Whether you believe in bitcoin or not, whether you think blockchain is a panacea or folly, you can’t deny that there is just an immense amount of activity going on in the space. It might not be all positive activity – like the almost-daily news of yet another theft from a crypto-vault. But for every negative, there seem to be at least three positives – some new ICO (though those seem to be getting curbed by financial markets), new patents, and an uptick in announcements of actual pilots or implementations. I originally wrote about four places blockchain could actually deliver value in the retail industry.
Since then, the list has expanded dramatically:
Digital Marketing Authentication
What it is: Proving that users are real and not bots, proving the identity of advertising channels so that brands don’t pay for ghost sites or for advertising on sites that go against what the brand stands for, and validating stories to prevent the spread of fake news. This article lays out the details behind all of these benefits and more, from a social media advertising perspective.
Example: IBM and Unilever tested [members only] blockchain for media buying
Pace of change: Very high. These are real problems for advertisers, in a channel where they would like to invest more money but fear both ad fraud and also looking bad. IBM isn’t the only company trying to figure this out, and Unilever isn’t the only big advertiser who would like to see a solution here.
WOM/Influencer Marketing Contracts
What it is: Smart contracts that pay influencers for word of mouth or affiliate marketing. The smart contract cuts down the cost of making the contract (and theoretically makes sure all parties participating are “real” via some of the digital advertising challenges noted above), so that a wider market of smaller influencers and smaller business can participate.
Pace of change: Low. It’s an interesting idea, and certainly there are already marketplaces for brands to find influencers with whom to partner. But the pain point here is low, especially compared to cleaning up digital advertising.
What it is: Using blockchain as a way to reward consumers for their transactions – or potentially actions they might take. I’ve heard rumors of retailers who have created loyalty-based offers that consumers have figured out how to game, and also (mostly in the credit card or airline miles rewards programs) cases where a consumer’s points balance was stolen. Theoretically, blockchain would make that kind of fraud more difficult. Outside of that, it’s almost more about using cryptocurrency as a form of loyalty reward.
Pace of change: Low. Qiibee isn’t the only company out there trying loyalty programs based on blockchain. In their case, it can also serve as a kind of affiliate program, where coins I’ve earned at a restaurant could be redeemed at a fashion retailer, for example, but there are a few very large, successful affiliate programs out there, and then not much else.
What it is: Creating a way to control the distribution and redemption of coupons. Could also be the thing that connects coupons and digital wallets for redemption, leading the way to truly digital coupons.
Example: MasterCard’s patent for a coupon system based on blockchain
Pace of change: Low. MC’s patent is interesting, but there are a lot of parties involved in coupons, which has hampered the adoption of digital coupons, and blockchain isn’t going to suddenly align all those parties’ interests. But the patent may serve as a notice to other parties, like the companies that make money issuing and redeeming coupons, other payment networks, and other digital wallet providers, that they need to not get left behind. So this one has the potential to speed up more so than many of the others.
Consumer Demand Contracts
What it is: A smart contract created by a consumer, who is looking for multiple parties to fulfill the need. The example below is really more travel-focused than retail, but it could be something that transfers to retail quite easily, especially for complex purchases. Two potential examples: a consumer creates a smart contract that says, I’m redesigning my living room, and here are the general outlines of what I want it to look like. Give me bids on any or all of the pieces, and when I accept your bid, you will automatically get all the details you need to fulfill the contract, including payment.
You could get even wilder and crazier: Here is a list of all the new clothes my child needs for back-to-school. Six pairs of jeans, 3 long-sleeve dresses in various colors, etc. etc., all in a size 10. Retailers bid on some or all of my contract, and if I accept your bid, the smart contract automatically handles placing the order, making payment, and checking to make sure I get the items.
Example: MasterCard’s patent for a consumer travel itinerary smart contract.
Pace of change: Low. This one is way out there. MasterCard’s patent applies to travel, and that makes sense. I’m not sure that you could make it work as easily for the living room or even what amounts to a capsule clothing purchase, and while I can come up with the ideas, I haven’t seen anyone try to put them into practice yet.
What it is: A way for consumers to own all their own data with an easy way to share it with retailers. There is some question as to whether retailers would actually pay consumers for this privilege (micropayments), or whether consumers would just opt in to share whatever they designate. The upside for consumers is more control, because they basically authorize who to share it with, and could potentially decide to revoke that sharing if they stop doing business with the retailer.
Example: Shopin is by far the front-runner here. IOTA has created a data marketplace where individuals can post streams of data coming from sensors and others (individuals or companies) could subscribe to a data stream. A marketplace like that might lead to consumers opting to share the contents of their refrigerator publicly to someone who is willing to pay to subscribe to that – theoretically so that they could market to that consumer based on their on-hand food items.
Pace of change: Medium. With data breaches right and left, GDPR, Cambridge Analytica and Facebook, it seems that the general public’s acceptance of life in a data wild west is getting smaller and smaller. Personally, I love the idea of a shopper record that I own and control, with a method of deciding which retailers I want to share data with – and explicitly what to share and how long they can have it and what they can do with it. The IOTA concept is farther out, and today focused on things like weather sensors. But as more smart devices come on in smart homes, what an interesting way to put monetization of those data streams back into the hands of consumers.
