Everybody is talking about blockchain these days, and some have even labeled it the next disruptive technology that will fundamentally change the retail industry. Yet, many retailers have not yet taken the steps necessary to understand how the technology can help their business and what will be required to embrace blockchain to its full extent. This article serves to start the thinking process, and presents a number of use cases and applications one could think of in a retail context. For a crash course on blockchain, Bitcoin and cryptocurrency, my colleague Devon Watson has provided an excellent overview.
Challenges for adopting blockchain
A recent TechCrunch article stated that despite all the hype, blockchain still lacks some of the ‘underlying system plumbing’ to make it really work within an enterprise setting. Many challenges remain, like speed of transaction handling and scalability, ease of integration with other (legacy) systems, handling of privacy and security, and the electricity consumption needed for the computational power to verify a transaction and add it to a block. Yet, that does not mean that retailers should just wait and see; it’s about time to consider and evaluate possible use cases and scenarios, not for the sake of ‘endorsing’ blockchain, but as a way to check if blockchain technology may help retailers overcome anticipated challenges in the area of consumer experience, and as a way to further reduce operational costs.
So the question is: what good is blockchain for the retail industry (if at all)?
Use cases for retail
The application of blockchain technology for Bitcoin as virtual currency is widely known, but there’s more to it. According to Deloitte, “Blockchain has the potential to transform the way that individuals and organizations interact, the way that businesses collaborate, the transparency of processes and data, and ultimately, the productivity and sustainability of our economy.” Deloitte so much believes in blockchain as enabler for tomorrow’s business challenges, that it prompted Deloitte Netherlands to open a new, dedicated Blockchain Center of Expertise called BlockCenter.
IBM conducted a recent study about how blockchain reinvents the consumer experience. The main benefits they described are that retail organizations—thanks to blockchain technology—can prove they delivered on their promises. Think about product authenticity, tracking and tracing reliable delivery throughout the supply chain, and accountability of suppliers.
But blockchain also offers consumer-facing possibilities to enhance the shopping experience. If we set aside the challenges mentioned above for a minute, then there are several potential use cases:
- Product provenance, or end-to-end transparency in the source of origin for ingredients and products, basically allowing consumers to “track your fish from boat to plate.”
- Fraud prevention. Blockchains prevent counterfeit goods from reaching the market. For example, one sneaker manufacturer explained how they are using blockchain and embedding smart tags in their footwear, allowing consumers to scan the smart tag with their smart phone and verify the sneakers are genuine. And, De Beers Jewellers aims to launch the first industry-wide blockchain this year to track gems each time they change hands.
- Management of loyalty points. Digital wallets based on blockchain can be created, to centrally manage all loyalty points, reward cards and paper and digital coupons. On top of that, blockchain offers real-time liquidity to consumers, making loyalty points more easily transferable between consumers and across retailers, brands and stores.
- Consumer data and privacy. Retailers could manage each consumer’s digital ID and information centrally, including audit trails that track who changed or read data and when. This directly feeds back to recent privacy protection initiatives around GDPR and the California Consumer Privacy Act of 2018. According to Forbes, blockchain could be an interesting way of helping retailers manage consumer data with automatic compliance, as it enables smart contracts that could be used to govern permissions and access to consumer data.
- Blockchain enables the use of cryptocurrencies as of a means of exchanging value or data. These cryptocurrencies offer real advantages for both cross-border payments and micro-payments, and can be an attractive proposition in a business context where you have a large number of international transactions. In addition, the end-to-end data trail provided by blockchain has the potential to ease the accounting and finance burdens on retail organizations in the areas of supply chain management and inventory keeping.
- Smart contracts. Blockchain enables the use of so-called smart contracts, which help ease the hassles associated with collection and enforcement under traditional transaction structures. For example, instant collection and payment, automated refunds, automated insurance settlement and payout, and so on.
There are certainly other use cases one could think of, and I’d love to hear about those! At its core, blockchain is an exciting technology for retailers to investigate in more depth due to its ability to enable greater trust, transparency and collaboration across the entire production and delivery chain.
Closing the trust gap
Blockchain is still ‘early days’ technology, and according to Deloitte, we’ll likely see a tipping point in the next five years.
The potential of blockchain is enormous, as it establishes new forms of trust between consumers and retailers and within the entire retail supply chain. In an era where consumers increasingly call the shots, adopting technologies and tools that foster consumers’ trust in your retail brand may well become obligatory in the very near future.
In his book “Blockchain: Trust Companies: Every Company Is at Risk of Being Disrupted by a Trusted Version of Itself,” Richie Etwaru explains the ‘why’ of blockchain lies solely in closing the ‘trust gap.’ Previous technologies closed other gaps, like the knowledge gap (printing press technology), the power gap (steam engine technology) and the distance gap (Internet technologies). In an increasingly confusing world where consumers no longer have clear visibility into supply chains, product quality and provenance, blockchain could be the technology to close the trust gap with the retailer.
All-in-all, investing some time and resources to explore opportunities and scenarios for your organization is a valid next step in the path to retail transformation
Would you like to talk to one of our experts about how transformational new technology like blockchain could help drive change for your organization? Let’s start a conversation.