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Blockchain in Retail: Building a new level of consumer trust

Cheerleaders for blockchain say the technology will be as disruptive for retail as the advent of online shopping. [Ed.: Blockchain is a digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded and stored chronologically and publicly.]

It’s still early to know whether or not that will turn out to be true but, if it does, the key contributing factor will be because blockchain enables retailers to provide greater transparency than ever before.

We are, for example, beginning to see how blockchain could transform retailers’ supply chains to the advantage of brands and consumers alike. Consumers want to trust retailers’ promises about the provenance of the products they sell, but recent scandals – from tainted food, to concerns about unethical factory practices – have eroded faith in the industry.

Every link in the chain
The distributed ledger technology (DLT) that underpins blockchain is helping retailers confront these challenges. The premise behind DLT is that is achieves “trust” via distributing consensus without a central authority. This implies keeping all parties informed and jointly agreeing on if an event occurred or not. Thus, it provides a means with which to track every item from the first link in the supply chain to the last, forming a trusted and immutable record that has been verified and agreed by multiple parties, rather than one central authority.

Blockchain can also be used to foil attempts by criminals to cheat the system by swapping genuine products for fakes. By harnessing internet of things and sensor technologies, retailers can encode blockchain into the physical world to secure traceability of goods in real time.

The potential benefits of these advances go well beyond the immediate problems that retailers hope blockchain can solve. For example, blockchain offers an opportunity to augment retailers’ data management, driving higher-quality actionable insight. It can also help deliver improved consumer safety, as investigations into food-borne illnesses can be undertaken in seconds rather than weeks.

The technology can also deliver significant supply chain efficiencies. Retailers’ supply chains represent the sector’s biggest cost center, partly because they are mired in paper documentation such as customs declarations – which can be completed instead via blockchain applications.

Blockchain in practice
Blockchain applications are far from theoretical: we see industry leaders and early adopters testing solutions and implementing blockchain tools to tackle previously intractable problems.

In the business world, retailers deal with known parties such as vendors, suppliers, trading partners, shippers etc. Thus a “permissioned blockchain” is used, which can be significantly more efficient than the one used within Bitcoin.

For example, a consortium comprising AB InBev, Accenture, APL, Kuehne + Nagel and a European customs organization has successfully tested a blockchain solution that can eliminate the need for printed shipping documents and save the freight and logistics industry hundreds of millions of dollars annually.

An international shipment of goods for companies in areas such as the retail, consumer goods or automotive industries typically requires more than 20 different documents, many of which are often paper-based, to enable the goods to move from exporter to importer. Across these documents, up to 70 percent of the data can be replicated. The document heavy approach limits data quality and real-time visibility to all parties involved in the trade and this can also delay the financial settlement on goods.

The consortium tested a solution where documents are no longer exchanged physically or digitally but instead, the relevant data is shared and distributed using blockchain technology under single ownership principles determined by the type of information. The solution can speed up the entire flow of transport documents, reduce the requirement for data entry by up to 80 percent, simplify data amendments across the shipping process, streamline the checks required for cargo and reduce the burden and risk of penalties for customs compliance levied on customers.

British business Provenance offers a blockchain solution that enables retailers to track a product through every stage of the supply chain in real time, and to build a verifiable and trusted story for each product that can be shared with consumers, in-store or online.

Global retail giant Walmart, meanwhile, has begun trialing blockchain tools with food producers. Alibaba has launched an initiative with partners including health foods retailer Blackmore to use blockchain to combat food fraud. And, at JD.com, blockchain underpins plans to enable customers to check the provenance of meat sales, with a tool enabling them to monitor their meat from the Australian farm where it was reared, all the way to their doorstep.

There will be many more examples of blockchain applications across the retail sector, as well as moves towards other use cases. Payment systems are an obvious area to explore, along with customer loyalty programs.

Overcoming the challenges
Realizing new value from any emerging technology has its challenges, and blockchain is no exception. One issue is that blockchain requires a consortium of partners to agree common standards – not least on which “block” they will use. Over time, retailers are likely to coalesce around agreed permissions, but this will not happen overnight, particularly as large retailers as well as specialist blockchain start-ups are working on solutions in tandem.

Similarly, adopters of the technology will need to have first connected their IT functions, which are taking the lead in trialling the technology with the customer-facing functions of the business. The technology not only has to work; it must also be accessible to consumers.

It is also likely that retailers will need to secure regulatory approval for some blockchain initiatives. Technologies connected to food safety, to give one example, will attract regulatory attention, as will many projects in the payments space.

Conclusion: The incentive is real
The benefits that blockchain offers are attractive enough to incentivize a wide range of stakeholders to work together. The prize is large and multi-faceted: improved transparency, reduced fraud, greater safety, heightened efficiency and, above all, enhanced customer trust.

Industry leaders are seizing the initiative today, focusing on what blockchain could achieve rather than what could potentially go wrong. In our view, the most successful ventures will be those where retailers pinpoint the problem they want to prioritize before looking at how blockchain might help.

If brands can master this still-young technology, perhaps blockchain will indeed be transformational for the industry– the odds, from here, look good.

Vish Ganapathy is managing director and retail technology lead at Accenture

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