While the financial industry has been successfully making use of blockchain applications for several years now, blockchain technology has the potential to transform a number of other industries as well, including retail.
Recent blockchain-driven experiments by large retailers such as Walmart, Amazon, and Alibaba are proof of the many possibilities for the technology to solve age-old challenges in the retail industry. For instance, blockchain technology can help retailers improve how they store information about their suppliers, help seamlessly execute payments and contracts, and even reinforce product authenticity to prevent counterfeiting of goods.
As retail sales increasingly shift online, it’s important that retailers adapt their systems to cater to the ever-changing ways consumers are searching for and purchasing products. From managing the supply chain to improving customer loyalty programs, here are four of the most promising use cases for blockchain in retail.
In 2017, retail losses due to fraud were estimated at $23 billion. Retailers in the luxury consumer goods industry are especially vulnerable to fraud, averaging 20-30 per cent more in losses due to their exceptionally high margins and more flexible return policies.
With counterfeiters and retail fraud on the rise around the world, blockchain technology offers brands a way to assign a unique scannable code or label to each product and allow their customers to access the entire history of that product – from the country of origin to the final reseller – and every step along the way. IBM recently developed TrustChain, a blockchain that proves the provenance of jewellery by following every step in the supply chain from mine to store.
The ability to track products through the supply chain is one of the most popular uses of blockchain technology in retail to date. Not only is it helping to verify the origin of luxury goods and eliminate counterfeit goods, but it’s also having an impact on food safety. Walmart is pioneering the use of blockchain technology in the food supply chain to reduce waste, cut tracking times, and improve contamination management and transparency. The retail giant filed a number of patents related to blockchain technology, including one for a “Smart Package” system, or devices that contain information about the contents of a package, its environmental conditions, its location, and more.
Starbucks is also exploring blockchain technology with pilot programs in Colombia, Costa Rica, and Rwanda that help the company track its coffee from “bean to cup” and share real-time information about its supply chain. The large French supermarket chain Carrefour also launched Europe’s first “food blockchain” which uses blockchain technology to track its animal and vegetable product lines. Consumers will be able to scan a QR code with their smartphones and view a product’s entire journey to the shelf.
The food traceability technology market is expected to continue growing at 7.15 per cent annually and reach a whopping $20.95 billion by 2026. As consumers become more concerned with the origin of the products they buy, retailers across all industries are adopting more ethical sourcing practices and using blockchain to provide more transparency into their supply chains.
In 2014, Overstock became one of the first online retailers to accept Bitcoin payments. Today, online retailers of all sizes have begun to accept cryptocurrencies as a form of payment; however, it is still taking some time for digital wallets and cryptocurrency payments to reach mainstream adoption in the retail space.
The vast majority of online retailers still prefer to offer traditional payment methods, mostly because of the drastic fluctuations in cryptocurrency values, while others have found implementation to be too complicated. However, this also means the online payments space is still largely untapped.
Retailers that are willing to experiment with cryptocurrency payments can tap into an additional revenue stream and reach more customers around the world. What’s more, blockchain technology also provides retailers with more control over how they distribute coupons or discounts, and how their customers redeem them. Mastercard, for example, filed a patent for a system that uses blockchain technology to authenticate coupons. The system provides a way for retailers to decrease coupon fraud and issue highly-targeted discounts more effectively.
American Express is also experimenting with blockchain technology to revamp its loyalty rewards program. Of all the current uses for blockchain technology, the ability to help retailers streamline online payments and cut down on fraud are some of the most promising.
From collecting grocery store points to airline miles, loyalty and reward programs are a fundamental way retailers engage their customers and stay competitive. Last year, there were 3.8 billion users of consumer loyalty programs in the US alone.
With that said, existing programs are often prone to misuse or fraud and can cause a number of challenges for retailers if not implemented or maintained correctly. On the consumer side, many users (57 per cent) feel unsatisfied with loyalty programs or abandon them quickly, mostly because they find the sign-up process overly complicated or because it takes them too long to earn points.
Blockchain technology is addressing a number of these issues by offering new ways to handle, secure, and ultimately centralise loyalty program data. Blockchain technology not only allows for secure and immediate redemption of loyalty reward points, but it also streamlines the development and exchange of points across retailers and programs. With a tamper-proof, time-stamped database of transactions, retailers can secure and track loyalty program transactions easily and transparently. Ultimately, this can reduce the costs associated with complex loyalty programs and prevent both errors and fraud.
A recent report disclosed that by 2023, blockchain in the retail market could grow to $2.3 billion or at a compound annual growth rate of 96.4 per cent, which would be the highest forecasted growth among any blockchain-related industry. With that said, it’s important to recognise that blockchain technology is still in its infancy. But as the technology continues to gain the trust of large retailers around the world, its potential to disrupt the retail industry is remarkably evident, and the demand for blockchain applications will undoubtedly rise in the years to come.
Blockchain is clearly here to stay and is already revolutionising every industry. The real problem now is the lack of Blockchain developers, which is stopping deeper implementation of the technology.
Nacho De Marco, CEO, BairesDev
Image Credit: Zapp2Photo / Shutterstock
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