While blockchain has been around for nearly 10 years, and is most widely known as the technology behind the popular cryptocurrency Bitcoin, it is evolving into something far greater these days. More and more industries are finding new ways to apply the technology, namely retail and supply chain markets. We often hear about the benefits of using the technology, including increased security and more transparency into transactions, but many are still finding it difficult to wrap their heads around what the technology really is.
What is blockchain, anyway?
To get an idea about what blockchain is, think about Google Docs. Traditionally, users had to create and make changes to a document, save it and send it to another user while they in turn make changes, save a new version and then send back along to others, and so on. In other words, multiple users don’t have access to a document at the same time. With Google Docs, multiple users have editing privileges at once, and can see any changes others are making in real-time, providing more transparency, collaborative consensus and, arguably, better productivity.
Blockchain can help retailers increase operational efficiencies, optimize the payment process, reduce fraudulent activity, and ultimately gain consumer confidence.
Similarly, blockchain is a secure and accurate distributed public ledger or database that records and stores all the details about any transaction or transfer of an asset that has ever been conducted. It works like this: permissioned users can access and add data to the ledger which is time-stamped and attributed to them, but can’t change or delete any previous and connected “blocks” of data. To maintain accuracy and transparency, users must establish a consensus about the integrity of the data before adding more blocks to the chain. The system makes it virtually impossible for anyone to tamper with verified data without being detected by another person, or a monitoring and auditing system, making it inherently more secure than a traditional centralized database.
Potential for blockchain in the retail supply chain
In the retail world, blockchain enables businesses to establish a permanent record of every step in the lifecycle of a product — from development, manufacturing, order, delivery, and sale, to the potential return of an item. This transparent ledger can help retailers increase operational efficiencies, optimize the payment process, reduce fraudulent activity, and ultimately gain consumer confidence. Digging in a bit deeper, blockchain can help with:
- Tracking and tracing products: All members of the retail value chain including the manufacturer, retailer, transportation and logistics vendors–and perhaps most importantly, the consumer– have visibility into the product across the entire lifecycle. For example, if a consumer is particularly concerned about where the product was sourced from, like an organic farm or a factory that uses sustainable energy and fair employment practices, they can see proof of the source.
- Detecting counterfeit or stolen goods: With a transparent and secure record, retailers and suppliers alike can detect if the goods they are receiving and selling are coming from legitimate sources and are actually what they claim to be. This is especially applicable to the global diamond industry which is often flooded with fake gems, as well as designer brands that are plagued with knock-offs.
- Personalizing the customer experience: Tech-savvy consumers expect more personalized shopping experiences across the multiple channels they are already accessing. Retailers can only meet this demand by integrating various systems on the back-end to gain clear visibility about the product preferences, shopping habits and purchasing history of individual customers. A clear and accurate record also provides retailers with a better insight and opportunities to cross- or up-sell.
- Optimizing warranties and loyalty programs: Consumers get confused about the product warranties they are covered under and the rewards they have received through multiple loyalty programs. For consumers, having one cloud-based place to manage these clears the confusion. For bankers and merchants, using blockchain can significantly reduce the manual work it takes to cover their liabilities and get the most out of their respective investments in both attracting and retaining customers.
Meanwhile, in the real world…
While financial institutions have been working with blockchain for a while, retailers are just starting to get into the game with this relatively nascent technology. Recently, Microsoft and RFID hardware and data analytics software company Mojix have introduced a new blockchain-based solution to help retailers streamline their supply chains and reduce overhead through “smart contracts”. These contracts enable a retailer to control and track the quality of a product throughout its lifecycle and ensure the timeliness of its delivery. Walmart is also working on a blockchain solution with IBM and Tsinghua University to track the lifecycle of produce and pork products to ensure food quality and safety requirements are up-to-par.
While still in early stages of adopting blockchain, savvy retail and supply chain organizations are definitely starting to realize the positive impacts the technology can have on the hyper-competitive and rapidly changing industry. We’ve only scratched the surface of how it can be applied to the retail and supply chain markets, and there are many more benefits the technology can bring to the table that we expect to see in the coming years.