys and owns the product, [they] collect this passport, collect a piece of data related to the product, that is controlled by the user.”

Understanding how to leverage the opportunities made available by DPPs is timely and soon, business critical, when product passports become a legal requirement on fashion products. In August 2023, the European Commission announced new regulations that will require fashion and other consumer goods to be fitted with unique DPPs as early as 2026.

Now, BoF shares insights from Hurstel’s talk on how brands can effectively leverage DPPs to build consumer trust and data compliance while reducing acquisition costs.

Enable Direct Relationship While Cutting Acquisition Costs

Product passports can support circularity initiatives like resale and garment-to-garment recycling by providing detailed data on materials, facilitating easier collection and sorting of garments for recycling at scale.

“Many second-hand purchases are the first step into the brand for a user,” adds Hurstel, explaining how some consumers will indirectly buy a brand’s product through resale platforms. “So distributing pieces of data that people can circulate and transfer is a way to be connected to people that are part of the community, that are already consumers, even though they haven’t bought anything first-hand.”

Second-hand marketplace ThredUp estimates that resale will grow 11 times faster than the overall clothing retail sector over the next five years. As a result, connecting with those end-consumers who have bought into the brand universe through different channels, second-hand, can help better target brand marketing spend.

The value for brands over time will come with the possibility to deploy this new data structure and to create new revenue streams based on ownership.

“This will have an impact on the cost of acquisition and the money we spend paying socials and big tech to reach people and reach them again. Then, in a world where every product will come with a DPP, the possibility to one day add royalties on products, [...] would mean tomorrow, revenues coming from something other than selling something new — and something newly produced.”

DPPs can also help cut costs by streamlining the authentication process in resale. Historically a manual process for brands, the digitisation of this process can reduce reliance on authenticator specialists who have been in significant demand on industry jobs boards.

Meet Consumer Expectations on Data Autonomy

In Europe and the US, most websites now prompt users to allow tracking cookies to harvest their data. Yet, some 45 percent of consumers are uncomfortable with sharing their data to create personalised ads, according to a 2022 survey by Boston Consulting Group and Google. It also found that, in online and traditional retail, only a third of consumers reported trusting companies to protect their personal data and privacy online.

BCG and Google’s 2022 survey results revealed that “many consumers are willing to share their personal data with brands, but the majority want a clear incentive (or ‘value exchange’) to do so.” The data revealed about 30 percent of respondents said they are willing to share their email addresses with a given company for no incentive, while 90 percent were willing to share that data when presented with the right value exchange, like discounts and free samples or access to newsletters or communities.

“Collecting data is great, but any piece of data expensively collected is immediately obsolete — it is natively static, so [it is] hard to secure and protect against leaks,” said Hurstel. “People don’t care about sharing their lives on social media or with ChatGPT, but they are less willing to leave their data everywhere because it’s just inconvenient. So, the risk is to see first-party data disappear behind social logins and ‘hide my email,’ and other similar features that will reinforce the need for third-party data.”

“Third-party data is less and less efficient, it’s expensive and the regulator is going after it, and cookies are gone and the side effect of data centralisation by Big Tech has proven to be disastrous for the wider world, that brings me to the [next] challenge — compliance,” he added.

Indeed, since 2018, the European Union has passed data privacy regulations and, in the US, the California Consumer Privacy Act (CCPA) has given consumers more control over the personal information that businesses collect about them. While there is no federal digital privacy law in the United States, except to protect children, the Federal Trade Commission (FTA) is challenging the Big Tech land grab approach in buying up start-up competitors, as demonstrated by their efforts to block Meta’s bid for the virtual reality firm Within last year.

You can add the possibility of ownership intelligence by empowering users with the data they control about what they own.

Hurstel said that, when it comes to DPPs, “the value for brands over time will come with the possibility to deploy this new data structure and to create new revenue streams based on ownership. [...] You have the first-party data — the things you know and collect and that are non-dynamic — and then on top, you have user-owned data that you can read. [...] It’s new possibilities to understand new insights, but also new segmentation possibilities.”

“The client account for tomorrow is completely different,” Hurstel said. “Today, it’s all about purchase and returns. Tomorrow, it’s about what I own; [whether bought secondhand or] gifted; specific services that are allowing me to easily resell, repair, recycle, insure; to have specific recommendations, perhaps specific targeted communications around exactly what I own,” he added.

Prepare for Incoming Regulations While Offering Value

Hurstel explained that ecodesign DPP — a cornerstone of the European Commission’s Ecodesign for Sustainable Products Regulation (ESPR) for a more environmentally sustainable and circular approach to products — is going to ensure brands attach this DPP system to every single object they sell in the EU. This is “with the goal to push users to choose better; to push brands to produce better; but also mainly to push to reuse and resell and recycle.”

In order to implement DPPs, Hurstel explained: “First of all, you need connected components on every single object that can be scannable — QR codes [or near-field communication] NFC chips. To add QR codes and NFC chips at every stage in the supply chain is not easy — it takes time. This QR code will have to be linked to a persistent interface showing data about the product that can last forever — or at least as long as the product lasts.”

While a time-intensive process, this will ensure that brands are able to cross-reference and check compliance quickly and easily as different geographies and jurisdictions evolve their stance on compliance and data protection. Indeed, while the EU will have one set of regulations, California and Japan, for example, might require different information.

“Then, there’s an opportunity to add on top a new kind of data — the customer-owned data, about ownership that is neither centralised by the brand nor by any kind of third-party that would want to make any business on top of it,” said Hurstel. “You can add the possibility of ownership intelligence by empowering users with the data they control about what they own. So, you go from collecting, to being compliant, to truly offering value.”

This is a sponsored feature paid for by Arianee as part of a BoF partnership.