Distributed ledger technology (DLT) or “blockchain”, has been described by the European Securities Markets Authority as electronic transaction records maintained by a shared network of participants forming a distributed validation system which uses cryptography to store assets and validate transactions.
The benefits of DLT technology, such as enhanced efficiency, reporting, and security, along with the emergence of innovative uses of blockchain, are indicative that blockchain has a place in the retail industry. This is supported by a recent report from Deloitte, New tech on the block, within which Deloitte analyses potential blockchain use cases in the retail and consumer packaged goods industry.
The future of blockchain in the retail industry
Blockchain has the ability to:
- track, trace and authenticate products;
- record contracts;
- guarantee the movement of information; and
- record transactions.
It therefore provides retailers with opportunities to eliminate inefficiencies, drive business value (particularly throughout the supply chain), and improve upon customer experience (including through the provision of enhanced product tracking and protecting consumers from counterfeit goods).
Given the sophistication of the technology, blockchain in the retail industry could also be used as a secure method of:
- providing consumer loyalty programmes;
- engaging with consumers;
- tagging products with a view to proving authenticity and finding stolen goods;
- making and receiving payment;
- preventing fraudulent transactions;
- connecting services throughout the lifecycle of a transaction;
- providing an end-to-end supply chain;
- tracking delivery and recalls of goods; and
- recording consumer’s transactions.
Blockchain developments in consumer markets, so far
The following are examples of ways in which blockchain is disrupting the market for the benefit of consumers:
- INS Ecosystem, the decentralised ecosystem connecting grocery manufacturers and consumers, is scheduled to launch Q4 2018, enabling (i) consumers to buy groceries directly from manufacturers, and (ii) manufacturers to create bespoke marketing programs to reward their customers directly. INS’ goal is to “create the leading decentralised consumer marketplace…by maintaining a thriving ecosystem of consumers willing to buy everyday products at lower prices and manufacturers looking to sell directly and surpass existing retail chains.” Blockchain applications in INS include smart contracts, payments, and supply chain management, which, according to INS, (i) reduce time delays, added costs, and human error, (ii) automate inventory control, and (iii) streamline fulfilment processes.
- Consumers are becoming increasingly aware of and worried about how their personal data is obtained, used and retained. Nuggets is an e-commerce platform that uses blockchain technology to enable consumers to make payments, log in to services and verify their identity without having to share their personal data with anyone (including Nuggets).
Advice for retailers
Whilst retailers can be excited about the use of blockchain in driving value and offering innovative solutions to everyday problems, retailers should not overlook the challenges posed to the industry by the technology, in particular the retailer-to-consumer relationship threatened by the disintermediation created by blockchain (as evidenced by INS). It would be prudent for retailers to have a strategy in place to (i) utilise the advantages of blockchain with a view to improving their consumer offerings, and/or (ii) deal with the threat of blockchain as it disrupts the market.