Blockchain, one of the biggest buzzwords of 2018, has been tipped to impact a number of industries all across the world. In retail alone, the blockchain market size is expected to grow from USD 80.0 million in 2018 to USD 2,339.5 million by 2023, at a growth of 2,924%.
This just shows that even though there is a lack of awareness and technical understanding coupled with an uncertain regulatory and compliance environment this technology is on its course to shake up the world.
Is 2019 the year that blockchain emerges from the shadows?
So, what does this mean for the future of physical stores, are they doomed to follow the same fate? Amazon.com is quick to be blamed for the retail decline. However, Amazon with about $100 billion in sales, only accounts for 1.6% of the total U.S. retail sales. Online sales can’t be the only contributing factor to falling retail sales?
In its simplest form, blockchain is a distributed digital ledger that allows multiple stakeholders to share the same information. It allows this data to be viewed in real-time, so that any updates or changes can be seen across the network and makes it possible to see the full history of the product and every one of its components. These blocks of data cannot be edited or deleted in any way and hence makes it a much more secure alternative to digital data which we use in every element of our lives today.
Blockchain can record any sort of data, ranging from property deeds, intellectual property, art, contracts and medical records whilst minimising paperwork and ensuring the integrity of the information.
So what’s it got to do with retail?
The average consumer has changed over the last decade, with expectations surrounding delivery time, sourcing and authenticity quickly becoming a priority. Brands are now being held more accountable for production methods right down to the source of their raw materials. IBM conducted a recent study looking at how blockchain reinvents the consumer experience and the main benefit they described was that retail organizations can prove that they deliver on their promises.
Think of it as companies now being held accountable for their product authenticity and transparent tracking throughout the supply chain all the way to the consumer’s hands. The ability to prove every step of their process allows consumers to ultimately benefit in the form of increased trust and transparency and the assured consumption of safer and higher quality products.
A Deloitte study on Planning for Blockchain in the Retail and Consumer Packaged Goods Industry lists out some use case scenarios for blockchain across 3 areas:
1. The ‘consumer’
- Smart loyalty programs — capturing and storing customer details for personalised targeting, incentivising behaviour and rewarding loyalty
- Consumer participation — guaranteeing secure customer surveys and research
- Locating stolen products — tagging products to allow customers to verify the authenticity of what they purchased and to allow for tracing of stolen goods
- Connected services — enabling businesses to guarantee after-care services and warranties
- Targeted recall — allowing for easier identification of unsafe or defective products and the tracking of the status of any product recalls
- Sharing economy — allowing for the cooperative purchase of expensive consumer goods
2. The ‘supply chain’
- Connected supply chain — supporting an end-to-end supply chain solution, including tracking, documentation and payments
- Authenticity and provenance — verifying where products came from and their movement throughout the supply chain
- Delivery — enabling more secure manufacturing and consumer deliveries via improved tracking
- Know your supplier — using external information to store and verify supplier details
- Connected store — analysing supply chain and product data in order to improve the retailer’s fulfilment process
- Fraudulent transactions — protecting all parties by not releasing funds until mutually agreed upon
3. The ‘payments and contracts’
- Consumer payments— enabling people to save time on payments, whether through cryptocurrencies or more expedient approval of credit payments
- B2B payments — simplifying transactional processes and reducing costs and risk
- Digital advertising — supporting transparency in ad campaign execution and engagement targets by providing a data trail
- Consumer protection — maintaining digital records of purchases and keeping track of product warranties, thus reducing administrative work
What’s happening with blockchain in the Kiwi marketplace?
Implementing blockchain across the supply chain has already started making huge strides within the local market especially within the valuable export industry. China, a major importer of NZ products, has been marked by a number of food scandals over the last few years.
The middle-class Chinese consumer is now increasingly careful about the provenance of their food. With safety on the top of their minds, premium prices are no longer enough to assure the quality of products.
“blockchain could be the technology to close the ‘trust gap’ with retailers“
Widely reported in 2017, Alibaba and PwC signed a memorandum of understanding with Fonterra, Blackmores, NZ Post and Australia Post. This created a global traceability framework for food and brand protection to give consumers further confidence when purchasing food products online.
Chinese consumers will soon be able to trace that bottle of milk they purchased right back to the exact farm that the milk was sourced from in rural New Zealand. This unprecedented transparency allows consumers to have a 100 per cent confidence in the products they consume.
Origins Software is a developer of digital applications that create innovative traceability solutions for primary industries. Working within the honey industry they have created a modular, cloud-based platform that provides full visibility of the integrity of the honey supply chain from land to end consumer.
Future plans include expanding into the Kiwifruit and wine verticals they are even planning to venture into the fashion industry with a supply chain tracking solution that will cover every stage of the garment production process.
The plan is to develop an app, or similar, for end-users to scan the tag and find out exactly where the product was made.
An invested world
APAC is expected to grow at the highest rate during the next 5 years due to the growing number of blockchain start-ups and increasing venture funding activity in the retail space.
Key financial, shipping and trading markets like Hong Kong and Singapore are the lands of opportunity when it comes to the adoption of blockchain.
Retailers in the US are scrambling to integrate blockchain across their businesses in the US market. Walmart has filed patents for the expanded use of blockchain that mention using the technology for vendor payments and digital shopping.
American Express is launching a blockchain effort with Boxed to customize rewards for cardholders. Starbucks is piloting a program create transparency by tracing coffee beans from Costa Rica, Colombia and Rwanda.
According to the IBM study, the first wave of blockchain adoption will be led by industries such as banking, financial market, healthcare, government and electronics and will only then be followed by the consumer industry.
It’s all about closing the trust gap
Author Richie Etwaru in his book ‘Blockchain: Trust Companies: Every Company Is at Risk of Being Disrupted by a Trusted Version of Itself,’ 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 today’s world where consumers do not have any visibility into supply chains, provenance and quality and are forced to take companies at their ‘word’, blockchain could be the technology to close the ‘trust gap’ with retailers.
When it comes down to it, the potential for blockchain is enormous, as it establishes new forms of trust between consumers and retailers. In an age where consumers are increasingly calling the shots, adopting technologies that foster trust in your retail brand will eventually become obligatory.