What will Blockchain Mean for Retail?

BlockchainBlockchain is a digital ledger. It’s a distributed database that allows trustworthy and permanent record keeping. Each record, or block, is timestamped and links back to a previous block. Blocks are permanent once they are created because each transaction is recorded across a number of computers. This systematic process creates the chain of records which is considered permanent and trustworthy.

The idea behind blockchain has existed since the 1990s, however it was first practically conceptualized in 2008 with the bitcoin. Bitcoin is a peer-to-peer digital currency system that uses blockchain to record transactions. A reporter for Financial Times made the comparison that “blockchain is to bitcoin as the Internet is to email.”  According to IBM’s vice president of blockchain business development and ecosystem, Brigid McDermott, blockchain is “all about making sure data is trusted, immutable, and transparent.” For McDermott, the applications and implications of blockchain are seemingly endless.  

Many technology companies, businesses, and government agencies are testing blockchain’s potential utility in finance, healthcare, business, stocks, non-profits, and to track just about everything – including people. Of course, there are many implications for the retail industry. McDermott explains, “When you’re interacting and transacting with suppliers, vendors, and carriers one of the problems we have is an asymmetry of information. Things get convoluted between different organizations and different sources. Blockchain ensures everyone is looking at the same thing at the same time and all parties can trust the information is 100 percent accurate.”

There are several ways in which the retail industry can directly benefit from blockchain:

1. Improved Supply Chain Clarity.

Blockchain can provide transparency throughout the supply chain from source to consumer. McDermott explains retailers can track not only their shipments but individual containers. They can also have access to information on how quickly or slowly similar products are moving throughout the industry, for better inventory management and trend-spotting.

2. Consumer Confidence

Knowing how products were made and sourced is increasingly important to many consumers. Blockchain can serve as a trustworthy method for shoppers to see where an item is coming from McDermott explains, “For example, if I have this diamond, is it ethically sourced? If I have this mango, is it really organic? Blockchain allows you to look back and be sure that your information is 100% accurate.” This will also help the luxury and designer goods market ward off knockoffs. 

3. Democratization of Data

McDermott tells Independent Retailer that because blockchain was created on the idea of building trust, it’s a great way to democratize data throughout the industry. “Right now there is information that is difficult for small players to get to because it’s in very siloed forms. Sometimes you have to pay for big chunks of information just for one thing. Ideally, this really does allow everybody to participate more effectively in global trade.”

The technology behind blockchain is not exactly cutting-edge. However, the implementation process has been slow. McDermott describes it as similar to the adoption of the telephone. “If you’re the only person who has a phone, then it’s a great paperweight. If you and your best friends have phones, then that’s something. If everyone has a phone, then we’re at the network we have present day.” She continues that for the blockchain network to be most effective, you really want everyone to participate to receive the ultimate value. Today, many larger companies, such as IBM® are piloting blockchain programs to get the momentum running for widespread adoption. McDermott concludes, “At the end of the day, the idea is to remove inefficiencies within the system to save companies trillions of dollars while also helping businesses run better.”