How Blockchain Technology Is Altering The Apparel Industry

In the past, a lack of transparency into an apparel company’s supply chain could be seen as a competitive advantage. Businesses wanted to keep insight into their suppliers and manufacturers as opaque as possible.

If no one knew where supplies were coming from, no one could build identical apparel. And this thinking extended to customers, out of sight meant out of mind when it came to worries about ethical sourcing and manufacturing in the fashion industry.

It’s clear there has been a shift in the way companies and consumers view transparency.

It’s now an advantage for everyone to know where your clothes come from, thanks to consumer trends and companies like Better Kinds that focus on decentralized manufacturing. Consumers increasingly demand it, while companies like Patagonia and Everlane tout sustainability and supply chain transparency as a selling point.

But there’s still plenty of work to be done. Many apparel companies lack ethical supply chains, and a full 10% of global emissions are produced by the industry alone.

Fortunately, the blockchain has already begun transforming apparel supply chains through technology such as track-and-trace and inventory management. But as other technologies like 3D printing and AI continue to advance, the apparel industry may very well see much more dramatic changes.

Here’s how the industry is advancing — and what’s to come:

Blockchain technology is already transforming the apparel supply chain.

The blockchain solutions in the industry stem from its unique ability to create a physical-digital link between goods and their digital identities on a blockchain.

Often, a cryptographic seal or serial number acts as the physical identifier, linking back to the individual product’s “digital twin.”

This link offers opportunities for a more transparent supply chain. Every time a product changes hands, that change in custody is recorded on the blockchain. Counterfeit goods missing the physical-digital link are obvious, as are any attempts to divert goods. The chain of custody on blockchain provides a record of the last party to gain custody of the product, showing where the counterfeit product slipped in — or the authentic product was diverted out.

Greater transparency into supply chains will create new incentives for companies to change the way they do business and even how they view themselves as an organization.

Companies like Loomia are working on solutions to collect consumer data directly from the textiles themselves and register that data on the blockchain.

But truthfully, blockchain is only the beginning. The industry may be entering a new era with vastly different forms of production and consumption.

Companies are rethinking their brand positioning and business models.

Millennials are not consuming as much fast fashion, and they tend to distrust spurious claims of sustainability.

Too many brands have been exposed as wasteful, environmentally unfriendly, or simply unethical. The backlash to fast fashion is evident in a younger generation less impressed with labels and happy to purchase vintage pieces that have stood the test of time.

Apparel companies are beginning to take note, in some cases attempting to transform their business models.

Take Nike, for example. They don’t position themselves as an apparel company anymore. Instead, they talk about themselves as a tech company that just so happens to make clothes. Their clothes and shoes often come equipped with sensors for tracking heart rate, miles run, or calories burned.

That’s because data is now the most compelling business model. And the companies that will thrive in the coming years are those that can reinvent themselves to keep up with changes in technology and society.

The entire culture is shifting to keep up with technology and trends.

Blockchain technology can help the industry track apparel through the supply chain, which in itself is a major upgrade in the way many companies do business.

Yet the future of apparel is more about a change in the business model and culture of the industry, from a supply chain that prizes consumption to a demand chain that takes pride in sustainability.

A shift from a supply chain to a demand chain will mean clothing production moves back to local, distributed hubs.

Imagine a consumer walking into a store to buy a t-shirt. They use a screen to choose the type of fabric, the cut — even the brand. After a short wait, they have the exact shirt they want in their hands.

Truthfully, this model is not that far fetched. The technology is already here to begin making clothing quickly and locally, and it’s not just going to change the way apparel is made. It’s going to change patterns of consumption and behavior. People will make what they need, when they need it.

Brands will have to think ahead and position themselves to integrate with the technology. They’ll need to answer fundamental questions about their existence. How do they maintain their brand’s integrity? Do the concepts of scarcity and exclusiveness still play a role in the brand’s image? What does it mean to be authentic if people can make clothing at home, on demand?

The apparel industry is going to be unraveling the answers to those questions for a long time to come. But if the current trends continue, the results will dramatically change the way individuals shop for and consume clothing.

This article originally appeared on Forbes.

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