Much of the buzz surrounding blockchain has been around cryptocurrency, particularly after the recent sharp rise – and subsequent fall – of Bitcoin. However, the technology also offers significant opportunities that retailers should consider.
Counterfeiting is a major issue for brands and the value of the global counterfeit market is forecast to rise to US$2.3 trillion by 2022.
The encrypted ledger system behind blockchain allows retailers to create a ‘digital passport’ for goods, showing the exact movement of products from their origins all the way down the supply chain into the stores.
Particularly for retailers dealing with third party distributors, this will give peace of mind about the authenticity of products they’re selling in their stores.
There are also provenance implications, with food retailers already using the technology to track the source of products such as meats.
While retailers want reassurance about the authenticity of their merchandise, the same holds true for consumers.
Imagine being able to scan products with your smartphone, with a hidden NFC chip providing details on an item’s origins through blockchain encrypted data. This sort of technology might not actually be that far away into the future.
For example, DiguSign, which already offers blockchain encryption for documents and contracts, has a platform that is already capable of enabling this more consumer-driven use of blockchain.
Such applications could prove particularly valuable for retailers looking to tap into the growing group of Gen Z shoppers, who value authenticity and are inherently less trusting.
In an age when consumers have become more fickle, many retailers are failing to realise the full potential of their loyalty programmes.
For example, incorporating the blockchain into a loyalty scheme means shoppers can be rewarded immediately after they make a transaction - rather than having to go through a centralised system that may take days to credit.
Loyalty rewards might also be transferred to others in a secure way, allowing consumers to share the brand experience with friends or family – a win-win for any retailer.
With the sector constantly faced with rising costs, there is also the potential for blockchain technology to be used to improve efficiencies.
The tracking capabilities of the technology are key here, as it makes it possible to see exactly where goods are in the business and where they are headed.
The wealth of data on these movements helps to drive insights and optimise stock management and sales forecasting – which has cost benefits.
The potential impact could be multiplied if visibility is extended beyond a retailer’s operations to include external suppliers.
Lastly, the payments area will offer opportunities for retailers to benefit.
Digital wallets such as Alipay and WeChat Pay have already proven popular to consumers who are outside the traditional banking system, but cryptocurrencies can fulfil a similar role and are an interesting option for businesses looking to pay lower commissions to payment providers such as MasterCard and Visa.
However, payment infrastructure will need to improve as at present it can be a challenge to set up a digital wallet, or indeed for payments to be transferred to a retailer in a timely manner.
Philip Wiggenraad is Head of Research at tofugear. Prior to relocating to Hong Kong, Philip worked at Retail Week in London, providing insight on the technology and e-commerce strategies of the UK’s leading retailers.