In the span of ten years blockchain has grown from a doubted cryptocurrency-focused technology into a secure, widely used method of business process automation. A decentralized ledger allows to perform operations and maintain system privacy at a lower cost due to all data distributed and stored on working stations within the blockchain unlike traditional SAP-based solutions where data is stored outside the system.
Through immutability and traceability, a blockchain-based platform in retail would serve as a highly trusted, one-for-all solution for suppliers, manufacturers and other chain participants.
Blockchain in the retail market
The market of blockchain in retail is
expected to grow up to a remarkable 1937 million USD at a compound annual growth rate of 60% during 2020-2025. The sum seems even more persuasive compared to the volume of the blockchain in the retail market in 2019 when it comprised 113 million USD. The outstanding growth is explained by the rising need for truly traceable, scalable customer service which became crucially important for the global retail massively affected by the coronavirus pandemic in early 2020.
At the same time, some of the market experts
forecast the retail market volume to grow to 2339.5 million USD by 2023 due to the technology’s high adoption in the banking and compliance industries that are tightly tied to retail. Fast transactions, immutable service and verifiable delivery tracking without human control have become must-haves for mobile and online e-commerce in the time of home sitting. Out of all available technologies blockchain grants more advantages in the long run such as cut costs and transparent retail supply chain management.
At present, blockchain in retail is mainly applied in compliance management, document handling through smart contracts, supply chain and inventory management, transactions, customer care automation, and identification.
becomes a key player in the modern retail market with its rising number of ecommerce startups. Online retail platforms like China’s Alibaba start opening stores in shopping malls of Australia moving retailers from online to offline. Despite the risk of closure faced by the majority of retailers in 2020 due to the pandemic, the smooth lockdown waiver continues showcasing that real-life retail is still highly demanded. Ecommerce should go through certain changes so as to provide maximum benefits of both online and offline shopping at a maximally secure level. A retailer’s success strongly depends on its supply chain, a pivotal part of retail. A blockchain development company, blockchain enables retailers to boost customer loyalty, improve logistical efficiency and skyrocket consumer privacy.
Smart contracts continue winning the market of transaction management and compliance. Unlike manual verification, smart contracts eliminate the risk of failure due to human error since compliance checkup is performed automatically by the system code in accordance with the embedded regulations. Once transaction requirements are met, a transaction is performed with smart contracts meaning that it cannot be compromised, lost or changed without prior consent of authorized retail supply chain participants.
In recent years, smart contracts have been widely used in corporate operations such as supply chain management, billing, transaction processing, and inventory management. Blockchain-based process automation brings cost reduction as it helps to remove intermediary agents and to cut down headcount required for operational and auditing tasks.
Fraud is a common pain point in retail. According to “LexisNexis True Cost of Fraud” report, a large merchant
loses 1 USD from every 13.20 USD on average due to fraudulent activity in the supply chain. Fraud can take place in situations with lack of supervision during transportation, warehousing or sales control. Automated IoT-powered control systems may be used in retail to advance shipping control, inventory management and customer service, securing the most sensitive parts with smart contracts.
The FDA Food Safety Modernization Act of the US as of 2011 required the food industry to implement health protection measures including food origin tracking. Blockchain turned out to be a perfect instrument for it due to its almost instant transactions, eliminated risk of fraud, transparency, and proven information security. According to the Section 103 of the CPSIA amended section 14(c) of the Consumer Product Safety Act (“CPSA”) (15 U.S.C. 2063(c)), traceable labels must be used on every product applicable. This is to immediately block use of prohibited materials and components in products.
Along with that, Congress released the Consumer Product Safety Improvement Act to make children’s products traceable, too, aiming to remove counterfeit products containing unregistered, dangerous components or ingredients.
Data authenticity is by all means one of the major factors that retail should sustain, and hence, data security is a prime focus here. Use of a single database storage or a third-party server often implies the risk of data loss or compromising as it conveys consumer banking and personal information. And here blockchain brings to the table its distributed ledger technology when all information is shared within the retailer’s authorized working stations. In blockchain, data can be programmed to be automatically verified for compliance; each important operation requires approval by all authorized participants. As a result, data cannot be changed or compromised, each action can be traced back to the origin, and information cannot be lost since it is duplicated on multiple machines.
Major players in the blockchain for retail’s market are SAP SE, IBM, Oracle, Microsoft, and Amazon. In 2019, IBM and Scentre Group, an Australia-based shopping center operator, teamed with local financial companies to develop a private blockchain under the retail lease bank guarantee. Same year, months after joining IBM’s Food Trust blockchain Nestle and a blockchain-based platform OpenSC started developing a blockchain to distinguish Nestle from Food Trust. This fact especially highlights Nestle’s confidence in the potential of blockchain for retail. And the same year, a Russian retail giant Dixy moved its corporate financial system to blockchain.
Blockchain is a technology that can solve the above-mentioned issues. One of the core benefits of blockchain is the capability to trace item origin back to the moment of its entry into the system database. Products, documents and other items get individual tags which can be used for distinguished end-to-end transparency in the supply chain.
Using a blockchain-based system, manufacturers can manage orders, shipping documents or other supplementary requirements. Suppliers can track shipments and logistics, manage invoicing and provide product origin tracking opportunities for supply chain participants and consumers. Communication within the supply chain gets simplified thanks to automated processes so that participants only have to follow up in case of irregular breaches. Similarly, defective items can be tagged and processed separately visibly to all chain authorized chain participants for immediate reaction.
With blockchain, retailers leverage its remarkable features boosting the revenue through the combination of cut administrative expenses and improved supply chain management, and bring customer service to a new level by ensuring product originality and service optimization.