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INN4SCIENCE BLOG

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Blockchain

Blockchain Technology in the Retail Industry: All You Want to Know

blockchain technology in retail

Today the blockchain technology is all over the crowd, and some even call it the next revolutionary technology that will radically change the retail industry. However, many retailers have not yet taken the steps necessary to understand how this new technology might help their business and what is required for blockchain retail industry. This article presents a number of blockchain use cases and applications in retail that you can come up within the discussed agenda.

Talking about the blockchain technology in the retail industry, we most often divide retail business niches to apply blockchain technology to:

  1. Blockchain in logistics
  2. Blockchain in sales and payments
  3. Blockchain in loyalty
  4. Blockchain in factoring and business process optimization
  5. Blockchain in warranty for goods

But let’s start from the very beginning.

What Is Blockchain Technology?

The principle of the technology of blockchain lies in the work of distributed databases, where all the holders keep full copies and verify the correctness of the data. The integrity of all data in these copies are specially monitored and the full history of operations is preserved. Thus, the stored information cannot be changed without going unnoticed by others.

decentralized networks

In fact, with the help of this technology, it is possible to verify and ensure the reliability of any critical information so that any errors and actions of intruders cannot interfere with business processes. Blockchain-based solutions allow you to operate with any set of objects or processes – from voting to maintaining the registry of property rights.

How does blockchain technology work in retail?

The blockchain is a sort of digital registry, a distributed database, with no opportunity to change the data loggings without the consent of all the members of this registry. Each logging or block (as they are called in blockchain terminology) is marked with a timestamp, and refers to the previous block.

For the moment, it is the most unconcealed and secure system for daily business operations in any industry: undoubtedly you have heard about various blockchain use cases in retail, agriculture, real estate, gaming etc. In practice, it means that in order to tamper or falsify the data, it will be necessary to tamper all subsequent entries, too, and not in a single copy, but also on the computers of all the other participants. Hacking such a distributed system implicates a significant effort and security experts claim that it is not economically profitable.

What are the advantages of retail companies using blockchain?

Various experts outline different opportunities of blockchain in retail industry. In order to take a closer look at the blockchain in action, it is necessary to divide retail as a business into several key areas – logistics, payments, sales organization, including category management, and marketing.

  1. Blockchain in logistics

  2. blockchain in logistics

    There are several crucial logistical problems faced by companies of any size today. One of them is tracking the food supply chain. There are cases, when whole industries have had to stop production because of poisoned products of one manufacturer.

    Poor-quality products can cause serious harm to health and pose a threat to people’s lives. Only a quick response allows you to cope with such situations.

    Using the blockchain, all suppliers can specify their products reliably from each other (recycling can combine products from different manufacturers), and store chains can accurately inform consumers about the origin and shipping of any ingredient in any product they buy.

    Another significant issue is the inability to track the packages throughout every stage of delivery. In accordance with the report by the World Shipping Council, the shipping industry loses as many as 1000 containers a year at sea, which causes millions of dollars lost for retail companies and enterprises.

    Blockchain use cases in the retail market

    Provenance company is one of the startup examples that offers a solution to track the food supply chain. It is successfully implemented in small supermarkets. In the global scale, the task of changing the supply chain management is much more difficult, and all major chain stores are working on a solution. So far, the most famous efforts are from Walmart in collaboration with IBM and several other companies.

    To solve the problem of tracking packages, the freight giant FedEx has begun a partnership program with the Blockchain in Transport Alliance (BiTA) to introduce blockchain technology into its operations, according to industry resource Freightwaves. The company has already begun to develop industrial standards for using distributed registry technology and is testing blockchain solutions. The blockchain will ensure the transparency of the supply chain and be able to change the logistics industry, helping customers to track packages more effectively, not only during the FedEx process, but at every stage of delivery.

    At the end of 2016, members of R3 Wells Fargo and the Bank of the Commonwealth of Australia for the first time effectively used the blockchain and smart contracts to ship cotton from the United States to China. The technology was also tested by the Netherlands and the largest Danish carrier Maersk. In addition, giant block retailers are interesting for such giant retailers as WalMart, Amazon, Alibaba and Kestrel.

