Firstly, let’s split the “business problems” into three main categories. This way it will be easier for us to figure out which problems can be solved using blockchain technology and how exactly this technology could solve these problems.
Thinking in such a manner we can create 3 groups of business problems:
Business Logic Issues:
- Customer/Supplier Relationships;
- Product and Service Availability and Inventory;
- Crowdfunding (ICO).
Financial Transactions Issues:
- P2P Lending;
- Tokenization of Assets;
- Data Storage;
- Decentralised hosting.
Let’s start with one of the examples from the Financial Transactions group – P2P lending. With this method, a borrower is allowed to get money through a loan without guarantees or security from a third party such as a bank . Blockchain has made it possible by creating peer-to-peer lending using decentralisation and smart contracts.
All transactions, processes and conditions are recorded on blockchain and backed by the immutability of its records. Therefore, all data is transparent and available for everyone to see: what amount was lent, when it was lent, who lent the money, at which interest rate etc.
All information can be seen in one place not only by borrowers but also by lenders. The process is automated with the use of smart contracts that allow lending parties to follow preset rules if certain conditions are met . For instance, a certain loan will only be issued if there are at least 5 persons willing to provide their funds. As soon as this condition is met, people will get notifications about further steps in the process without any third parties involved.
Example from Business Logic group – Product and Service Availability and Inventory. When a retailer enables to use blockchain for their business it provides following advantages:
- Transparency of product existence, pricing, condition etc.;
- Ready information about goods without the problem of double selling;
- In case of selling used item there is no warranty issue anymore because it cannot be sold twice;
- Clear overview about where the product currently is located in real time mode.
These things can be achieved by using so-called smart tags that contain automatically generated IDs which can be read by RFID or NFC readers . The technology automatically creates unique identifiers while the product is manufactured, so these identifiers won’t be duplicated while producing the same product.
Blockchain allows retailers not to wait for products to arrive at the store – they know where they are and if there is any potential risk of the product being damaged during transportation, etc. When a store finds out that a certain item has already been sold, it automatically removes this product from their inventory.
Furthermore, it can also help with recalling goods in case of a recall order or warranty reasons by checking which items were sold and which ones were returned or repaired .
Another example from Business Logic group – Crowdfunding (ICO). ICOs have been around for quite some time now as different projects tried to use crowdfunding as an alternative way of raising money through issuing their own tokens that would be used within a particular dApp or sold to others in order to finance their own projects.
However, crowdfunding is based on trust that creators of the project would actually implement it . That’s why there were many cases when people lost money because they didn’t see the promised product or got something completely different than intended .
But with blockchain-based ICO’s you don’t need to pay for what you don’t get since everything is recorded in smart contracts and all transactions are made with the use of cryptocurrency. It also doesn’t allow anyone (not even creators) to modify conditions in order to cheat investors .
As soon as a set goal has been achieved, payments are automatically made in full amount otherwise transactions remain paused forever until goals are met.
To sum up, blockchain technology provides many benefits to e-commerce retailers compared to traditional business . Transparency of product existence, pricing, condition etc. are just the top of the iceberg. There are great opportunities for establishing your own cryptocurrency with its own marketplace or getting funding for creating one’s own application on Ethereum platform which is secure and transparent by default.
This is not possible through traditional ways of running a business due to high transaction fees, ability to manipulate marketplaces etc. Blockchain might just be the next big thing that could change the way how things work nowadays in this industry
Many applications can be created with blockchain based architecture such as:
- IoT applications;
- Real estate transactions;
- Health care applications;
- Food traceability systems.
One of practical use cases is supply chain management that was probably the earliest blockchain application in retail. One example is Walmart that started testing food safety by tracing pork in China using blockchain technology allowing it to track each step within 2 seconds . This also brings transparency for consumers allowing them to see the full history about meat’s journey from farm to table, including its processing time and temperature along with where it has been shipped or stored .
Another great case study comes from Nestle, a company that partnered with IBM to develop a new open ledger network called TrustChain which tracks all kinds of resources connected to the food industry starting from raw materials up until finished products are sold in stores . Blockchain helps reduce inefficiency in supply chains allowing to save money and time, while providing the highest level of product freshness .
As it has been mentioned before, there are a number of benefits that blockchain technology could bring for the retail industry . For example, there is no need to trust any third parties or middlemen when making transactions. At the same time if something goes wrong (shopping data changed, goods damaged during transportation etc.) retailers can prove who was responsible for it by showing transaction history.
Furthermore, all kinds of testing could be done without access to the store’s physical location by using mobile devices or virtual point-of-sale systems. In addition, the value of e-commerce retailers will increase in reliability and trustworthiness among consumers.
One of the most popular blockchain networks is Ethereum that allows developers to create their own apps (smart contracts) and has its own cryptocurrency called Ether. This network provides many opportunities for businesses such as building secure marketplaces, establishing loyalty programs etc.
However, there are also some challenges when it comes to implementation of blockchain technology like:
- Limited number of developers with blockchain expertise;
- Learning curve since new concept needs to be adopted by corporate culture;
- All kinds of regulations and fees related to cryptocurrencies’ use.
Despite all these drawbacks we believe that blockchain technology can open a lot of new opportunities for current retail market players.