How Blockchain Technology Changes Consumer Perception Within the Luxury Consignment Market

Abstract:

This research focuses on identifying and analyzing the key factors affecting changes in buyer perception on blockchain implementation as an authentication process in luxury consignment. The model of this research is knowledge based with TAM (Technology Acceptance Model) with additional elements of Perceived Risk and User Innovativeness as mediator. A quantitative research method is utilized, incorporating a 3 x 2 factorial design where participants were presented with stimuli of: no information, a testimonial script, and a formal infographic. Participants over the age of 18 were sent an electronic survey via text, email or social media platforms, a total of 100 valid responses were collected and analyzed for the study. The data processed and analyzed using SPSS for Descriptive Statistics, Preliminary Analysis (Factor Analysis & Reliability Test), Cronbach's Alpha, Manipulation Test, Pearson Correlation Analysis, and MANOVA. Research results suggest that knowledge on blockchain technology has a positive impact on Perceived Usefulness and Perceived Ease of Use toward Buying Intention, while Perceived Risk has a negative influence. These results can be an incentive for luxury consignment to adopt blockchain technology as an authentication tool as it shows that as long as consumers are presented with knowledge of the technology it can lead to purchasing intention.

Keywords: Behavior Intention, Blockchain Technology, Luxury Consignment, Technology acceptance model.

1. Introduction

Blockchain is a decentralized digital ledger that records information and assets in a manner that makes it difficult to revise or hack (euromoney, n.d.). Many fashion brands are now integrating blockchain technology into their supply chains. Brands such as H&M and Kering are some of the first fashion players that have used blockchain technology in their programs. For example, H&M is working with Arket, a subsidiary of H&M to improve the traceability of products along with VeChain (Saha, 2020). Utilizing distributed ledger technology, they are striving to provide their customers with a system that determines the authenticity and quality of products. Blockchain technology is relatively new, and the benefits it brings to the fashion industry are uncounted for.

With transparency as its most significant benefit, this technology can help luxury consignment stores provide their consumers with an easier authentication process, “blockchain can unite the currently fragmented data across the supply chain”(Jordan & Rasmussen, 49). The use of blockchain for these companies can not only encourage traceability and transparency of where the products have been but also helps to increase the desirability of purchasing an authenticated product. Buying second-hand luxury goods is a sustainable solution that promotes longevity for many fashion products. Currently, luxury consignment resellers are faced with the problem of appropriately identifying genuine and counterfeit luxury goods. Mistakenly selling counterfeit items can be detrimental to a company causing them to have a tarnished brand image which can cause consumers to lose interest in purchasing second-hand luxury designer goods. With the help of blockchain technology, the authentication process can be made simpler.

Problem Statement

Consumers are reluctant to use luxury consignment websites and services due to the lack of assurance of authentic products. The luxury industry is currently seeing an all-time high of believable counterfeits, “Authentication company Entrupy claims a 99.1 percent accuracy rate after training its image-recognition technology on a self-built database of hundreds of thousands of items” (CNA Luxury, 2021). Our research focuses on consumer perception and trustworthiness of blockchain technology applications in luxury products, especially from consignment resellers. The participants of our study will be given information about blockchain technology usage within the luxury goods market and we will examine the change in perception of people who may not have considered purchasing second-hand luxury products before; once they know the benefit of blockchain technology.

Purpose of the Study

The broad research statement of our study is to identify how luxury resale can be positively affected by decentralized blockchain technology. This study will also aim to look at how various ways of presenting information about this technology can impact consumers' opinion of whether they think blockchain technology can be of importance when it comes to luxury consignment. Within recent years there has been a growth of about 12% per year in online resale retailers (Oliver Abtan et al., 2019). Investigating the process of consignment and authenticity is important to analyze how more small businesses can also easily be a part of this new fashion sector as well as how consumers can benefit. With the use of new technology like blockchain we aim to research how it changes the perceptions of individuals when it comes to the making of designer goods specifically for a much more efficient and reliable way of reselling luxury items.