    An interesting activity on the logistics market is the Ambrosus project. Its essence is in the installation of sensors that monitor, for example, the temperature in the package and report violations of storage conditions in the supply chain.

  3. Blockchain in sales and payments

  4. Blockchain in sales and payments

    Sales are the main and most straight use of the blockchain. The most useful are examples of blockchain integration into the current payment infrastructure. There are lots of sites in online trading, that accept cryptocurrencies. The e-commerce giant Shopify added the option to enable a gateway to accept cryptocurrencies on any e-commerce website, allowing to widespread the technology among the sufficient number of small and mid-sized businesses. Still, the ability to pay in digital currency depends on the legislation of the country.

    Startup blockchain projects in the retail sector

    The English company Everledger has come up with an interesting way to use blockchain technology. All information about diamonds, including the data on related transactions, are recorded in a special registry, to which Everledge users have access.

    They use cryptographic protection to confirm the authenticity and origin of more than 1 million diamonds, which significantly reduces the number of false insurance claims for the loss and theft of diamonds.

    Another interesting example of the rise in blockchain startup projects in the retail industry is the number of cryptocurrency wallets available today. Being a small or large enterprise, you can choose a web or desktop solution for your cryptocurrency transfers, or create your own wallet with customized features.

  5. Blockchain in loyalty

  6. blockchain in loyalty

    Blockchain for the advertising and marketing industry in general, and for loyalty programs, in particular, shows us the way to build communication with customers using the newest technologies and having all the transactions reflected in the buyer’s wallet. The operator builds a buyer’s profile and rewards him / her by encouraging further spending. For instance, if the person would like to purchase any food of the same brand for 300 USD a month, the buyer receives one of the products as a gift or with 100% cashback.

    In discussed above systems, the blockchain is useful in various ways:

    • For consumers, the validity of the points is much higher due to their liquidity and the potential increase of their value.
    • For participating companies it simplifies work and reduces costs. The blockchain system removes the need for an intermediary, and the participants interact directly.

    Successful applications in the retail industry

    Many companies have begun to develop their own solutions using different approaches:

    • Loyyal offers a solution that flexibly adjusts to each program of an individual company or corporation.
    • The Incentloyalty product is an excellent solution for small and medium-sized businesses, as it provides a turnkey program.
    • Some huge companies have created their own solutions (Walmart, Burger King, De Beers and others)
  7. Blockchain in factoring and business process optimization

  8. Blockchain in factoring and business process optimization

    Both the business process management and factoring operations require mutual trust and a high-level of automation of inter-organizational procedures, in order to reduce the amount of bureaucracy and improve the operational environment that retail companies start using blockchain technology in their daily business routine.

    Blockchain use cases in retail

    California-based company Skuchain used blockchain technologies in the development of an effective factoring solution. The company is engaged in sales financing and expands the availability of financing with its solution, accelerating this traditionally long process.

    Skuchain plans to replace letters of credit with a more modern form of commerce: financiers do not need to have any data about the companies which they are going to finance. Such a decision would mitigate the huge risks imposed on bankers themselves when conducting transactions with letters of credit.

    The company plans to develop services on the blockchain, allowing them to create a supply chain and carry out notarization, transfer of ownership and ownership chains.

    Another company, Wavebl, proposed a solution that optimizes business processes for international logistics and financing. The main idea of ​​the solution is to connect all the entrants of the supply chain to the decentralized database on blockchain, which allows the exchange of documents without intermediaries, which in turn significantly speeds up the work processes.

    This solution allows the company to eliminate possible disagreements, to avoid forgery of documents and much more.

  9. Blockchain in warranty for goods

  10. blockchain in warranty of goods

    The main issue with the warranty on goods is the communication gap between the manufacturer, wholesaler, retailer, end-customer and warranty company. The complication with tracking the path of the product makes it a problem to find the proper warranty service as well as to restore a warranty contract and see whether the case is covered. This can be easily solved with the use of the blockchain technology, providing the whole supply chain with the opportunity to be verified in minutes.

Blockchain applications in retail

The product Warranteer is interesting for marketing campaigns for sellers of electronic and home appliances. It allows you to increase customer loyalty by solving problems with the warranty on goods.

