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Innovative technology changes everything it touches. Every industry it affects is changing one way or another, getting better, and opening up new potential for growth. We've already talked about how blockchain can change the world, but in this article, we're going to talk about one particular part of that world: the retail industry.
Retail is something we have to deal with on a daily basis. On the Internet, in real life, commerce is a part of our world. And we most definitely can no longer imagine our existence without it.
Have we got your attention? Do you want to know what blockchain can do for retail? Read this article and you will find out!
What is blockchain and why does the retail business need it?
Blockchain is a chain of blocks that stacks a decentralized database, allowing information to be transferred directly from one host to another. Each block contains encrypted data that can be accessed by each user of the network. Each transaction contains a timestamp. Roughly speaking, blockchain is a way to transmit data directly, only more secure and faster than the ways we're used to.
But that's if you keep it simple. You can read more extended info here.
Blockchain in retail is a whole lot of info to discuss, and for this, we have an entire article. Nevertheless, what the retail industry needs blockchain can be defined in just a few words:
Security is exactly what millions of people have come to love and trust blockchain for. Basically, it is the very thing that has ensured its popularity.
Automation is something that every business, not just retail, strives for, and that can be achieved through this decentralized network and all the information it contains.
Optimization, as you might think, is more about AI, but blockchain can also optimize financial transactions, eliminating the need for third-party services and commissions.
Marco lansiti, Professor of Business Administration at Harvard Business School, speaks of this technology as of the foundation for that future we are eager to see:
This is easy to see when we look at the changes that blockchain can bring to the world if managed properly.
The numbers make it even more obvious.
In 2018, the total value of the global blockchain in the retail market was $83m and forecasts show that it may reach $11.18 billion by 2026. Its integration has changed large retail companies such as Walmart, Louis Dreyfus Co, BanQu. Now it's possible for them to ensure on-time delivery, supply chain transparency, reliability, quality, and secure product quality.
Blockchain in Retail Business: supply chain optimization
According to a report from Deloitte, the supply chain is one of the retail business branches that can be optimized with blockchain integration the most. Different researches, like the one you can see below (2019), show there are aspects that blockchain can transform in the supply chain:
One of the biggest issues in the supply chain today is transparency, and as you can see in the infographic above, that blockchain can change the most the possibilities for tracking products to the end. This is what most mean under the transparency of the supply chain. So, if you combine the work of two technologies - blockchain and Internet-of-Things - in a couple of hard-working years you could achieve the dream of creating fully traceable goods. This will make the supply chain transparent from the beginning of the product's journey all the way to its arrival at the destination point.
This will be especially useful for businesses in the B2B segment.
For B2C, this change could also be a big deal. As the demand for home delivery has increased in 2020, and businesses working in both B2C and B2B are shifting smoothly in that direction, blockchain in that area could increase the level of trust from buyer to seller. Each item in the supply chain could have its own marker. Therefore, by being able to fully track its delivery, the customer would trust the retailer more.
Walmart is already using a similar system, with IBM's blockchain tools to track products. Their main goal was to find out when and where a product was grown and tested. The Food Chain tool creates a network in which all information about each food vendor is stored and transmitted on demand.
In addition, this optimization could have an impact on transaction processing when purchasing an item. It can be used in purchase processing with smart contracts. Smart contracts are a computer algorithm for forming, controlling, and providing ownership information on any product/project/etc. This could allow funds to be held in a virtual environment until both parties are satisfied; until the product has been shipped and the recipient has received it.
Blockchain in Retail Business: Payments Optimization
The main potential of blockchain technology for the retail business lies exactly in payment optimization. Blockchain provides the ability to transform electronic payments, make them much more secure, and generally change the entire customer experience from the beginning of the sales cycle to the end.
The statistics you see above show what purchases can be made with cryptocurrency nowadays. In November 2020, 33% of payments via cryptocurrency were made to buy gift cards, 4% to buy groceries, and about 3% were spent on information technology.
Yes, with cryptocurrency you can not only buy something hellishly expensive, but also food, drinks, or a couple of nice things from Amazon.
Even though Amazon does not yet accept bitcoin, it accepts gift cards that you can buy with cryptocurrency. Also, Burger King in Germany just recently started accepting cryptocurrency for online orders.
Blockchain is changing the world, and it all starts with what we’ll describe below. The first thing blockchain has already done for the retail industry is an opportunity to pay for purchases in cryptocurrency. This greatly speeds up transactions and, thanks to encryption, reduces the chance of fraud. In addition, it reduces the expense of banking services by eliminating the need to use third-party services and bank commissions. So, customers of blockchain-enabled stores are already spending less.
A number of retail companies have already adopted this approach with a great profit, and you can read about it here. Or think of the example of Burger King, which we discussed above. KFC and Subway are on the same page with them. Famsa, the largest retailer in Mexico, also accepts bitcoins, so their sales increased significantly in 2019 compared to 2018.