Significance of the Study

This study will mainly benefit consignment companies and possible luxury consignment consumers. Finding out consumers' perceptions and newfound willingness to purchase more second-hand goods could lead to a boom in the luxury consignment market. With the rise of a safer and more secure channel of purchasing authentic goods, consumers will be more willing to give consignment resellers more of a chance. This boom in the market will directly benefit the companies as they will have more consumers. Additionally, it will benefit the consumers by providing a more trusting and secure luxury consignment environment.

2. Literature Review

2.1 Background literature

What is Blockchain?

Blockchain refers to a database that keeps and stores data on a digital secure network (Nofer et al., 2017). The blockchain works in a system of databases where data and information are stored in blocks and whenever that information updates a new block is formed and added to the original, this forms a chain of blocks of information, hence a blockchain. This system/blockchain is best known for its use in cryptocurrency systems. As stated in the article titled Blockchain, “A blockchain consists of data sets which are composed of a chain of data packages (blocks) where a block comprises multiple transactions” (Nofer, Gomber, Hinz & Schiereck, 2017). This forms a timeline that will only move forward and continue as information is added. Once new information is uploaded to the network of databases it cannot be changed or altered, it can only be added on. This also creates a level of transparency within the chain. Nothing can ever be faked or altered to look like something that it is not. Making blockchains trusted by millions to guarantee decentralized, secure, and untraceable transactions within the cryptocurrency industry. This leaves the system of decentralized blockchain with a high level of strong credibility amongst many.

A decentralized blockchain refers to the data and information being spread across a wide variety of computers and databases, this allows for a system of checks and balances. If one computer or database gets tampered with, that computer's information would then get cross-referenced among the other data, once it is flagged as false that information would no longer be valid. This protects the integrity of the good or property within that block, blockchains have been theorized to be used in many different formats, protecting many different types of property. According to Ravid and Monroy, blockchain technology could be used to protect intellectual property by creating a crypto-legal structure of protective laws and self-executing smart contracts.

Tanisky-Ravid and Monroy explain how the intellectual property in a fashion design industry viewpoint can be protected using a decentralized blockchain. This is a similar take on how the implementation of the decentralized blockchain can work within the luxury consignment. Implementing ​​legitimacy laws and checks could ensure many levels of security within the buying and selling process. The whole chain is also extremely accessible to the public, you can view all transactions made in the history of that chain. This gives consumers transparency on the goods they are buying and selling. If all goods across the board had their history easily traceable, if any tampering or forging were to happen, the culprit or item can easily be found on the timeline.

What is Luxury Consignment?

Luxury consignment items are designer goods that have already been pre-owned and are then resold either in consignment shops, online, or by individuals who own the items. With an increased awareness of the poor state of our environment, consumers are trying harder to do their part to be more sustainable. Repurposing older designer items and giving them an even longer wear life has become a way of implementing sustainability practices within the designer shopping experience. The Real Real is a luxury consignment store as well as an online selling platform and they created a study to help find how much buying second-hand designers is contributing to helping the environment. The study demonstrated how this company was able to help contribute positively to the environment by saving millions of car miles worth of greenhouse gasses and energy. (Malik, 2018) To help measure how much they are helping the environment by consigning, The Real Real has created a weight system that weighs each item and measures how great of an impact each item is making. Using a scale like this can be of great help to many other growing consignment businesses.

There is a desire in the second-hand luxury market to purchase vintage items from fashion houses because of their exclusivity and rareness. There was a study done by Aurelie Kessous and Pierre Valette Florence which examined consumers' motivations behind purchasing luxury second-hand designer items. The study demonstrated how there are varying influencing factors of second-hand luxury and they include sustainability, great deals, unique pieces, and pre-loved treasures.(Kessous & Florence, 2019) There are many consumers who are motivated to purchase luxury consignment for many different reasons ranging from a better deal to unique finds further demonstrating how this industry holds an important role in the fashion world.

