Blockchain for Social Impact

Luxarity: Blockchain Case Study for Tracking Donations and Ensuring Trust

An initiative that provides complete philanthropic transparency into the social venture operations of one of the world’s largest fashion conglomerates.

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Tackling unsustainable consumption practices in luxury retail

 

The Challenge

Nonprofits face serious challenges regarding trust: About one-third of Americans don’t trust charitable groups to spend their funds well, and more than 60% of people globally don’t have faith that groups can accomplish their missions.

Currently, nonprofits and charities suffer from a lack of transparency concerning how donations are allocated. Third-party websites that track charities and the quality of their donation transparency have emerged in an attempt to provide people with peace of mind when they contribute to a cause or organization. Nonprofits with a proven transparency record average 53% more in contributions the following year compared to organizations that didn’t have the same track record.

How can blockchain technology improve social sector organizational transparency? Can blockchain technology be leveraged to track the value received via cash and item donations while enhancing trust with donor audiences?  

 

The Ethereum Solution 

Recognizing the desire from donors to verify precisely where their money goes, LUXARITY partnered with ConsenSys Social Impact to register and track donations from their annual pre-loved luxury pop-up sale on the blockchain. 

Together, the two organizations established a blockchain-based platform that brings unprecedented transparency and accountability into the tracking of charitable donations. On the platform, customers have the opportunity to decide which cause their donations would fund — including education on ethical consumption, environmental causes, and recycling efforts.

LUXARITY is the social venture arm of the Lane Crawford Joyce Group (LCJG), Asia’s premier fashion retail and brand management group. 

As Luxarity becomes a trusted social enterprise with traceability built into the shopping experience, they are encouraging an industry standard for transparent giving. By integrating blockchain technology, Luxarity is taking the first step towards building an ecosystem that creates a circular giving economy.

Cristina Ventura

Executive Director of LUXARITY

How it works

The Donation Tracking Process

  1. Consumer attends the LUXARITY pop-up to purchase pre-owned luxury goods.
  2. Consumer selects items they are interested in, and the cashier attendant processes the consumer’s purchase using Shopify. The purchase is saved on the blockchain with the user identity remaining private.
  3. The web application monitors all of LUXARITY’s Shopify sales and keeps track of how much was spent in each transaction. 
  4. Consumer receives an email from LUXARITY with their receipt and a unique PIN # that can be used on the pop-up website to allocate their sale’s proceeds to a cause of their choice.
  5. Consumer enters PIN # on the pop-up website.
  6. Consumer chooses which cause they want to allocate their funds. The selection is saved on the blockchain.
  7. LUXARITY sends grant capital to causes and receives proof of their gift. Proof of donation is recorded on the blockchain.
  8. LUXARITY sends each consumer a specialized report of how much the consumer gave, what percentage of the grant the consumer contributed towards, and the total amount raised for the grant.

Digital wallet extensions like MetaMask were used across blockchain applications, ensuring simple interaction with the donation platform. ConsenSys built LUXARITY’s decentralized application and website:

 

LUXARITY Home Page

 

LUXARITY Cause Selection Page

 

LUXARITY Cause Progress Page

Reinventing the retail and charity ecosystems with blockchain technology

Through its partnership with ConsenSys Social Impact, LUXARITY is transforming the retail and social impact ecosystems in four primary ways:

  1. In 2018, LUXARITY reinforced its charitable activities with blockchain technology. At their annual ‘LUXARITY Preloved Pop-Up” sale in Hong Kong, each donation was tokenized and tracked in their blockchain-based platform. Additionally, when scanning a QR code, customers were presented with background information: who owned each item, where it was worn, and the positive environmental impact of the purchase. The code also revealed a digitized handwritten note from the original owner of select items. 
  2. The world of social good, impact investing, and charitable giving has long been an attractive form of philanthropy and driving force of social change. Coordination inefficiency, donation obscurity, and outright corruption are unfortunate qualities of many efforts and organizations. The immutability, transparency, immediacy, and public access of blockchain technology is uniquely poised to address all these matters. LUXARITY’s innovative adoption of blockchain technology represents the beginning of a paradigm shift in the way companies and individuals donate.
  3. Beyond the retail industry, LUXARITY sets a standard for the tracking of physical goods on a blockchain-based platform. With the successful tracking of second-hand luxury goods for a social cause on a blockchain-based platform, LUXARITY serves as a model for any platform seeking to tokenize and track physical assets.
  4. By integrating blockchain technology, LUXARITY is taking the first step towards building an ecosystem that creates a circular giving economy, helping to achieve Sustainable Development Goals 3 (Health and WellBeing), 4 (Quality Education) and 12 (Responsible Production and Consumption), aligning with the mission to build a community that shares RAW values.

