The awareness of blockchain continues to spread across all corners of the world. The success stories of people making thousands and even millions of dollars has created a hype and interest, people have even taken out second mortgages to get on the blockchain currency wagon (Holder, 2017). Newscasters and YouTubers such as Philip de Franco have encouraged but also have warned their audience to become familiar and educated with the growing new currency.
This interest has not been missed by corporate industries, including retail.
Blockchain is already making its mark in the retail world. Retailers are already preparing for blockchain to impact their multi-trillion dollar industry by implementing new techniques and solutions such as accepting crypto-payment methods and blockchain loyalty programs.
To begin, one must understand what is blockchain. There are several excellent sources that explain it in further detail but to give a general summary: it is a continuously growing list of records, called blocks, which are linked and secured using cryptography. The most commonly known is the Bitcoin blockchain which is an online ledger that tracks and verifies every time virtual money (Bitcoin) is used on it (Kharif and Leising, 2018).
Below are the four ways that blockchain will revolutionize the retail industry.
Consumers, businesses and regulatory authorities are increasing their demand for retailers to be more transparent. Blockchain keeps an unforgeable log of all transactions, which provides an opportunity for retailers to show their clients the history of each product from start to finish.
Blockchain technology allows for transparent recording throughout the supply chain. This is applicable to fish, organic fruit and vegetables, clothing and much more (Ccgrouppr.com, 2018). Provenance is a startup powered by blockchain and open data and builds a software to enable retailers to empower customers with knowledge about the origin, journey and impact of the products they buy.
With the distributed ledger, blockchain also has immense value in the luxury industry to avoid counterfeiting. Consumers of luxury goods, using blockchain, can see the cost/background of the product to determine if it is truly a luxury mark or a fake. Start-up companies such as Tilkal are creating services to do exactly that.
A surprisingly small percentage of buyers keep track of their product’s warranties or are able to activate them when the need arises (Warranteer, 2018). With blockchain technology, retailers and brands can now grant their customers easy access to their product warranties.
Warranteer has created a service that moves product warranties from paper onto the cloud via blockchain, making them easily accessible and searchableby consumers. Consumers are able to maintain a virtual warranty wallet, saving retailers and manufacturers costly administrative work.
There is a high transaction fees for the retailer when shoppers buy products with credit cards. High transaction costs often bully a market, which reacts by increasing prices, translating into lower demands. By incorporating crypto-currencies, retailers will be able to increase profits or lower prices by cutting transaction costs.
This is one of the reasons why crypto-currencies are receiving so much attention, as they offer the opportunity to swap the “expensive” forms of payment for a cheaper option (Baird, 2017). Currencies such as Ethereum, Litecoin, or Vertcoin currently have fees all below $0.2 while cards such as Visa have a 1.43% — 2.4% fee and American Express can be as high as 2.5% — 3.5% (ValuePenguin, 2018).
This has spurred the creation of digital wallets that allow users to make payments and transactions with crypto-currencies. Some retailers are already accepting Bitcoin as a form of payment, including Subway in Buenos Aires, KFC Canada, some Wholefoods, and a number of Famsa stores (Chokun, 2018).
Harvard Business Review (2014) showed that by increasing customer retention rates by 5%, retailers could increase profits by 25%-95%.
However, current loyalty and reward programs suffer from a lack of simplicity and transparency, with the average U.S. household consumer is a member of 29+ programs (COLLOQUY, 2018). The result is a maze of point systems and redemption options, with unmanageable processes for exchanging points among program partners. According to a survey made by CodeBroker in 2017, over a thousand of shopper across the United States, only 24% of respondents said they always use the rewards they earn and 38% said they did not even know if they have a reward available.
With the help of blockchain, retailers will be able to unify the myriad of loyalty programs existing today into a single decentralized network.Shoppers can earn rewards in cryptocurrency. They can later redeem this cryptocurrency, with the same retailer or another one, as part of an exclusive offer that is tailored to them. This loyalty network thereby increases global shopper experience and customer loyalty.
With retailers turning to startups to find opportunities and solutions, whether it be guaranteeing luxury products or promoting customer loyalty, it is difficult to deny that cryptocurrency is here to stay.
What do you think about retailers using blockchain?
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