Previously luxury consignment was known to originally be sold in smaller independently owned consignment shops that would receive goods from secondary sellers. Many of these shops were small businesses that would sell vintage goods which had been bought off individuals who no longer wanted the item. Secondary sellers are those who own the designer item and would like to sell their piece so they then take the item to a consignment shop where they can resell the item for them while taking a portion of the profits for themselves.

Popularity in Second Hand Luxury

Within recent years the second-hand clothing industry has taken off, along with thrifting, trading, and finding ‘preloved’ items many online and offline have expressed their renewed interest in buying second-hand. The same can be said for the high-end luxury fashion industries. Second-hand luxury goods have seen a rise in recent years. This can be attributed to many factors ranging from discounted prices on items, uniqueness of items, and sustainability impact. Along with the take-off of second-hand goods comes the setbacks of fakes and counterfeits. Many companies, such as The RealReal, Far Fetched, and Vestiaire Collective, have found ways to verify the item's legitimacy, however, there is always a chance of a product or a few fakes slipping through.

What we are looking to do is to see how the consumers' perception of the concept of a decentralized blockchain in luxury consignment can change. The implementation could better protect their purchases and investments.

How has Luxury Consignment evolved in recent years?

The luxury consignment sector has continued to expand and there are now many well-established luxury consignment shops that are trusted by consumers.There are many different ways in which these types of stores try to guarantee real pieces and some can be through serial numbers of an item or having professionals try to authenticate. One of the fastest-growing luxury resale stores is The Real Real which started off online but now has various brick and mortar locations. The Real Real is a luxury consignment retailer that aims to guarantee authentic items for its consumers. The method of authentication used by The Real Real is having a team of people who specialize in the authentication process but they have stated that there is not any secret or special information that they have about the consignment supply chain. (Malik 2018) Another luxury consignment shop that has various locations around the U.S, as well as an online presence, is 2nd Street. Both of these stores are more established and operate at a greater scale in comparison to consignment shops from the past.

Although the primary way of purchasing luxury consignment has been through brick and mortar locations there are now many online retailers that provide the same products and consumers can actually compare prices to one another. There are now various online retailers that sell vintage/designer items that are secondhand which include The Real Real, Vestiaire Collective, Tradesy, and Re-bag. Another way to purchase consignment items is from the secondary seller directly if they add their items to their social media platforms or online shopping apps like Depop or Thredup. There is a risk that a consumer poses when purchasing from an individual which is a possibility of a fake item and there is no guarantee of reimbursement the way there is when purchasing off of a trusted website or store.

How can a decentralized blockchain affect the luxury consignment industry?

A decentralized blockchain can allow potential buyers peace of mind when purchasing their items, they can be assured that they will receive an authentic product. It provides a trustworthy and unique log that displays historical information on an item like when it was made and the variety of owners it has had (Yuan, Xu, & Shen, 2020). Having the ability to track all buying and selling of items, particularly exclusive and unique items, can be beneficial not only to the sellers but also to buyers as it guarantees authenticity. Many consumers of second-hand luxury goods are interested in the history of the goods they are purchasing. Knowing the purchasing history of an item can be beneficial to the vintage luxury market. If they are not interested in history, being able to verify the validity of the luxury item will provide consumers with peace of mind. A decentralized blockchain allows for a transparent and secure network of authentic goods and because it cannot be modified or altered it creates assurance for the consumer. It will benefit the seller as well because it will reduce external costs associated with lack of trust like returns. Knowledge of this technology has the potential to build a trustful relationship between the buyers and sellers by minimizing risks and uncertainty, which may make informed consumers more inclined to purchase second-hand goods from luxury consignments.

2.2 Theory

Technology Acceptance Model (TAM)

The use of the technology acceptance model shows the process of how individuals come to accept new technology and thus use it (Kim & Crowston, 2012). This theory was first developed by Fred Davis over three decades ago (Sauro, 2019). Two main factors that will determine whether a technology will be accepted by potential users are perceived usefulness and perceived ease of use. The key feature is the behavioral intention factor in this model that leads people to use the new technology that is introduced to them. Under TAM, two other theories are also integrated to measure the adoption of technology-based on customer attitudes. Both Theory of Reasoned Action and Theory of Planned Behavior by Martin Fishbein and Icek Ajzen have been used in studies to conduct research on cyber-infrastructure adoption.

