Blockchain’s Scope in Retail
The growing consumer interest in smart contracts and open transaction records are fueling the retail sector's adoption of blockchain technology. The use of blockchain technology in retail solutions allows businesses to offer unprecedented levels of service to their customers, including the ability to track their orders in real-time and have them delivered promptly. Additionally, the technology guarantees authenticity, product safety, product quality, and product reliability, allowing supply chain partners to know exactly where their products are. Moreover, logistics and supply chain businesses have greatly benefited from blockchain's transparency and quick transactions, leading to a recent surge in demand for the technology.
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The global blockchain market in retail is predicted to increase from $123.1 million in 2020 to $1644.4 million in 2027, representing a CAGR of 44.5%, according to the latest analysis by Market Reports World.
Blockchain in Retail
Blockchains are distributed ledgers that enable people to record and permanently distribute data. The distributed ledger technology behind blockchain means that no central authority controls the creation of new blocks or the modification of existing ones. Briefly put, the blockchain's potential in retail is enormous because of the trust and transparency it can bring to the relationships between stores, customers, suppliers, and payment processors. Blockchain lets everyone in a retail network keep an eye on system activity in near real-time without giving any one entity control over the system.
Discover how blockchain is changing the face of retail
Here are the use cases to prove it.
1. Protects the standard of our goods
The provenance, authenticity, and state of goods are three aspects of supply chain management that stand to benefit greatly from blockchain technology. Temperature-tracking sensors for perishable commodities, for instance, can record data on a private blockchain while the sensors monitor the goods' storage conditions. IBM and Walmart have collaborated on this through the IBM Food Trust.
In case of a bad product, blockchain can track it back through the manufacturing and distribution process, showing any potentially compromised batches, suppliers, or manufacturing locations. Because of this new idea, stores can recall products quickly and effectively and fix problems in the supply chain.
2. Manages customer data
In the United States, laws like the California Privacy Rights Act have brought attention to managing customer information well. Companies have a growing responsibility to protect people's privacy as they collect more data than ever before on their customers.
Blockchain technology makes it possible for decentralized identity (DID), allowing users to keep their personal information outside centralized systems. Unlike a third party, like an email provider, the DID is held under the owner's control and custody. With DID, the user's identity and any related data can be stored on the blockchain, along with any relevant relationships.
Users can hide their online identity by switching from an email address to a DID. This prevents third parties from compiling their full profile by collecting and correlating data from different sites.
3. Inventory tracking
Maintaining an accurate stock is a must for every successful retail business. A tighter rein on your inventory allows you to save money, keep your customers happy, streamline your operations, and boost your forecasts and profits.
The unique blockchain identifiers assigned to inventory items, orders, and bills of lading, as well as the supply chain actors who handle these items, ensure complete, immutable transparency throughout the supply chain.
4. Combats fraud
An annual estimate puts the cost of fraud at $5.38 trillion worldwide.
It's easy to see how helpful it would be to have an unalterable digital information log in this scenario. Companies can use the immutability of the blockchain to ensure that invoices are accurate from supplier to buyer, reducing the risk of procurement fraud. Because of the need for confirmation from all parties involved, fraud is diminished.
For items that have been verified and recorded on the blockchain, retailers can offer a guarantee of authenticity. As expected, the integrity of the data placed into the blockchain is crucial for it to serve this purpose.
5. Boosts customer loyalty programs
More and more businesses are spending money on developing or enhancing customer loyalty programs to compete in today's customer-focused, consumer-driven market. In many situations, blockchain technology can be useful.
Collecting client data is a key component of loyalty programs but also introduces new vulnerabilities. Using smart contracts, which are pre-programmed onto a blockchain and activate automatically when specific criteria are met, loyalty programs can help protect client data by transferring digital tokens rather than data for rewards. Because smart contracts make it possible to automate redemption operations, there is less need for a central authority to oversee them, making them more efficient and safe.
When it comes to simplifying the process of earning and redeeming points at participating businesses, loyalty program operators often develop their own digital rewards currency. Enhancing adaptability and loosening the limits on standard loyalty programs can increase customer participation.
6. Effective payments
In light of the widespread acceptance of cryptocurrencies, merchants who still don't support them would be well served by modernizing their payment processing systems. In the retail sector, PayPal is an example of a service that makes it easier for users to use many digital currencies when making purchases and payments.
Blockchain is only useful for cryptocurrency transactions now. It can reduce the cost of establishing an infrastructure for financial services by doing away with the time and effort spent on authentication. More than that, blockchain technology has various possible uses in economic systems, including exchanging digital and physical assets, safeguarding intellectual property, and creating fully automated contracts.
