The cryptocurrency market lost a lot of its luster in the last year. Bitcoin, which reach an all-time high earlier this year, has plunged more than 80% since January. Despite the volatility and pain in that market, though, the underlying blockchain technology remains an incredibly promising asset.
Blockchain has been slow to take off in the payments space. There are several reasons for this, including:
- Confusion: As much of a buzzword as it became, relatively few people really understand blockchain technology.
- Skepticism of New Technologies: Tools that promise to upend decades of entrenched practices are always a hard sell.
- Fear: Blockchain is closely associated with the cryptocurrency market, which has its own, long-running image problems.
Still, a recent report analyzing blockchain in the retail market suggests big gains. The study projects the value of retail blockchain applications will multiply 29-fold in the next five years, from an $80 million value in 2018 to $2.3 billion by 2023. That seems like an incredible jump; however, if you look at the real value proposition behind blockchain technology, it’s not surprising at all.
Decision makers in the retail industry are waking up to the value blockchain presents, and all the different applications for the technology. Blockchain framework can help with anything from fraud detection to managing customer transaction data. Blockchain tools can even make it possible for retailers and banks to conduct instantaneous, error-free payments clearing.
As just one example, let’s look at how blockchain technology could revolutionize supply chain management in the retail sector.
Blockchain & Supply Chain
Blockchain offers numerous advantages for retail supply chain management.
First, deploying a blockchain system can enable traceability. The merchant has full range to follow a data trail for each individual product in the journey from source to shelf. The blockchain ensures safety and compliance because you will always know where an item is and where it’s been. For example, if there is a defect in a product sourced from one supplier, the blockchain makes it possible to recall only the affected items, rather than taking thousands of perfectly-good units off the market.
A blockchain system can also make it easier to prevent counterfeit merchandise from impacting the market. Anything produced in a specialized or limited quantity can be authenticated easily, even once it makes its way onto the reseller market. This prevents trademark infringement and helps protect brand reputation.
And, of course, blockchain can also streamline store stock and track goods by location. Retailers can have up-to-the-minute information on what items are running low, which ones have been reordered, and which ones are on their way. The business can dramatically cut back on the amount of back product that ends up languishing on shelves.
Even better, a blockchain can minimize those costly stockout instances. Stockouts may cost the retail industry as much as $1 trillion annually, and that’s not even accounting for the negative impact on customer perception of the brand. Stores can have more efficient, up-to-date stock tracking with a blockchain in place to manage inventory. No more errors or oversights.
Is Anyone Already Using Blockchain?
Yes, some retailers have taken a chance on the new technology. For example, Walmart and IBM partnered on a blockchain-based Food Traceability Initiative earlier this year. This system allows the retailer to identify the origin of food items almost instantaneously. Other items can be traced, too, ensuring their supply chain is free of human trafficking and other labor abuses.
Walmart’s decision to go in on blockchain technology could be a gamechanger. The move makes a lot of sense, as part of the problem whenever there’s a food safety issue is that it’s so difficult to trace food by its point of origin.
Think about the outbreak of E. coli in romaine lettuce detected last month. We knew the vast majority of lettuce on grocery store shelves and in restaurant kitchens was completely fine. Regardless, businesses had to throw out millions of pounds of lettuce across the entire country, and consumers had no access to the leafy green. After weeks of investigation, the FDA had only been able to isolate the source of the incident to a large region of California as of December 6.
The situation could have been different if there were a blockchain system in place at the supplier level. Retailers like Walmart could instantly identify affected product and remove it from stock. Items unaffected by E. coli could have been left on the shelf.
What’s Next for Blockchain?
As the current applications of blockchain technology pan out, more and more businesses are going to see the benefits. When they do, they’re going to want to get on-board.
I expect to see blockchain become a major force in the retail industry over the next decade; not just in supply chain management, but payments, too. Eventually, the financial sector will be unable to deny blockchain’s advantages over their existing automated clearing house (ACH) framework.
It will require a significant upfront investment, but laying down the infrastructure for the new payments system will pay for itself quickly.