Blockchain Technology – A Rendezvous with Retail
Just as search engines, browsers and Google disrupted the Internet, and Napster and peer-to-peer file sharing changed the face of recording industry, the Blockchain technology plus its associated ecosystem will eventually force many organisations around the world to reconsider and change their traditional role and infrastructure. If the first generation of the digital revolution was Internet of “information” then the second generation — powered by Blockchain technology — is bringing the Internet of “value”.
Blockchain, as technology, came into being following the emergence of Bitcoin in 2009, accredited to a developer by pseudo name – Satoshi Nakamoto. Initial euphoria created was for Bitcoin, a Crypto-currency, governed by no government on planet earth; now finds the focus shifting to underlying technology called Blockchain. With increased awareness of the technology, the fintech and banking sector lapped it up first. As the awareness is growing about its usage and benefits, the technology is being seen as next tech revolution across sectors and industries.
Developments in India
“Disruptive technologies such as Blockchain and the Internet of Things, will have a profound impact in the way we live and work. They will require rapid adaptation in our workplaces.” –
Narendra Modi, PM of India.
India is not far behind in realizing the simmering potential that Blockchain holds within. India’s Finance Minister Mr. Arun Jaitely declared in his Budget speech of FY18-19 that the Government may not support Crypto-currency under present circumstances but it is considering adopting Blockchain technology in various areas of governance. Rightly so, India has seen the following key developments:-
- Last year, India’s first Blockchain consortium, Bank-chain, was launched for banks. India’s largest lender – The State Bank of India, is looking to explore the Blockchain technology solutions by the end of 2018.
- According to McKinsey Global Institute, distortion to India’s land markets is a barrier to faster growth, accounting for 1.3 percent of lost GDP growth every year. This is being arrested by the use of Blockchain technology in managing land records. At the state level, the Andhra Pradesh government is building a ledger system in collaboration with a Sweden-based startup ChromaWay, tracking digital information that will allow people to collatarise property. The neighboring state of Telangana too is digitizing its property documentation system.
- AP has also entered into a partnership with cyber security firm WISekey, making it a frontrunner in securing citizens’ data.
- Recently, the Maharashtra Government, one of the biggest data creators and data consumers, called upon industry leaders to devise ways of incorporating Blockchain technology in e-governance operations, with an eye on better efficiency, transparency, accountability and accessibility in data flow.
- The technology is seeing lot of traction within India majorly in Banking, Insurance and Cards industry.
- NITI Aayog too is currently working on a national strategy to leverage Blockchain technology and even create an India.chain project.
As an expert handling Blockchain projects in India, Dr. Chamria, visualizes a larger picture revolving around revolutionary technology. He sums it up, “Just the way India leads in IT Industry the country is set to lead the Blockchain Revolution as well. Owing to the fact that the governments as well as enterprises are embracing this technology, it is set to bring massive innovation and growth to the nation. India is a nation where population functions through interpersonal relations and verbal contracts, Blockchain will grow manifold, building a trustless economy and uniting the functions. At the moment, the Central and State governments are working to implement and leverage this technology across different departments.”
So what is Blockchain technology in real terms? A Blockchain can be described as an electronic append-only transaction ledger which can be written onto with new information, but the previous information, stored in blocks (hence the name), cannot be edited, adjusted or changed. This is accomplished by using cryptography to link contents of the newly added block with each block before it, such that any change to the contents of a previous block in the chain would invalidate data in all blocks after it.
Blockchain is consensus-driven. A large number of computers are connected to the network, reducing the ability for an attacker to maliciously add transactions on the network (unhackable & secure). Those adding to the Blockchain must compete to solve a mathematical proof. The results are shared with all other computers on the network, the computers or nodes as they are called in technical terms, connected to this network must agree on the solution, hence the term “consensus”. This also makes the work of appending data to the ledger decentralized and immutable. That is, no single entity can take control of the information on the Blockchain. Therefore, there is no need to trust a single entity (trustless), as there is a dependence on agreement by many entities instead. The beauty of this construct is that the transactions recorded in the chain can be publicly published and verified (public ledger), such that anyone can view the contents of the Blockchain and verify that events that were recorded into it actually took place (transparent).
Blockchain and Retail
Blockchain technology is poised to fundamentally alter the retail industry. Yet, many retailers have not taken the steps necessary to understand how the technology can help their business and what will be required to embrace Blockchain thinking and technology. Retailers should begin collaborating with external stakeholders and partners on joint projects to stress-test how and where Blockchain’s distributed ledger and shared infrastructure, in combination with smart contracts, can fit into their businesses.