 

The Role of Ethereum

By leveraging blockchain technology (in this case, Ethereum’s Rinkeby Testnet), Luxarity is aiming to create a system that offers new opportunities to engage supporters in conscious consumption, transparent donation, and sustainable ecosystem development.  

  • Increased transparency
    LUXARITY donations (clothing donations to be sold at pop-up events with all proceeds going to the educational grants) recorded on blockchain systems will be 100% transparent & traceable. Donors will be able to specify which grant opportunity revenue generated from their donation will fund. Consumers will be able to track and trace their money from their wallet all the way to the grant beneficiary/ies. 
  • Acceptance of different kinds of assets
    Digital, physical, and intangible assets can all be recorded on the blockchain. Value add from the entire supply chain, as well as external stakeholders, can be captured on the blockchain & benefits can be equally distributed.
  • Decentralization
    Blockchain systems allow LUXARITY to move assets across borders in an easier and cheaper way. Assets (pre-loved luxury goods or capsule products) are not tied to any particular geographic location. This allows LUXARITY to expand outside of Hong Kong.

 

Goals Achieved

The proof-of-concept application hosted the following results after the 2018 LUXARITY pop-up event: 

Overall, the pop-up accrued 586 orders and served 452 unique customers to raise a total of $586,532 HKD. 25% of the orders were allocated using the LUXARITY platform, resulting in 33% ($196,017 HKD) of total sales being directly allocated by customers to HKRITA Research, the SCAD HK Education Grant, and the Parsons Educational Grant. Customers who had more than three orders had a much higher probability of going to the LUXARITY pop-up website and choosing where to allocate their order proceeds in contrast to consumers that had made only one or two orders. The below table provides a high-level statistical summary of the performance of the pop-up.   

 

Next Steps

The LUXARITY Preloved Pop-Up 2018 succeeded in proving that blockchain technology can be used seamlessly within a retail environment. The prototype application worked well in live demonstrations and through the entirety of the pop-up event. The total error rate of the application was less than 1%. Although only 33% of total raised funds were allocated to causes using the web application, new user experience iteration opportunities have been determined that seek to increase that allocation percentage by over 200%. 

The LUXARITY proof-of-concept has enjoyed the success of media fanfare and has served as the first successful use of blockchain technology within a retail, luxury brand setting globally.   

Moving forward, LUXARITY sees an opportunity to continue leveraging blockchain technology for donor transparency, hoping to iterate and continue piloting within Lane Crawford Joyce’s retails stores. At scale, a platform like this could evolve the Lane Crawford Joyce Group into the most sustainable and innovative luxury group on the planet and infuse transparency, technology, and conscious living into the broader lifestyle industry. ConsenSys sees the future potential of applications like these affecting the fashion industry in the following ways:
  • Peer-to-Peer Circular Economy: With LUXARITY, LCJ can incentivize the exchange of their products between consumers with loyalty points, helping preserve the environment while building a community based on shared values.
  • Donation Transparency: LUXARITY will empower LCJ to bring full transparency to its philanthropic efforts, and transform its 450 points of sale to potential avenues of product donation.
  • Brand Digitization: LUXARITY can leverage hyper-specific marketing to build connections between brands and customers. Every item is an opportunity to create a unique experience.

 

 

About LUXARITY

LUXARITY is the social venture arm of the Lane Crawford Joyce Group (LCJG), Asia’s premier fashion retail and brand management group. Based in Hong Kong, LUXARITY was founded to create social impact in response to recent global fashion trends that have seen an increase in unsustainable and non-environmental consumption practices.

In 2018, LUXARITY embarked on a mission to recycle luxury goods, collect donations, and educate buyers about sustainable consumption — all with the support of blockchain technology. In partnership with ConsenSys Social Impact, LUXARITY aimed to redefine how we as consumers interact with luxury products, fashion items, and social impact donations. The partnership established a public blockchain on which pre-loved luxury items, cash, and cryptocurrency donations can be tracked. 

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