7. Enforces global supply chain labor rights
The latest estimates place the number of individuals in forced labor at 24.9 million. With proof that it can't be changed and that regulators can look at, blockchain has been discussed to document and check that workers follow the supply chain rules.
However, blockchain is not a panacea for eliminating human trafficking and forced labor. Companies that abuse their workforce may enter false or misleading data to make it look like they have passed a social audit. Therefore, the implementation of blockchain technology must be in tandem with the principles that guide responsible labor practices.
8. Streamlines administrative processes
When a project is accomplished, smart contracts allow freelance contractors to get paid quickly. This could speed up the administrative work in retailers' back offices. More importantly, administrative tasks that require much data, like payroll processing, can be digitized and monitored in real-time. This frees up time and energy for employees to work on higher-value, more creative tasks.
Real-World Examples of Blockchain in Retail
Given Walmart's history of pioneering new technology to improve its supply chain operations, its foray into the blockchain space is surprising. Using blockchain technology, Walmart Canada solved one of the most pervasive and long-standing issues in the logistics and transportation industry: how to process large numbers of invoices and payments across a network of freight carriers. Walmart Canada uses 70 freight companies each year to transport over half a million cargo to its various distribution sites around the country.
A huge logistical difficulty is coordinating the delivery of a massive quantity of goods. Employees must manually collect and enter approximately 200 data points for every invoice to process the thousands of monthly shipments. Inevitably, data inconsistencies and delayed reconciliations result from the massive manual labor involved in moving commodities. This led to more than 70% of invoices needing to be more accurate in their data. These problems in the supply chain may be traced back to the fact that Walmart and the 70 affected freight companies were utilizing different business systems.
Walmart Canada collaborated with DLT Labs, a provider of business blockchain solutions, to address these problems. The DL Freight commissioned blockchain network became online in 2021 after nearly two years of testing. Now that all transaction information is permanently stored on the blockchain, DL Freight is a trusted hub for the logistics network, and only 1% of invoices are contested after DL Freight's adoption, representing a reduction of 70 times.
American Express launched the rewards program Plenti, which it dubbed a "loyalty coalition business," after discovering the limitations of traditional loyalty programs. The basic concept behind Plenti was simple: let customers earn loyalty points at one store and use them at any other Plenti store.
While initially promising, the program's success was doomed when participating retailers began pulling out one by one less than two years after launch. In reality, though, almost all consumers will legitimately take advantage of these reward programs. Users of Plenti could easily rack up loyalty points at gas stations and redeem them for merchandise at Macy's or other stores with a greater selection.
Plenti's rewards program competes with the loyalty programs offered by stores. It became clear that the inability of the participants to agree on the best way to organize the program was due to flaws in the underlying network. So, a month after Plenti shut down, American Express announced its cooperation with Hyperledger to build a blockchain-based system that will enable businesses to construct unique Membership Rewards programs for American Express members. Simply put, it gives shops the freedom to associate American Express reward points with whatever they like. A win-win situation is created here, as merchants and customers benefit from the flexibility of the many offer discounts. Using Hyperledger's blockchain technology, merchants can be onboarded in weeks instead of the months it would take when using traditional APIs.
The De Beers Group is a major diamond wholesaler and reseller. Verifying the genuineness of finished items and raw materials is crucial in the high-end fashion and jewelry markets. Luxury brands' customers now count on accurate and transparent provenance information. Millennials see themselves as more than just consumers; they are social activists who want to make a difference through their purchases. Recent studies by Bain & Company and the American Gem Trade Association show that when selecting to buy diamond jewelry, up to 70% of millennials think about the effects on the environment and local communities. For this, De Beers built Tracr to verify the legitimacy of its jewels. This blockchain-based system creates a digital asset whenever a diamond is mined, making it possible to trace the diamond from the mine to the buyer's possession. Tracr utilizes blockchain technology, artificial intelligence, and the internet of things to accurately track a diamond as it moves through the supply chain. Such a policy ensures that the company's products come from a reliable source and discourages the trade in diamonds mined in conflict zones.
The retail industry is being revolutionized by blockchain technology because of its many high-value distributed applications. These include new business models like digital payment, smart contracts, internet/online shopping, and risk and compliance. Blockchain catalyzes retail-digital transformation because it boosts customer trust and loyalty, increases supply chain visibility, improves loyalty programs, and combats counterfeiting. Now that the hype about blockchain has died down, retail businesses can use the technology to improve mission-critical processes and stay ahead of the competition.