Cognizant, in its report titled Retail: Opening the Doors to Blockchain, July 2017, state that 87 per cent of global retailers believe Blockchain is important to the future of Retail industry. As retailers struggle to maintain margins, the increased efficiency of Blockchain-enabled processes will allow retailers to reduce costs: 82 per cent of retailers predicted that Blockchain would yield cost savings for their organization of more than 2.5 per cent by streamlining operations and automating manual tasks.
Potential Use of Blockchain in Retail
Dr. Chamria’s opinion on Blockchain adoption in retail sector is, “The technology showcases immense potential and natural adaptability in retail sector where huge data is always in transit mode and needs uncompromising security.” On the aspect of managing customer data at store operations level, Dr. Chamria observes that managing store data is a tedious task as it stacks up continuously. He adds, “Blockchain helps in storing authenticated transaction data on consensus basis, where the ledger is distributed amongst all the participating members of the chain. This helps in maintaining customer data, transactions and stores in a foolproof manner.” On elaborating further on safety and security of financial data, Dr. Chamria points out, “Blockchain helps in establishing a tamper-proof records of sales and stock that will help better finance opportunities for retailers with lesser risk.”
Munesh Tomar also sees benefit of technology use in retail, “The technology allows retailers to rest easier when keeping track of the customer’s sensitive data and transactions, such as their credit card numbers.”
So retailers ought to know where this technology can be effectively used in their business area, few of those are below:-
Supply Chain and Inventory Management
Blockchain can manage supply chain and inventory for retailers with perfection. Technology enables retailers to keep track of goods from dispatching of product to final shipment and delivery. The data recorded once cannot be manipulated by any means, hence removing any chances of fraud or con, whatsoever. Retailers will know exactly when the product shipment will finally arrive at their store or even shelf, in some cases.
Munesh Tomar says, “While most Blockchain technology is still in its nascent stage of testing and development, experts say that the technology is poised to completely change the way retailers operate their stores and supply chain in as little as a couple of years’ time.”
Agrees Dr. Chamria, “Blockchain brings proof of provenance and streamlines the functionality of the whole supply chain, making it transparent to the participants and creates a trustless condition, where track and trace of the goods can be accessed to maintain and ensure quality and authenticity.”
Improving Trust and Transparency
With revenues around US$ 600 billion per year, counterfeiting hurts brands and consumers alike.
Imagine if a chocolate cake is purchased from a store, the Blockchain data will reveal when, where and by whom the cake was made. Moreover, it can even track individual ingredients used to make the cake. With the help of this data, it can be known whether the company is using fresh ingredients or not. It would ensure the fresh chocolate cake every time without worrying about selling expired cake. Thus Blockchain enables trust and transparency across entire value chain; the retailers will be able to prove their products are responsibly sourced.
A case in point: Babyghost, a young Chinese-New York fashion label, teamed up with BitSE – a company specialized in Blockchain, and VeChain – an anti-counterfeiting application, to showcase its Spring and Summer 2017 collection. The team of two, called FashTech, put unique IDs on the Blockchain which could verify if an item is genuine or not. This enabled label’s collection to be verified on the Blockchain to fulfill a bunch of possibilities: anti-counterfeiting, supply chain management, asset management and client experiences.
Payments and E-wallets
Blockchain serves as a trusted means of payments, thanks to valid Crypto-currency. Internationally, majority of retailers have already integrated Bitcoin as a means to payment processing; biggest advantage being that it is quite cheaper to process transaction as compared to credit cards. Blockchain allows retailers to accept Crypto-currencies along with digital records that helps streamline the refunds and return processes. While buying things that require huge money such as property or a car, technology can track the ownership and verify the resale of stolen goods. Internationally companies like Expedia, Overstock, and Newegg are already accepting Bitcoin as a payment method. However, India is not open to Crypto-currency usage as of now.
As far as payments through e-wallets are concerned, the role of a middleman, as Dr. Chamria sees it, is to ensure transaction validity and recieving of funds. He questions relevance of such a role, “This consumes not only time, but extra charges by the middleman to process the transactions. Blockchain in this area assists by eliminating the requirement of the middleman and creating a trustless and swift way of transacting. Each transaction gets recorded onto the chain, making them traceable and secure.”
Validity of Brands and products
Brand conscious consumers always fear if the product being sold is original or replica. At the same time there is always lurking danger of thefts of luxury items and resale or smuggling of stolen goods in the market, putting buyers in an unforeseen ethical and legal fix. Blockchain dispels such fears by allowing customers to track data and guarantee whether they are buying genuine products or not. The owner of the stolen item can be suitably tracked with the help of technology.
