What is blockchain and what can it do for retail?

Most people associate blockchain with Bitcoin, the digital currency (or cryptocurrency). This form of money is beloved by those wishing to see money free from government control or criminals trying to hide their assets away from law enforcement. But the technology behind these digital currencies could also help companies improve their operations.

Blockchain is a decentralised and distributed digital ledger that is used to record transactions. Transaction records cannot be altered or changed after they have been added to the blockchain.

How can it be used and where?

According to Martha Bennett, principal analyst at Forrester, in terms of proof of concepts and pilot projects, there’s quite a lot of activity around supply chain use cases, mainly around product tracking, and tracing back products to their source.

“This often goes hand-in-hand with the aim of proving provenance, i.e. ensuring that the physical goods are what is stated, and haven’t been tampered with. The latter remains a challenge, as it’s necessary to address all potential points of fraud along the supply chain. In short, if there’s fraud today, a blockchain-based system can’t solve that,” she says.

She says there are opportunities for retailers to use blockchain in their business – supply chain visibility and traceability of goods is a key use case.

“For large multi-national retailers, internal use cases (e.g. cash management) can also be valuable. Any use case that currently involves a lot of inaccuracies, wasted time and friction because multiple parties are dealing with divergent information and systems when all should be working off the same data,” says Bennett.

Decreasing fraud and improving security

Blockchain can help ensure that retailers’ products are legitimate, according to Kristine Kirby, managing director of digital at consumer strategy consultancy Pragma. She says that tools, such as Block Verify, can deal with the issue of counterfeit goods and is a great example of blockchain decreasing fraud.  

“Simply, it’s a blockchain-based anti-counterfeiting solution that goes far beyond a handbag or watch. It can be used in many retail areas, such as pharmaceuticals, luxury items, diamonds, and even electronics. Goods can be certified with blockchain’s digital ledger record, so that stolen merchandise is more easily recorded,” she says.

Ensuring food safety and compliance

Trailing in China and the US, IBM and Walmart demonstrated that blockchain could be used to track a product from the farm through every stage of the supply chain, right to the retail shelf, in seconds instead of days or weeks.

“Blockchain technology enables a new era of end-to-end transparency in the global food system – equivalent to shining a light on food ecosystem participants that will further promote responsible actions and behaviours,” says Frank Yiannas, vice president of food safety at Walmart. “It also allows all participants to share information rapidly and with confidence across a strong trusted network. This is critical to ensuring that the global food system remains safe for all.” 

Game changer

Rupert Colchester, IBM blockchain leader, says the technology is a total game changer for some of the problems around supply chain that traditional technologies have not yet been able to tackle.

“By building a trusted network of protected transactions, all members of the supply chain have visibility of engagement and as such, accountability becomes a lot more comfortable. Supply chain provenance is an increasingly important purchasing decision factor for consumers with more of an ethical conscience,” he says.

“If they can buy with a greater degree of confidence that their product has been sourced, developed and distributed ethically and within the bounds of the Modern Slavery Act, brand loyalty will only benefit.”

In the case of organic, blockchain technology can play a role in reinforcing the value of certification, what it means to be organic, and enable certified organic producers and processors to increase engagement and connect more directly with shoppers. 

“This implicated much higher levels of trust from shoppers in the food they buy, as they can literally see where it has come from; and for organic farmers, it will enable them to be visible to their customers and offer them opportunities to develop their businesses using this technology to communicate more directly with consumers,” says Hannah Turner, business strategy director at Soil Association Certification.

She adds that with organic certification currently the only legally required, fully inspected and audited certification, blockchain technology is bringing the story of what certification means to the point of sale. “Linking Provenance’s blockchain design with Soil Association Certification’s databases, a product’s journey enters the blockchain in real-time. Shoppers are able to see information including the certification’s validity, the organic criteria met by the product, a map of its journey, and even photographs from the farm,” adds Turner.

The future

According to Forrester's Bennett, in the next 12-18 months, we’ll see more proof of concepts and pilot projects.

“It’s the results of these that will determine what happens next. Let’s not forget, nobody has yet worked out the governance model for a blockchain-based network of ecosystem partners,” she says.

Further ahead, Blockchain will in many ways not be as visible to a customer, says Kirby. She adds that besides the areas already stated, it can also be used – looking ahead maybe 18 months – proof of ownership and retail: “And that can span anything from a handbag to a piece of artwork. It also lends itself to holding warranties, so that idea of less paper in the future can slightly become a reality.”