When buying a product, the warranty is recorded in the blockchain. The consumer gets a convenient and reliable storage (in the mobile application) and, if necessary, can find out all the details of the purchase: expiration date, contacts of service centers and more.
Instead of searching for a paper warranty and its conditions, the consumer receives all the necessary information electronically in a moment.

Another example of a blockchain application that could be implemented into retail is the Bitmark project. The Bitmark allows the identification of digital property and establish legal control over the customer’s data. Their collaboration with Chibitronics led to a blockchain-based solution to coop with warranty fraud.

How will blockchain change the retail industry?

In retail and wholesale, the use of blockchain is just at the very beginning, but even a few successful cases gives an idea of the need of this technology in the near future.

The auditing company Deloitte presented a new report, in which it concluded that the blockchain will most likely radically change the scope of retail trade and the sale of consumer goods. The findings display that, the integration of technology into the supply chain industry will happen sooner or later, but it’s better to start planning and developing the transition programs now.

In the report titled “New tech on the block“, researchers analyzed 50 cases of using the blockchain in trade and estimated what added value was obtained with the technology. In the course of this study, four areas were identified in the retail trade and sale of consumer goods, where the technology of blockchain could potentially eliminate problems such as product traceability, compliance, flexibility and management of interested groups.

The researchers looked at the prospect of using technology at a more detailed level and suggested that the “know your supplier” solution would be key for enterprises. With it, companies will be able to store supplier data, make payments and enter into contracts.

Steve Lark, Deloitte’s technology consulting partner, sees the technology of blockchain as the next step for retailers and consumer businesses to authenticate, track and record transactions. He also notes:

“It is critical that decision-makers understand which parts of the value chain will benefit the most from the application of the new technology, and how easy it is to implement.”

Lark also added that companies that are not going to use the blockchain in business processes risk losing behind their competitors. However, they should carefully assess in which areas the technology can bring the greatest benefit before investing in it.

Technology giant Amazon also did not stay behind and has launched a blockchain service that allows customers to develop their own blockchain network without incurring the cost of building a platform from scratch.

Amazon Managed Blockchain platform is a fully managed service allowing you to create and maintain your own blockchain network.

This new platform is another Amazon web service, part of the Amazon Cloud system that runs a huge number of websites and services, which includes platforms such as Netflix.

“Amazon Managed Blockchain eliminates the cost of building a blockchain network and automatically scales to the requirements of thousands of applications that process millions of transactions.”

The service is currently working in test mode, and all those interested in testing a new product can register and submit an application to test the capabilities of the platform. If the application is approved, everyone will be able to create their own blockchain network and invite other Amazon web services participants to try it out for a multi-user network.

Other large retailers are already experimenting as well. Recently, Signet Jewels, which sells diamond jewelery, has joined the blockchain-project of the De Beers Group miner. The system, based on a common distributed registry, tracks the movements of each diamond mined, which ensures full transparency of the value chain.

To conclude

blockchain in retail

The next few years should bring a large number of new ideas and projects, as well as the first massive use of the blockchain in large companies.

The total cost of blockchain solutions in the global retail sector is expected to grow 29 times in the next 5 years. Thus, the cost of blockchain applications used in commerce should rise from $ 80 million today to more than $ 2.3 billion by 2023. This is stated in the report of risk management specialist Monica Eaton-Cardone, published on November 29.

The prediction by IHS Markit, a world leader in critical information, looks even more promising. They expect the growth to be up to $2.0 trillion till 2030.

In any case, there is no doubt that the market will grow. The blockchain’s innovative capabilities promise big changes, which of course, will be interesting to watch.

In an interview for Independent Retailer, Brigid McDermott, the Vice President of Blockchain Business Development at IBM, compares the development of the blockchain with the evolution of telephone communication: “If you are the only person who has a telephone, this is an excellent paperweight. If you and your best friends have phones, this is already something. If everyone has phones and we are connected to a common network, this is today. In order for the blockchain network to become an effective tool, everyone must participate in it. ”

Whether you consider the opportunities of blockchain retail for establishing a new breakthrough business or level-upping an existing one it’s a great tool to create an amazing project! You may find out about your idea realization feasibility by asking us.

DO YOU HAVE ANY QUESTIONS?

LET'S DISCUSS! BOOK A CONSULTATION WITH OUR SPECIALIST


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