What it is: At this point, the most obvious use-case for blockchain. It’s almost passe. Consumers pay retailers with cryptocurrency.
Example: 13 retailers that accept bitcoin today.
Pace of change: Low. I think digital wallet security needs to improve drastically before retailers will feel comfortable adopting this on a wide scale. Add in the crazy valuation fluctuations lately, and there are few hard currencies that face the risk to the last person holding the coin that cryptocurrencies face. It has taken years to get to thirteen retailers.
What it is: A blockchain-based way of reporting sales to taxation authorities. This could span retailers reporting sales that they owe sales taxes on, or retailers reporting sales to consumers, who might then turn around and claim deductions from the government. Taxation participation is fairly high in mature markets, but it’s a problem everywhere to one degree or another. It’s been a big problem in Italy, for example, and worse in countries where government reach is weaker.
Example: Tencent and Shenzhen’s taxation tracking.
Pace of change: Medium. China is tackling a somewhat unique problem within the idea of taxation, but if their pilot yields better participation, you can bet all the taxmen will sit up and pay attention, everywhere.
What it is: A way for consumers to sell merchandise on the second-hand market, while demonstrating the authenticity of their purchase. It’s both a way to put the kibosh on gray market goods, while also increasing trust among buyers that the sellers are legitimate.
Example: Walmart’s patent for customer purchase tracking.
Pace of change: Low. It’s an interesting idea, but supply chain tracking and product provenance on the manufacturer side will take off first, and may well extend to cover this use case, simply with a consumer closer to the tail end of the chain. Which product would you want to buy? One that shows a provenance all the way from raw goods to the last consumer to purchase it? Or one that begins and ends with a consumer purchase?
Product Provenance / Counterfeiting
What it is: Using blockchain to track every company or entity involved in getting a product from manufacture to market. The intent is to demonstrate that the product is genuine, and make it much harder for gray market sellers as well as counterfeiters.
Example: IBM Trustchain for jewelry
Pace of change: High. Jewelry isn’t the only luxury good where pilots are happening. Eliminating counterfeiters is a high priority in luxury. And consumers increasingly demand peace of mind in product provenance even when it’s not a luxury item – so that they know it didn’t come from a conflict region, or from farmers who are treated unethically.
Supply Chain Tracking
What it is: Using blockchain to track all of the actions taken across multiple parties to deliver goods from source to destination. The expected benefits include far less paperwork and an increase in the speed of conveying information across the supply chain, both for all parties to get updates, and to expedite the movement of goods through customs in import situations.
Example: Walmart’s food safety blockchain.
Pace of change: High. The Walmart food safety blockchain is already live, and there are multiple brands and retailers participating. There’s a lot of overlap/concurrence with product provenance, which helps things along.
What it is: Blockchains designed to accept the kind of data generated by RFID. The idea is really to make it easier for IoT devices to write to blockchains, which is seen as a way to make supply chain and inventory tracking easier (see Supply Chain examples above).
Pace of change: Medium. In some ways this feels like simply trying to combine two buzzwords in order to create something even more buzzworthy, but the reality is, RFID and IoT in general both need some specialized systems at the edge of networks to figure out how to sort out the signal from IoT noise. If supply chain is going to be taken over by blockchain, then IoT is going to need to talk to it.
What it is: A smart contract governing the sourcing, manufacturing, and delivery of goods. With blockchain, companies could attach payment promises to achieving objectives – the delivery of a design, the delivery of goods, etc. In sourcing retail goods, anything that deals with importing from other countries also deals in letters of credit and specified currencies, which the cryptocurrency aspects of blockchain could also make easier.
Smart contracts are a fascinating, and less well-covered, aspect of blockchain. Basically, it just means that the contract’s terms get set up in advance and then as conditions are met, execute automatically.
Example: Plantoid. This is not a product contract in the traditional sense of a retailer buying tens of thousands of units of a shirt or something like that, but it is a really interesting exercise of what a smart contract could be. People make crypto payments in order to get the plantoid (a manufactured art object) do its intended action – light up, shake, bloom, something like that. When the plantoid has collected enough currency, it puts out a new contract to build a new plantoid, which will then collect payments for performing whatever its intended function will be. There’s more to it than that (I recommend the article in the link), but that’s the gist.
Pace of change: Low. There are a lot of parties who want this to get better, but all of the challenges of sourcing products, especially from regions of the world that are less technology-enabled, still exist, and blockchain alone is not going to fix them.
What it is: Similar to the smart contract for products, retailers could set up smart contracts that governed the site selection and ultimate construction of a store. Retailers could even create a smart contract that let consumers bid on/show their support for a local store such that if a certain level of support was achieved, the retailer might commit to build the store. That could be based on actual online sales delivered to a geography, or a certain level of online behavior coupled with sales.
Example: This isn’t a perfect fit, but in addition to the Plantoid example above, here’s an example of a movie that was distributed via blockchain, where consumers were rewarded for viewing the movie and for doing things like posting a review. Combining these two ideas together (plantoid and consumer behavior) would give you the customer behavior that might trigger an activity like building a store.
Pace of change: Very low. I haven’t found an example of someone even attempting something like this. But I’m sure there will be an example in the future.
The Bottom Line
There are many industries that stand to benefit from blockchain. Retail’s potential opportunities are getting to be a pretty long list – and getting longer every day.