Automated Customer Services
Blockchain also allows use of smart contracts (a set of directives that are automatically fulfilled after the given conditions are met). It would benefit consumers in case of claims or settling conflicts without the need for court proceedings and documentation. The smart contracts are stored in a digital ledger, which requires no receipts, insurance papers or warranty documents on the part of consumers. Hence, Blockchain offers automated customer services without the need of any receipt or document. This capability of technology also improves the efficiency in vendor management for retailers and dealing with other contractual parties.
Munesh Tomar explains smart contract as pieces of software embedded into blockchain that store rules for negotiating the terms of an agreement; automatically verifying fulfillment and then executing the agreed terms. A smart contract behaves logically based on its algorithm and guarantees that all the agreed terms and conditions are fulfilled immutably. Parties in an agreement can transact directly without relying on each other.
Loyalty and rewards
It’s a near-certainty that the loyalty programs of the future will be tokenized. Most loyalty programs today create frustration and friction rather than improved customer experiences. Tokens can dramatically simplify the tracking and managing of loyalty points, rewards cards and paper or digital coupons. Additionally, Blockchain offers real-time liquidity, making points more easily swappable between consumers and across retailers. Retailers will still be able to reap the customer insight benefits, but in a more consumer-friendly way.
Retailers who choose to adopt Blockchain could expand loyalty partnerships without adding complexity, driving increased brand awareness and program adoption while making it possible for smaller retailers to compete effectively with larger competitors. A welcome side effect for many program operators will be a reduction in the balance-sheet liabilities associated with unredeemed points and rewards.
Advertising and consumer data
Consumers are increasingly fed up with perceived abuses of their personal data and regulators are beginning to ask hard questions about data security. Blockchain is expected to underpin the consumer data and advertising systems of the future, enabling collaboration between stakeholders and reducing fraud while also giving consumers greater transparency and control over their own data – how it’s used and by whom. For retailers who collect and retain consumer data today, getting ahead of this coming shift by embracing open and transparent Blockchain-based models will have a positive impact not only on operations, but at a public relations level as well.
Munesh Tomar says, “Blockchain based protocols could change how online ads are purchased, delivered, measured and valued. It is hard to determine true followers on social media channels such as Facebook, Instagram, YouTube, Twitter, etc., or hired clickers who artificially pump up advertising statistics so that their distributors can charge higher rates. Blockchain can help businesses determine if people viewing their ads are from target group of audience, and thus help them save substantially on their ad spends.”
Developing effective Blockchain Strategy
Developing a Blockchain strategy should not be seen narrowly as a technology issue, but instead should involve stakeholders from across the business at the outset. A Blockchain pilot project may demonstrate how the technology works, but it is even more important to learn whether the project is an optimal solution for the business problem being addressed and how a full-scale implementation would impact the organization’s business processes and technology. Retailers need to develop a cohesive Blockchain strategy rather than taking on projects in a piecemeal fashion. Today, Blockchain involves more theory than practice so retailers need to make it real, identifying con¬crete business problems that the technology can address and tangible benefits it will generate. For each use case, the organization should:
- Specify the actions needed for implementation.
- Assess the resources required, create a process map and develop an implementation guide.
- Determine KPIs that can be used to evaluate success. The KPIs will not only allow the organization to assess performance but can also help to communicate value to senior management.
Increased demand for Blockchain developers
The banking industry will derive US$ 1 billion in business value from the use of Blockchain-based Crypto-currencies by 2020, states a Gartner report. The combined value of Crypto-currencies is US$ 155 billion worldwide; and is estimated to increase to represent more than half of worldwide Blockchain global business value-add through year-end 2023, which means more scope for jobs – Blockchain Developer, Blockchain Consultant, and Blockchain Architect. According to a recent TechCrunch news report, the demand for Blockchain developers is on a rise globally. Even in India, cities such as Bengaluru, Mumbai, Hyderabad and Pune have seen a rise in demand for Blockchain developers. As per an Economic Times feature of July 2017, technology profile of Blockchain developers in India is among the ‘top most in demand’.
Talent pool creation
The popularity of Blockchain has moved from Crypto-currency to business applications across industries such as insurance, finance, supply chain logistics, digital identity, healthcare and public sector; sparking rise in the interest in Blockchain technology among students. Sensing the growing demand for Blockchain professionals, IBM has come up with a free certificate course on Blockchain technology for students in India. The technology giant has partnered with Indian e-learning platform National Programme on Technology Enhanced Learning (NPTEL) – a JV of some of the most reputed engineering colleges in India (IITs and IISc), to offer a 12-week online course titled “Blockchain Architecture Design and Use Cases”. The programme is funded by India’s education ministry. A similar course put up by University of California Berkeley witnessed nearly 8,000 students signing up.