COMMENTARY

Why retailers should be sold on blockchain

Sept. 25, 2017

by Andrei Povarov

Ongoing discussions around blockchain applicability in different areas are noticeably changing in tone and content lately — especially during the last year.

Instead of arguments about how good would it be to use blockchain here and there, one hears more and more about real startups and various implementation scenarios, specific problems faced and detailed plans on how to encourage broader adoption in a particular area.

This applies quite unevenly, though, to different industries and use cases. Some are very close to the market  (or even already deployed) while others remain more theoretical.

Retail is one of the interesting areas where different uses of blockchain have different speed to market and different chances to materialize as part of the ongoing business practices.

One of the straightforward cases for retailers is to use blockchain to improve their supply chain efficiency. The technology can be used to track immutably documented movements in the supply chain, which results in quicker transactions and guaranteed accurate representation of the system state at any time.

This also improves forecasting capabilities of suppliers, shippers and retailers consolidated around a single blockchain-based version of verified facts.

Blockchain has the potential to be the game-changer for complex global supply chains, but it can be especially powerful when combined with smart contracts, in which contractual rights and obligations, including delivery and payment terms, can be automatically executed.

One of the recent examples is the blockchain-based smart container management program developed at the IBM Watson IoT Center.

Each shipping container is equipped with sensors transmitting storage-related data for products inside (e.g., temperature, pressure, vibration), this data is collected within the IoT platform and can be monitored in real time by all supply chain participants.

Appropriate action can be taken in case any parameter is outside of acceptable range — where possible, triggering a replacement supply and automatically making related payment and term changes through smart contracts.

There are other interesting aspects of blockchain interactions with IoT; these have been previously discussed in the article, Blockchain in the economy of self-sustaining devices.

Another retail use case is to reliably trace product origins, thus confirming their authenticity, for instance, whether an item on the shelf at a supermarket is indeed organic, and not simply (and falsely) labeled as such.

There is certainly a large demand for authentication of provenance — particularly for producers of gourmet food and luxury items. In response to consumer demand, retailers  increasingly are faced with the burning need to demonstrate proven product origins through a reliably traced processing and supply path. This also helps in the fight agains counterfeiters who steal sales and can undermine brand image by dumping fake products on the market.

This area is probably advancing the fastest in practical terms, and we can see a number of very interesting startups here. Among them:

  • Food Blockchain XYZ — a food tracking platform providing quality and safety monitoring, as well as management of commercial relationships among supply chain participants via smart contracts.
  • Provenance —a real-time data platform that helps to empower brands through provable transparency about product origins.
  • FarmShare —  a decentralized platform that optimizes resource sharing for local agriculture markets.
  • Ripe.io — an infrastructure of distributed ledgers and IoT that provides APIs for a connected food supply chain workflow, and aspires to become the "blockchain of food"
  • Arc-net — supply chain security and analytics

Big companies are in the picture as well. IBM, Walmart, Nestle and other food supply chain partners recently announced plans to use blockchain to trace food origins and transaport — as demonstrated in this video.

Other blockchain implementations within retail are, so far, less practically developed. One such project involves blockchain-based secure financial interactions among partners, which would allow faster payments and a more efficient settlement process — and could also reduce processor fees.

In early, but active, development are blockchain-based loyalty programs that solve issues such as instant availability of bonus points after a qualified transaction, interchangeability between partners and participants (with the possibility to set up your own "exchange rates"), and quick access by all stakeholders.

One recent example is the tourism-oriented Dubai Points, in development since mid-2016. The program aims to promote tourism, with stakeholders that include airlines, hotels, telecom and others.

One recent and quite unexpected development is the blockchain-based loyalty program of Burger King restaurants in Russia, which are issuing their own token, the Whoppercoin. As noted in this recent blog post, "the currency acts more as a closed-loop loyalty program than any kind of actual financial instrument."

The Burger King initiative is interesting and also courageous — the Russian Ministry of Finance has tried persistently to ban cryptocurrencies over the last three years.

Finally, one more blockchain application not yet broadly developed concerns the verification of authenticity of customers in the retail space for both personalization and security purposes.

Blockchain is used to secure the results, while the recognition itself is done using artificial intelligence, which is also more and more actively used in retail — but this is another story. We showed how these two disruptive technologies can be used in combination in Blockchain and artificial intelligence.

To sum up, we're beginning to see an interesting development in retail-oriented blockchain technologies, some of which have lately seen real, practical implementations. Food origin tracing is one of the most exciting and in-demanded applications, and the one where the most significant progress has been made.

Following it are smart contracts with supply chains and blockchain-based loyalty programs, both in development, but largely in the prototype phase at this point. No doubt in these and other, currently less advanced areas we will see exciting new developments to come in the near future.


Andrei Povarov works on the adoption of emerging technologies for a large Switzerland-based IT company. He also leads digital management and disruptive technologies programs at the Russian Presidential Academy. Andrei holds a PhD and an MBA and has many years of experience in the IT and payments industry.

Topics: Blockchain


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