The technology acceptance model is used prevalently throughout many pieces of research. Along with the use of TRA and TPB, researchers mainly use these theories to tap into individuals’ behavioral responses to new technologies. For example, TAM was used in a study by applying it in the context of online auctions and introducing new consumer-oriented variables (Stern et al, 2008). It examines eBay, one of the first most successful online auction sites to show that its business is the technology that fuels growth and increases its profits. Then it discusses how TAM variables were applied in business contexts. Another research also used TAM to explore user experience, their intention, and the user behavior of a portal created for clients (Portz1 et al, 2019). The aim of this study was to see how older patients feel about the use of patient portals. It also researches the portal user interface, UI, and UX preferences of older adults with multiple chronic conditions to improve accessibility and adoption of patient portals. Both these studies used TAM as their theory to support their research and successful outcomes were concluded.

The technology acceptance model will allow us to understand the intention and tendency of consumers to adopt new technology. We will be able to see whether their perception of luxury consignment stores has changed or not by implementing blockchain in the authentication process. The reason we chose to go with this model for our theory is that blockchain is a new technology that is being introduced into the market and many research papers based on technology have used adoption theories as support. Since our research taps into the consumer’s behavior, using adoption theories would allow us to see their opinions change throughout pre-adoption, adoption stage, and post-adoption. With this model, we will be able to gain a new perspective on how blockchain decentralization can improve the efficiency and sustainability of smaller luxury resale companies.

2.3 Hypotheses Development

Knowledge on Blockchain Technology in Luxury Consignment

2.3.1 Perceived Knowledge and Actual Knowledge

Perceived knowledge refers to the self-assessment of knowing the information (Park, Gardner, Meryl, Thukral, & Vinod, 1987). Actual knowledge is one awareness of facts and conditions on the information. Perceived knowledge and actual knowledge play an important role in this study between participants that receive stimuli and those that do not. We will be able to analyze if the perception of blockchain technology within luxury consignment is impacted by the level of knowledge on the topic. A study has found that when consumers have prior knowledge about topics beforehand, the knowledge leads to increases in self-confidence and competence, which has a significant impact on fashion consumerism. (Lee & Hwang, 2019). Although Blockchain is a complicated topic and we are uncertain about consumer self-confidence and competence of their knowledge of the actual usage and benefit of blockchain within luxury consignments. We expect consumers with high perceived and actual knowledge to respond stronger than those that have low perceived and actual knowledge.

H1: High perceived and actual knowledge of blockchain technology application in luxury fashion has a positive impact on perceived usefulness toward the perception of luxury consignment resellers that utilize blockchain technology.

H2: High perceived and actual knowledge of blockchain technology application in luxury fashion has a positive impact on perceived ease of use toward the perception of luxury consignment resellers that utilize blockchain technology.

H3: Low perceived and actual knowledge of blockchain technology application in luxury fashion has a negative impact on perceived risk toward the perception of luxury consignment resellers that utilizes blockchain technology.

2.3.2 Type of information

Customer-generated content is generally viewed as more trustworthy than manager-generated content (Sparks, Perkins, & Buckley, 2013). Consumer-generated information, and testimonial, is more likely to have a stronger impact on participant perception of usefulness, ease of use, and risk than manager-generated content, or infographic. While infographics may attract more attention from curious consumers due to segmentation and graphic arrangement of information content, it may cause some skepticism of trustworthiness in information according to theories of attitude formation and persuasion. While consumer-generated content, testimonials, with the same information, are more likely to be perceived as more trustworthy and informative (Dickinger, 2011). Consumers are more likely to perceive manager-generated content as more biased toward topics (Senecal & Nantel, 2004). Consumers' trust in information leads to confidence and significantly impacts buying behavior.

