Application Of Blockchain In Retailing: Can The New Technology Solve Its Problems?
Since the introduction of Bitcoin in 2009, scientists have never relented their efforts in exploring other possible applications of the blockchain technology. It is no argument that blockchain offers abundant innovative technical and business applications beyond beyond the imagination of Satoshi Nakamoto and others who contributed to the development of the first ever cryptocurrency, the Bitcoin.
While Bitcoin had a clearly defined use-case being a financial tool to store the value of currencies, and or make financial transactions easier and faster than ever before, it became obvious that the underground technology powering the Bitcoin, because of its versatility, could be utilized for a wide range of other applications.
One of the be most common use-cases of this blockchain is in retailing. Nowadays, global retail services are becoming very complex with the addition of emerging markets and new suppliers all over the world, such that it is becoming increasingly difficult to manage global retail sourcing and the enormous amount of data that comes along with both new and existing products and suppliers. All over the world, there is a constant upward rise in concern about sustainability among manufacturers, retailers, and consumers.
Consumers are always demanding a higher quality of services, unfortunately; the limited available amount of resources is insufficient. Considering the differences in laws and traditions of conducting trades, the standards of services and products are different around the world. These challenges thus have a direct impact on product retailing.
How Can the Blockchain Solve The Problems In The Retail Sector?
Considering the tremendous innovations experienced so far, it becomes evident that the Blockchain isn't just having an impact on Business to business subdivisions, it's also becoming progressively observable and significant in the Business-to-Customers’ relationships too. The retail sector has already discovered several practical applications of recording transactions in a Blockchain system.
These include everything from ensuring the authenticity of high-value products such as golds, and diamonds, and the art of locating stolen goods and protecting both customers and sellers from fraudulent transactions. We explore some problems in retailing, and how the blockchain can actually be of help in solving them.
Inconsistency And Incompatibility Of Databases Between Vendors, And Retailers.
Varying discordant databases between vendors, shippers, and retailers has absolutely led to congestion in the retail processes. One of the biggest challenges for retail is the fact that 90% of industries still rely on the use of spreadsheets that generate hundreds of thousands of data into the databases, built and operated by different solutions with different data structures. To achieve uniformity in the ways these databases relate, there is a need for consensus among the databases to interact with one another.
To solve the problems in systems connectivity, and differences in formats of the contents of the connected systems, blockchain as one single distributed ledger can be effectively used to remove incompatibility and data collision issues. The blockchain is an incorruptible digital ledger of records distributed across hundreds of thousands of computers. Because it’s in a decentralized, peer-to-peer network, entries into the ledger are not modifiable. That is, none of the participants can alter data, without a consensus among all of the participants once it has been recorded in a block of ledger.
Once the products make it to a retailer’s store, most times, the details of the inventory become hidden to the vendor. Thus, the vendor has to rely on tons of analytical data provided by the blockchain. Naturally, the blockchain provides access to the raw data as the product moves through the life-span of trade, giving vendors an in-depth view on the performance of their products.
Advertisement Of Goods And Services, While Protecting Users’ Data
The recent info-leak reveals how social media platforms are exposing user data without their consents. It has become viral how users are complaining about the audacious use of their personal data and regulators are beginning to ask hard questions about data security. The decentralized nature of the blockchain prevents individuals and organizations from unrestricted access to users’ data without prior confirmation, enabling collaboration between stakeholders and reducing fraud while also giving consumers greater transparency and control over their personal data.
The Blockchain technology enabled a trusted means of payments. It allows the use of cryptocurrencies as of a means of exchanging value or data. Majority of retailers around the world are integrating cryptocurrencies, especially bitcoin as a means to payment processing because it offers real advantages for both cross-border payments and micro-payments far cheaper to process than transactions made with the traditional credit cards. Cryptocurrencies allow retailers to accept payments along with digital records that will help streamline the refunds and return processes. Some of the most popular companies accepting cryptocurrency as a means of payment include Expedia, Overstock, and Newegg.
Retaining Customers Loyalty
For any brand with a product or service, it’s been proven over the years that customers loyalty reflects the customer's inclination to purchase from or work with a brand over and over as a result of satisfaction per value derived from the product or service, often noticed from positive customer experiences.
Research proves that it costs a business about 5 to 25 times more to convince new customers than it does to sell to an existing ones. Not only that, existing customers spend up to 67% more in buying products or paying for services than new customers. Therefore, loyalty or reward programs becomes an important customer engagement and retention strategy for businesses to remain competitive in the market.
The blockchain, because of its property of shared transaction ledger, can be considered to be an excellent solution for loyalty programs. However, certain requirements must be met for a particular blockchain before it can be considered as a solution for loyalty programs. According to a comprehensive report conducted by Cognizant Reports on leading retailers in Europe and North America to identify some of the very important technical requirements of a blockchain to make it compliant with real world use-cases such as the loyalty programs include:
- Scalability and/or Latency
- Compliance with legal and regulatory issues