In addition, the retailer has more control over payments made via blockchain because of the decentralized nature of the network, its security, and the timestamp on each transaction. This automates the payment process and makes it much faster.
The increased security of this technology has already been taken advantage of by Mastercard, which has patented a system for coupon authentication. The system uses blockchain to issue discounts more efficiently while reducing fraud.
An important part of the optimization that blockchain can make is also a change in consumer protection. No more paper contracts; every transaction and its documents are stored in the cloud, making the customer experience more seamless for each customer and for the store as a whole.
Of all the ways blockchain could change the world of retail, security, speed, and payment optimization seem the closest to reality today.
Blockchain in Retail Business: improvement of the brand’s image
In the future, blockchain is expected to be one of the ways to increase brand awareness and conduct a quality marketing campaign.
The first thing that blockchain can do well in this area is event planning. Thanks to blockchain this can be greatly improved, as all data will be stored in the cloud, have a timestamp, and the ability to track every ticket to the event. This way, it can help fight fraud and theft when it comes to copyright.
When it comes to marketing, it's important to say that blockchain can make advertising campaigns much easier to run. Despite the fact that retailers have spent about $15 billion on online advertising in 2020, they still face fraud, bots, and unfair ad pricing. Blockchain, on the other hand, can ensure the accuracy of ads, tracking them to the pages viewed, and grant the views of people, not bots. This can be accomplished by having ads delivered directly from the provider to the customer's device via blockchain, without clogging the cache or putting the customer's data at risk. The fact that your ads will be viewed by real people, not bots, will be ensured by having data about where the ads have to be shown.
In addition, tracking products from production to delivery that Walmart does can also be seen as part of an advertising campaign. Today's person wants to know where the products on their table came from, and if you can give them that knowledge, you have an advantage that others don't have.
One example of a successful company in the blockchain advertising market is MadHive. They provide digital marketing solutions that store and track data in private blockchain networks and generate reports on customer activity. This way, the startup provides opportunities for marketing professionals to see the full picture of the market and audience interest, while not having to worry about the privacy of their sites' visitors' data.
So, blockchain could make one of the loudest and most significant transformations in retail marketing. Conversational marketing, targeted to each customer individually that, as in a decentralized network, allows the selection of the most important data for each user.
Customizing advertising at this level will lead to higher conversions and therefore higher profits.
Blockchain in Retail Business: customers’ experience improvement
At first, we wanted to cover blockchain speed, ad customization, and security separately. But then we thought we couldn't take these things apart because they are all part of the customer experience.
Which blockchain most definitely can improve.
Firstly, blockchain allows you to store customer data much more securely than traditional methods and even the cloud. Information on the blockchain network is encrypted, and to pull it out or alter it, there is no option to hack into a central server. Oh no, your potential "hacker" would have to break into each individual device, each block, since there is no central server. We're not saying it's impossible, but it's definitely more complicated than breaking one big server.
Imagine this with this simple analogy. A bank that holds all the money of everyone in the city behind a guarded door; and a bank that guards the door to each resident's home. In the first case, an intruder needs to break into one building to take all the money; in the second, they'd have to break into many securely protected homes.
Security is so important to the retail industry because most purchases require a person to log in his or her personal information. In the event of a cyberattack or information leak, the customer base loses its security and each customer's personal information becomes publicly available. Blockchain helps to avoid this.
To put it simply, if you enter your card number on a site with a convenient payment method no one will guarantee you that security systems won't break down and you won't put your personal funds at risk. Despite all the security measures, it is still a risk we all take knowingly.
Blockchain removes that risk. Your personal information is only available to you because your device - as a block in this chain - acts as a personal server.
The second thing blockchain can improve the customer experience is the speed of transactions.
Blockchain is the direct transfer of data from one medium to another.
So there are no intermediaries in this network, which speeds up its work. Transactions take place instantly, at any time of the day, without commissions, banks, or other third parties.
This greatly speeds up the process of making a payment in online stores. That's why blockchain transactions are almost instantaneous.
And that's why blockchain improves customer experience.
And finally, the third. Customization of advertising. Usually, this perspective is drawn more by AI, but if you combine it with blockchain, the level of ad personalization will reach a point where your customers will see exactly what they need at that moment.
So, for example, smart loyalty programs that combine artificial intelligence and blockchain will be able to offer personalized coupons or rewards to your customers.
All this affects the customer experience, increasing customer interest in both the brand and the product. The shorter and more convenient your sales cycle becomes, the more people will want to go through it.
So what can blockchain do to retail that no one else has done? The answer, as you can see, is not entirely straightforward. Blockchain is about security, speed, customer experience, and so on. There's so much more to it that you can't really sum it all up in a little paragraph.
So, we'll put it this way. Blockchain is an innovation. And like any other innovation, it can change what it touches for the better.
Some say that blockchain is destined to "undermine" the market with more convenient solutions. Some say it's the technology that's building the bright future of the entire digital industry.
We think it all depends on who holds this technology in their hands. Go for it!