H4: Consumer testimonials about blockchain technology application in luxury consignment testimonials will have a greater positive impact on perceived usefulness than infographics.

H5: Consumer testimonials about blockchain technology application in luxury consignment testimonials will have a greater positive impact on perceived ease of use than infographics.

H6: Consumer testimonials about blockchain technology application in luxury consignment testimonials will have a negative impact on perceived risk than infographics.

Measurable Variable

2.3.3 Perceived Usefulness

Perceived usefulness is the degree to which a person believes that using this technology would yield benefit (Davis, 1989). Blockchain technology can help enchant consumer shopping efficiency at luxury consignment resellers. The benefits of blockchain technology include record keeping, product history, transparency in sustainability, authentication, and efficiency. However, all of these benefits are not very apparent to everyday consumers and we don’t know which factors would be perceived as more useful than others or create a positive use-performance relationship. Thus, providing knowledge about blockchain technology applications within luxury consignments should theoretically increase consumer awareness of the usefulness of the technology.

H7: Perceived usefulness has a positive impact on behavior intention toward the perception of luxury consignment resellers that utilize blockchain technology.

2.3.4 Perceived Ease of Use

Perceived ease of use is the degree to which a person believes that using this technology would be free of effort (Davis, 1989). Customers would be more likely to accept the use of blockchain technology in the second-hand luxury market if they believe that the technology will make authentication of luxury products more efficient e.g. self-authentication vs. having to go to the luxury brand boutique to authenticate the products. The real-life usage example that provides stimuli will increase consumer knowledge about blockchain technology, thus increasing perception toward buying intention.

H8: Perceived ease of use has a positive impact on behavior intention toward the perception of luxury consignment resellers that utilize blockchain technology.

2.3.5 Perceived Risk

Perceived risk is defined as the person who believes that using this technology would result in consequences (Renn, O. & Benighaus, C., 2013). Blockchain is still a new technology that brings uncertainty about the technology and its usage. If consumers believe that blockchain technology would bring more negative consequences either directly or indirectly than benefits, then consumers are less likely to buy products with blockchain technology. Provenance knowledge can create an assurance that comes from the origin, authenticity, custody, and integrity of the products that helps reduce risks perceptions (Plangger, K., Montecchi, M., & Etter, M., 2019)

H9: Perceived risk has a positive impact on behavior intention toward perception on luxury consignment resellers that utilize blockchain technology.

Moderating Effect

2.3.6 User Innovativeness

User innovativeness is the degree to which a person's interested in trying new technology (Hu et al., 2019). A high level of user innovativeness on perceived usefulness offsets the effect of perceived risk (Yu, Lee, Ha, & Zo., 2017). Highly innovative consumers are more likely to be more informed about new technology than those with low innovativeness, thus knowing more about the usage of blockchain technology applications in luxury consignment usefulness. They have the ability to forecast future demand regardless of current market size and uncertainty level.

H10: Relationship between knowledge and perceived usefulness of luxury consignment resellers that utilize blockchain technology would be stronger among people with high innovativeness.

H11: Relationship between knowledge and perceived ease of use about luxury consignment resellers that utilize blockchain technology would be stronger among people with high innovativeness.

H12: Relationship between knowledge and perceived risk about luxury consignment resellers that utilize blockchain technology would be weaker among people with high innovativeness.

2.4 Conceptual Model

The conceptual model in this study is based on TAM with the addition of variables from other studies they deem beneficial and related to blockchain technology usage in the luxury consignment market. The figure below summarizes this paper's purpose of research and hypothesis to examine the intention to purchase luxury consignments that utilizes blockchain technology by using concepts of perceived knowledge and actual knowledge, and the type of information provided as a stimulus. We then examine consumers' perceived usefulness, perceived ease of use, and perceived risk, and provide user innovativeness and personal experience as a moderator in between relationships.

Figure 1

Conceptual Model