Most of us have heard of blockchain. We have seen the commercials about its power and searched the internet for clues. But I think if we are all honest, most people, even business leaders, have a limited understanding of blockchain — what it is, how it works and why it matters.
In short, blockchain is a distributed, digital ledger that allows multiple stakeholders to share the same information. It can’t be hacked or manipulated. That explanation likely brings little clarity to retailers (and their customers), however.
The real question is why should retail businesses care about blockchain, when many of its benefits are technically complex and seem to be far away? Because the average consumer is changing– quickly. Expectations surrounding delivery time and transparency, sourcing and authenticity are quickly shifting. And while new tech like artificial intelligence will ultimately help retailers deliver on those expectations, blockchain will likely play a big role too, particularly in mobile payment, supply chain, and finance applications.
- Increasing transparency and consumer confidence
The vast majority of consumers do not care how blockchain works, but they do have very defined expectations and values when it comes to purchasing goods. They care that an organic tomato actually came from California and that their engagement diamond is conflict free. Of course, they have higher-stakes concerns too, like confidence that their food and medicine have been safely produced and handled.
Historically, consumers have had to trust third parties, many of them motivated by profit, that their product is produced a certain way or comes from a particular place. Blockchain changes that with its single source of truth. If all of a product’s suppliers are part of a blockchain, retailers and their customers could potentially track a single product — from raw materials on the other side of the world, through every stage of production and delivery.
Consumers might access that information and get the assurances they need, for example, by scanning a QR code in store and receiving transparent information instantly. Sound like something to expect in 20 years? It’s actually happening in China now at Alibaba and JD stores.
In some parts of the world this kind of transparency is very valuable. Further it props up security and safety measures much needed in a global marketplace faced with heightened consumer pressures.
- Guaranteeing authenticity and reducing counterfeits
Related to transparency, businesses with global supply chains (which is basically all retailers now), will be more accountable that goods are exactly what they claim to be. That power not only helps primary markets and secondary resale markets in products like luxury goods, but it also means a lot for product safety.
Take for example a pervasive problem you may know little about, depending on where you live: counterfeit spirits. In parts of Eastern Europe and China for example, the black market for alcohol has exploded. Brown-Forman, the company that makes Jack Daniel’s, estimates that around 30 percent of all alcohol in China is fake. The European Union Intellectual Property Office (EUIPO) estimates counterfeit alcohol costs the EU member states an estimated 1.2 billion Euros a year. While resale of the actual bottles is a significant and more difficult to mitigate concern, blockchain could play a large role in tracking a spirit or an over-the-counter medication’s origin which is literally a life-saving application.
- Speeding up delivery and smoothing logistics
In general no consumer appreciates– but every retailer is painfully aware– how unbelievably complex and challenging it is to get delivery right whether it’s from manufacturer to a retailer or straight to a consumer’s door. Disputes between parties along the supply chain, communication, administrative management and tracking all present challenges. These disputes are often difficult and pricey to resolve since they involve incompatible systems, poor data entry and more or less a game of telephone. AI, autonomous fleets, and other new tech can alleviate some of the pain, but blockchain – a single ledger of undisputable data and history– could make transportation and logistics more efficient, streamlined and reliable. That offers endless positive effects for retailers and consumers alike.
Now, the hard part
Of course, blockchain will face real challenges before businesses and consumers can reap the benefits. Ironically, for a technology that can foster trust among retailers, consumers and others along the supply chain, there are some trust-related challenges holding it back, such as getting supply chain partners (and even competitors) to work with one another.
But there’s no doubt: blockchain will make businesses smarter and more efficient. Retailers who learn how to integrate it into their business will be able to better deliver on the customer experience.