Blockchain tops many leading business trends lists these days across a variety of industries due to its innovative and potentially transformative efficiencies and advantages for companies. Middle market retailers are taking note of this trailblazing technology as well; but given its relative newness in the marketplace, questions remain, too, on what blockchain can provide specifically to the retail space and its consumers. In addition, many retailers may wonder how to initially implement the technology in the business, or in a broader sense, if blockchain is indeed a good fit for their organization at this time.
A closer look is in order to fully vet the benefits and outcomes, as well as next steps.
BLOCKCHAIN AND MIDDLE MARKET RETAIL
For starters, it’s important to clarify what blockchain means in the retail space. In its most fundamental sense, blockchain is actually a digital open ledger that shares data in a secure platform within a consensus network. So, for instance, inventory and supply chain data can be submitted, stored, tracked and evaluated—from manufacturer to retail outlet—across multiple parties and jurisdictions, all along the retail supply chain. This decentralized and shared approach allows for improved accuracy of data, real-time sourcing and accurate product traceability, all elements important in the retail space as today’s consumer requires greater transparency in product authenticity. Evidence of this: in a recent study on brand transparency, 94 percent of survey respondents indicated they would likely be loyal to a brand that offers complete transparency of their products, 56 percent said they would be very likely to stay loyal to that brand for life, and 73 percent noted they would be willing to pay more for a product that offers complete transparency. If blockchain can deliver this heightened transparency and authenticity related to sourcing, production, social responsibility and more, middle market retailers, in today’s competitive marketplace, would be wise to learn more.
Another interesting take for middle market retailers, blockchain technology, because of its decentralized, equal-playing field methodology is not just for the big players in retail. Smaller and middle market companies can equally take advantage of this technology and adapt it to their existing operations, whether it’s integrating blockchain into current enterprise resource planning efforts or in partnership with larger electronic data interchange vendors that the company is contracted with. In fact, this may be the initial step for many middle market retailers to enter the blockchain fold as they work with these larger partners who have the technology already in place and require compliance with their standards.
BLOCKCHAIN IN ACTION: NOW AND NEXT
In terms of real application, blockchain can be leveraged to address a variety of retail business needs. Note the following current and potentially future applications.
- Supply chain management – As mentioned earlier, blockchain improves supply chain by providing a digital ledger of every element along the production of a retail item, from clothing items and makeup to watches and purses. No more separate databases for each step of the production and supply chain. Rather, data is entered across a shared network. It’s secure and cannot be changed. This ensures accurate traceability, confirms to consumers that products are ethically and responsibly sourced, and can help if recalls are needed as complete histories of the product are maintained across the ledger. Larger retailers are currently using blockchain in this manner and middle market companies could benefit as well from this key usage.
- Logistics – As in supply chain tracking, logistical information within the blockchain can also be traced from where an item was produced, who handled it or when it shipped. This is especially helpful in managing products with expiration dates and tracking items closely so they’re not lost in the system. All of this contributes to efficiencies and cost savings for the retailer.
- Consumer payments – While from a practical usage standpoint at the consumer level, currencies like bitcoin may not quite be a reality just yet in retail, retailers should continue to explore the advantages of this new payment method. For instance, the use of cryptocurrencies for international transactions could be an advantage for retailers, offering a simplified, consistent platform to be used across borders between consumer and retailer. Likewise, given the end-to-end nature of blockchain, transactions can be done instantly or refunds made automatically. Further development is needed in this area, but retailers should stay on top of this evolving application.
- Loyalty and rewards – Current loyalty and rewards programs can be difficult to track for retailers due to traditional point systems or digital coupons. Points can go unredeemed or errors can be made related to transfers or transactions, leaving customers frustrated. However, if tracked with blockchain and tokenized, rewards points or tokens are maintained and exchanged in a secure real-time environment where token accuracy is assured, boosting consumer loyalty and brand confidence.
There are additional areas in which blockchain could affect retail, including fortifying consumer data security; improving smart contracts so payer and payee are connected as soon as items are received, eliminating intermediaries, which may save costs in the long term; addressing product safety and likely many, many more.
QUESTIONS TO WEIGH
The blockchain surface has just been scratched here. Clearly, a deeper dive is in order by retailers like you to fully understand the implications blockchain could have on the business. As you begin to research and learn, consider these questions to launch your blockchain journey in terms of your own business:
- Is your business challenged with traceability and supply chain management issues? Do you lack efficiencies in this area?
- Is your consumer data secure and leveraged?
- Do you work with partners who use blockchain and will they require your business to comply with their standards? Will your current systems support this?
- What ongoing business problems might blockchain address, i.e. supply and inventory management, customer relations, finance and accounting?
- Do you have internal capabilities to develop a blockchain strategy or will you require external resources?
