The consumer goods industry possibly has the most number of interactions between suppliers, manufacturers, and retailers. Blockchain-powered smart contracts can not only tie all the parties together but can also ensure all the parties are adhering to their end of the bargain.
Controls can be built around smart contracts to ensure ethical sourcing and adherence to labor regulations. Blockchain can prove to be a very effective tool in preventing counterfeiting, a problem that plagues the electronics, luxury, and lifestyle industry segments through traceability at every point in the supply chain.
Agricultural commodity trading based companies can make trading more rapid and efficient using blockchain. Vendor performance and payments can directly be derived from blockchain validated transactions thereby minimizing the need for human interventions and verification.
Blockchain coupled with IoT devices and sensors provides unparalleled visibility and efficiency gains into the logical and physical movement of goods across their entire value cycle.
We can say that a lot of companies in the retail, consumer goods, transportation, and logistics sectors have started limited evaluation pilots using blockchain. While the use cases for blockchain can differ by industry, the rule of thumb is any process that requires trustworthy transactions between multiple parties, is an ideal candidate for blockchain.
For example, in retail tracking merchandise from production to shelves to homes has always been a challenge and has kept retailers intrigued. Blockchain can provide some of the answers by helping build a strong underlying track and trace construct that can tie the entire supply chain from source to the customer and beyond. It can provide the ability to execute a product recall with pin-point precision not just in-store but even at the consumer end. It provides retailers a direct channel to reach out to the consumer regarding a product advisory or recall. Until today, that direct line of communication was not possible. Newer methods of running loyalty campaigns and digital coupon management are becoming possible entirely because of blockchain. Customer trust and loyalty are payback! Reverse logistics, warranty management, and inventory tracking are some of the other impactful application areas of this technology.
In this article, we will discuss how blockchain technology helps retail and consumer goods. Also, its benefits, use-cases, and lots more!
Blockchain is a technological advancement that could bring great benefits to the future of the retail industry. After slowly building up traction over the years, the technology caught public interest in 2015, with retailers making it a necessary element in their business strategy. Retail Insight Network explores how blockchain in retail will develop and how it could change the industry.
Blockchain technology has the potential to transform businesses and ultimately our economy. To continue meeting the changing consumer demands, and stay ahead of the competition, it is time to start planning and prioritizing.
- Consumers: Shopper confidence grows in aisles and online as blockchain verifies the authenticity and safety of goods.
- Suppliers: Retail supply chain participants can better ensure they’re trading in ethically-sourced goods to meet emerging consumer demands.
- Retailers: From big names to small-town businesses, retailers can promote products, earn loyalty, and gain insights into consumer preferences in entirely new ways.
Reinventing Business for Major Brands
- Bringing new clarity to the food supply: Food’s journey from farm to table relies on precise cooperation across organizations. To create the IBM Food Trust, IBM has joined with Dole, Kroger, Nestlé, Tyson Foods, Unilever, Walmart, Carrefour, and others to make food safer, more efficient, and more sustainable.
- Digitizing shipping on a global supply chain platform: TradeLens is a joint collaboration between Maersk and IBM that includes 90 organizations sharing important shipping data and capturing more than a million events around the world each day.
- Restoring trust in the digital advertising supply chain: IBM and Mediaocean bring together global leaders including Unilever, Kimberly-Clark, and Kellogg’s to address trust, control, and arbitrage concerns in online media supply chain.
Blockchain Leads to Tipping Point
The next few years are likely to see a tipping point as companies begin to appreciate blockchain’s ability to track and trace products, record contracts, and transactions, and guarantee the movement of information. The result will be widespread, mainstream adoption of blockchain in the retail and consumer packaged goods (CPG) industries but long-term, sustainable success will only be possible through careful planning. The more advanced businesses will focus on scaling-up the opportunities they have identified, where those who do not consider the possibilities are at risk of falling behind.
Improved Operations a Bonus for Companies and Consumers
Well-managed retail and CPG supply chains can have a fundamental influence on an organization’s competitive positioning in areas such as product cost, working capital requirements, speed to market, and service perception. But blockchain does not only benefit companies from an operational point of view, but it also has direct consumer applications. It has the potential to change the way we shop and pay for products, to provide alternative payment platforms, and to power superior loyalty programs. We believe the largest impact blockchain will have in the short term will be in traceability in the supply chain. A full audit trail can, for example, protect consumers from counterfeit goods.
Why does Blockchain Matter in Retail?
Blockchain helps retailers to better track the origin of stock, gives them better control over what they sell, and provides assurances for food safety, among other applications. Blockchain can also be useful for controlling supply chains as changes to data such as manufacturing dates and locations can be tracked. This could help eradicate the use of unreliable suppliers, poor quality ingredients, and child labor.
Here are five of the most promising use-cases for blockchain in retail:
- Tackling counterfeit goods: 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 percent 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 jewelry by following every step in the supply chain from mine to store.
- Supply chain tracking: 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.
- Transforming payments: 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. For example, 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 is some of the most promising.
- Loyalty programs: From collecting grocery store points to airline miles, loyalty and reward programs are a fundamental way retailers engage their customers and stay competitive. Blockchain technology is addressing a number of these issues by offering new ways to handle, secure, and ultimately centralize loyalty program data. It 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.
- Customer data management, security, and sharing: Retailers routinely record, store, and utilize vast amounts of customer data. Blockchain applications related to streamlining processes in this line of their work present a less explored yet immensely promising area. Harnessing the benefits of distributed ledger technology could improve security, give customers more control over their data, and create new forms of marketing to help retailers meet consumer needs with higher precision and capture the value otherwise missed. With the help of an artificial intelligence-powered recommendation system, retailers would be able to identify customers’ needs and advertise highly tailored offers to them. With advertising expenditures thus optimized, merchants will be able to reward those who opted into opening their data with tokens spendable at the store. With a blockchain data-sharing system in place, customers could also proactively let retailers know about their needs and preferences, sending them shopping lists in the form of smart contracts. Coupled with the potential affordances of the Internet of Things to outsource the execution and delivery of such orders to machines, blockchain could become a fundamental infrastructure for the new era of fully automated shopping.
Louise Garvin, the head of projects at Provenance, said:
“Provenance leverages the power of blockchain technology to bring transparency to supply chains, enabling businesses to build trust with customers.”
Anna Oldbury, the Director of LioBites, said:
“Is blockchain going to disrupt the retail industry? Absolutely! Companies that will adopt blockchain technology will lead the way and over the next few years, this will become the norm. Western Europe and the USA are pioneering blockchain technology, with Walmart already using it in their food supply management in order to cut waste, improve efficiency and traceability.”
The Future of Retail
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 percent, which would be the highest forecasted growth among any blockchain-related industry. With that said, it’s important to recognize 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 revolutionizing every industry. The real problem now is the lack of blockchain developers, which is stopping the deeper implementation of the technology.
The food traceability technology market is expected to continue growing at 7.15 percent 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.
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.
Thus, from managing the supply chain to improving customer loyalty programs, blockchain is raising higher demand in the retail industry.
Cover Image: LinkedIn