Blockchain: not a ball and chain for retail

Over the last year, many business leaders up and down the country will have heard some pretty bold claims about ‘blockchain’ and how it has the potential to transform their companies. Numerous commentators have talked about the new technology, advocating the transformational power of everything from cryptocurrencies to smart contracts. As blockchain gains traction amongst businesses, many tech-savvy retailers and consumer-facing businesses are scrambling to find the benefits. However, as with most early stage technologies, the hype around the technology is blurring what is important. Before jumping in with two feet and investing heavily in blockchain, business leaders need to consider the fundamentals: what is blockchain and how can it benefit my existing business strategy?

Blockchain is a complex technology requiring specialist skills and knowledge to build and use. However, the concept on which the technology is built is something that all business leaders should be able to understand. Blockchain is a digital, decentralised, distributed ledger that provides a way for information to be recorded, shared and maintained by a community (whether private or public). Using cryptographic principles, the technology acts as a storeroom for data and information which is recorded and shared through a peer-to-peer community. In short, blockchain allows everyone to keep an eye on what is going on in a system, without giving any single person control over the information.

The digital and secure nature of blockchain can provide benefits and opportunities across the retail value chain, increasing trust, transparency, reliability, and efficiency of operations. Digital disruption and changing consumer behaviour is revolutionising the retail industry. The pace of technology change and shifting consumer expectations means that in 10 years, the industry will be markedly different from what we see today. Retail leaders are acutely aware of the need to be more integrated and offer on-demand and personalised services that maximise the benefits of technology and meet changing consumer demand. In order to achieve this, there must be investment in new technology and, without question, blockchain has a major role to play in underpinning this transformation.

In fact, we are already seeing this. A number of organisations have already identified the potential use and benefits of blockchain technology to solve complex problems and generate business opportunities. All of which is leading to investment in the technology. In one survey, 42% of executives in the consumer products and manufacturing industries are planning to invest at least $5 million into blockchain in the coming year.

As you might imagine, there are numerous potential blockchain use cases for the retail sector, and some retailers may struggle to decide where they should focus their attention when it comes to blockchain investment. Broadly speaking, these can be pigeon-holed into three main categories of blockchain: consumer, supply-chain and payments and contracts.

First, there are a number of blockchain applications that are aimed at improving and protecting the consumer experience. Blockchain-powered smart loyalty programmes can securely capture and verify customer details and behaviour for more personalised targeting. Similarly, the technology can be used to tag products and verify their authenticity in order to prevent the risk of selling or possessing stolen or counterfeited goods.

As well as consumer applications, supply-chain efficiency can also be significantly improved through the adoption of blockchain technology. Blockchain applications could provide an end-to-end supply-chain solution to enable manufacturers to order, sell, trace and pay for goods once they arrive at their destination, seamlessly. Connected IoT sensors and smart devices could measure the condition of transport containers and record information via blockchain to inform parties when goods may have been damaged, which would be particularly useful for perishable goods, such as in the grocery sector.

Finally, blockchain also has the potential to improve transaction processes and ensure the validity and implementation of contracts. For example, a blockchain-powered payments system could facilitate both B2C and B2B payments processes.

Blockchain has the ability to track, trace, and authenticate products, record contracts and transactions and guarantee the accuracy of information. Significantly, the benefits can then be passed on to the consumer in the form of savings, increased trust, and safer, higher-quality products.

The benefits look appealing, but as is the case with any new technology, there are a number of pitfalls that will need to be negotiated before blockchain can be incorporated into new and existing business functions. Perhaps most crucially, decision-makers will need to have a good understanding of which areas of the value chain will benefit most from the new technology, and how easy it is to implement. Whilst there is a strong rationale for incorporating blockchain right across the retail chain, the reality is that this would require vast resources upfront. As a result, prioritising the investment will be key.

Naturally, each individual application of blockchain will vary in terms of ease of implementation and the returns on investment once implemented. Projects that offer greater value relative to investment in the short-term will obviously be more attractive to business decision makers. Without question, there are some areas that will see rapid value gains based on relatively simple implementation.

But not every business will have the structures in place to benefit immediately from high-value blockchain opportunities. Therefore trialling projects and exploring opportunities will be an important step on the road to fully integrate blockchain into a business. In addition, it is likely that organisations will also need to shift their thinking and collaborate with peers and competitors like never before in order to build and launch blockchain systems that support common and shared processes. Blockchain is fundamentally designed to solve problems that occur in networks involving many different parties, so the value gained through working together is likely to outstrip that of a single company using blockchain in isolation.

As we enter the ‘age of blockchain’, the retail and CPG sectors are particularly well-placed to capitalise on this technology and revolutionise the way many processes are conducted. Businesses that do not consider how blockchain could help their operations may be at risk of falling behind competitors. Retail and consumer goods organisations need to act now and plan for future blockchain adoption, or risk being left in the dust.

For more information on blockchain, read Deloitte’s research: New tech on the block: Planning for blockchain in the Retail and Consumer Packaged Goods industries