What Blockchain has in Store
September 16, 2019
- Author: Gary Arlen
July/August 2019
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Blockchain, the distributed ledger technology, is moving beyond cryptocurrencies and supply chain management. Developers foresee the secure system as a tool that will generate significant value within the retail infrastructure, including customer loyalty programs, ad placements, speedier payments, theft, fraud reduction and counterfeit detection.
Today’s early-stage optimism is generating bullish and wildly divergent forecasts for blockchain’s role in retailing: $2.3 billion in 2023 according to one prediction, $2 trillion globally by 2030 says another prognosticator.
Whatever the scale, there’s a growing expectation that blockchain projects at major companies like Walmart, Samsung, FedEx, Whole Foods and Alibaba are forerunners for the wider adoption of blockchain throughout the retail industry. Many forecasters believe that consumer technology dealers are likely to become early adopters because of the complexity of their products and transactions, plus the readily identifiable values of the blockchain process throughout their supply chains and follow-on customer services.
“Blockchain has interesting applications for securing cargo, providing an audit trail for all the hands that touch the goods on their way to store shelves,” explains Jack Cutts, senior director, business intelligence and research at CTA. He cites use cases in which merchants have “the ability to dictate how their goods will be handled and what underlying tracking and inventory systems will be used.”
As a result, Cutts says, “A retailer who is determined to use blockchain to drive efficiency or track performance of different vendors has the ability to push blockchain into the equation where it would not otherwise happen organically.”
Cutts cites ventures from significant industry organizations that may jump-start the perceived value of blockchain’s role in the retail process. He points to new “Blockchain-as-a-Service” cloud products from Microsoft and Amazon.
“This is an important development and a signal to those in the industry who are ready to begin deploying and using blockchain at enterprise scale,” Cutts says. “There are parallels to the mass deployment of machine learning and artificial intelligence, which have just now begun in earnest. Cloud deployment, such as the Amazon/Microsoft project, is a critical first step in taking blockchain out of the proverbial laboratory and cementing it in the enterprise.
Enhancing Customer Loyalty
Customer loyalty programs are especially adaptable to blockchain features. For example, Techrock, the Chinese e-commerce store, offers its customers a blockchain loyalty token called “Tael.” Shoppers can earn Tael by using the Techrock label to verify authenticity, a driving factor in Techrock’s use of blockchain.
Tokens are also awarded for purchasing products and referring friends. Rakuten, Japan’s largest e-commerce company, is collaborating with Techrock, enabling Chinese customers to shop from both companies. Other merchants can purchase tokens to distribute as promotional premiums. The blockchain technology keeps track of the entire process, with an emphasis on assuring customers that they are not only earning rewards but also are avoiding counterfeit products.
In France, the startup Universal Reward Protocol has developed a “WeWard” mobile application based on blockchain technology that allows shoppers to collect digital money (called “Wards”) whenever they interact with partner merchants. The blockchain technology keeps track of use and lets customers exchange the Wards for cash, products, gift cards or coupons inside the dedicated marketplace. Rewards are actually cryptocurrency.
Yves Benchimol, CEO and co-founder of Universal Reward Protocol insists the system is not a traditional loyalty program, which typically focuses on purchases to retain existing customers. “URP has a broader reach,” he explains. “It provides retailers with the opportunity to reward any behavior they deem relevant to better target existing customers or to attract new ones. Earned tokens can be redeemed through tailor-made offers designed to meet the shopper’s needs based on collected data” – a process made possible by blockchain connections.
Among the initial partners are high-tech/home goods retailers Auchan and national merchants Galeries Lafayette and Carrefour. “Blockchain technology allows us to give retailers access to transparent and verifiable performance indicators,” explains Benchimol, adding that the secure/private cryptographic method ensures that personal information is not disclosed.
In its first month of operation in France, the company signed up 20,000 daily users, according to Benchimol.
For those who came in late: blockchain is a decentralized ledger technology, in which data and transactions are maintained throughout a peer-to-peer network so that all activities are fully transparent and cannot be altered. The distributed technology has been in development for nearly 30 years, but it took off in 2009 when “Satoshi Nakamoto” published a white paper which became the basis for Bitcoin and other cryptocurrencies based on blockchain.
Blockchain’s core quality is that the decentralized system strengthens authentication and digital trust because it uses mass collaboration and a robust workflow. Although the volatile cryptocurrency market (featuring big names such as Bitcoin, Ethereum and Binance) has generated both big rewards and huge skepticism, the underlying blockchain technology is being widely implemented in supply chain management and global commerce.
Meeting Customers' Expectations
Advocates of bringing blockchain into the retail experience focus on features that cater to the digital-savvy customers of digital shopping. These customers want to be sure the products they buy are authentic, hence the value of blockchain’s promise of a single source of truth.
Analysts also cite blockchain’s ability to prevent fraud, especially when integrated with existing tools such as smart tags that keep track of products (and their components) from the point of origin to store shelves. Retailers also can manage each customer’s digital ID, including audit trails that track how customers assess potential purchases.
Supporters of these features contend that this approach fits into the new privacy protection initiatives such as the California Consumer Privacy Act of 2018 and Europe’s General Data Protection Regulation. Via blockchain, retailers could manage consumer data with automatic compliance, such as using smart contracts that govern per missions and access to consumer data.
Smart contracts are another vehicle for retailers to use in connection with payments, automated refunds, insurance and other transaction factors that require security and the ability to assure consistency to all parties.
Consultants are already preparing lengthy lists of ways in which retailers can use blockchain’s verification features on everything from taxation (keeping track and submitting tax information in ways that absolve them of liability) to cybersecurity and micropayments (inevitably involving cryptocurrencies).
Too Soon for the Blockchain Plunge?
“Most companies that are looking at blockchain will need to crawl before they run,” CTA’s Cutts contends, underscoring the reality that many organizations are just beginning to assess how blockchain will work for them.
He cited the TradeLens project being conducted by IBM and transport company Maersk, calling it “a promising one,” despite the challenge of recruiting additional participants.
“In this scenario, market power is spread across a number of companies and a number of geographies, making coordination and cooperation more difficult,” Cutts explained. Most significantly, companies are at different levels of technical sophistication and have different corporate cultures when it comes to sharing information.”
As retailers look around for examples of successful blockchain implementation, more use cases are emerging. One big splash this spring was the announcement that several major retailers including Crate & Barrel, Nordstrom and Whole Foods Market (owned by Amazon), will accept bitcoin and three other types of cryptocurrency. The project has the credibility of backing from Gemini Trust Company, which is in turn backed by the Winklevoss twins, the high-profile high-tech venture capitalists.
The digital currency plan is based on tying payments to the digital scanners that retailers use to accept phone-based payments from mobile apps and digital wallets, such as Apple Pay. Flexa, a startup global network that unites retail and blockchain technologies, actually coordinates the rollout, which also includes GameStop, Regal Cinemas and Baskin-Robbins. It is working with merchants to configure their scanners to recognize payments from its cryptocurrency app.
Experts agree that it is still early in the blockchain/retail relationship. But they also point to the increasing exploration of new ways to make blockchain part of the consumer experience. For example, Comcast Ventures has invested in several projects that touch its multiple entertainment outlets. Even Subway, the sandwich shops, are implementing blockchain for “traceability” – a way to keep track of everything that comes to and goes out of its shops.
Fundamentally, the retail pioneers working with blockchain agree it’s all about data integrity and security. Or, as some pundits put it: blockchain closes the “trust gap” that has made customers leery in the changing retail environment.
Expert Insights on Blockchain
Jack Cutts, Senior Director, Business Intelligence and Research, Consumer Technology Association:
“The most promising use cases are those involving efficiencies in the B2B space. In those scenarios, a mass merchant has the ability to dictate how its goods will be handled and what underlying tracking and inventory systems will be used. A retailer who is determined to use blockchain to drive efficiency and/or track performance of different vendors in the supply chain has the ability to push blockchain into the equation where it would not otherwise happen organically.”
Nathan Trail, Senior Manager, Technology Policy, Consumer Technology Association:
We need public policy that will allow blockchain to thrive. Instead of regulating blockchain technology as a whole, it makes more sense to regulate blockchain-enabled functions. It’s important for industry to work with policymakers to help them understand future applications of this technology, and to understand what type or regulatory adjustments (if any) need to be made so these applications can be utilized.”
Yves Benchimol, CEO and Co-founder, Universal Reward Protocol:
Blockchain technology allows us to give retailers access to transparent and verifiable performance indicators. We are monitoring the cost per incremental visit and the conversion rate in real time to optimize the offline performance of campaigns. Our secure and private cryptographic method ensures users than no one will receive any personal information. The reward is a cryptocurrency.”
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