Blockchain: A magic wand to omnichannel retail challenges?

Associate Professors Joline Uichanco, Stefanus Jasin and Debjit Roy offer their expertise to discuss how blockchain can be used to solve traceability, trust, and transparency challenges faced by omnichannel retailers

The word ‘omnichannel’ is no longer alien to those familiar with the retail industry. In the last few years, driven by fierce competition from giant e-commerce retailers, many traditionally brick-and-mortar chains such as Macy’s, Walmart, and Target have been leading the way towards providing extremely convenient shopping experiences for their customers.

Today, customers of omnichannel retailers have a choice in not only the mode of purchase but also in the mode of receiving the product. They can buy through the channel of their choice such as a physical store, online, or on the phone and receive their products via shipment, store walk-ins, store pickup, or secured lockers.

Omnichannel customers have also become accustomed to an unprecedented amount of information regarding the products they buy. This includes in-store availability information, estimates of delivery times, and the visibility of product movement throughout the supply chain. Despite this, there is still a demand for increased visibility, and retailers that are able to provide this are at a competitive advantage.

For instance, many customers are wary about the origin/authenticity of the product, especially for fresh produce and high-value luxury goods, while others are socially responsible and prefer to use products that are compliant with fair trade practices at all nodes of the supply chain. In sum, to win brand confidence of an omnichannel customer, retailers need to build trust in their relationship by offering a transparent and traceable product supply chain. A quick reflection on this challenge reveals the need of easy access to either real-time information or a reliable record of product movement and/or availability in the supply chain.

Can blockchain address the current misses in Omni-channel retail?

Blockchain, which operates on a digital ledger of transactions distributed among a network of computers, has found many applications in financial services. Interestingly, blockchain could be an answer to the many challenges faced by omnichannel retailers including traceability, trust, and transparency. Indeed, a recent report by fintech specialist Monica Eaton-Cardone found that about 78% of retailers will have joined the blockchain revolution by 2023. Further, the study forecasts that the blockchain retail market value could grow to $2.3 billion or at a compound annual growth rate of 96.4%, which would be the highest forecasted growth among any blockchain-related industry(1).

With blockchain technology, both retailers and customers can have real-time access to the product serial number and the process status details such as order processing status, payment status, real-time order location, and delivery status. Since blockchain works on a distributed ledger, the information blocks cannot be easily modified and the temporal pattern of the information blocks cannot be altered, which means that all stakeholders in the supply chain has a unified view of the information.

In addition to making the purchase process more transparent, the real-time information can also provide retailers and customers with details on product flow in the supply chain from factory to store. Such information can be quite valuable, particularly during food recalls where information from the ledgers can be utilised to quickly trace back the origins of the products. Due to transparency built across all nodes in the supply chain, the B2B transaction clearing times that could be long at times is reduced significantly (Treshock, 2016). Further, transaction delays can be minimised by executing automated transactions between the retailer (franchisee) and customers, also known as smart contracts.

Initial success cases

LVMH, the world’s largest luxury conglomerate, is using blockchain technology to track luxury goods and prove their authenticity(2). Walmart is using blockchain to identify the source of its produce. When an outbreak of a food-borne disease happens, identifying the source could take several days. As noted in a Hyperledger casestudy, “(b)etter traceability could help save lives by allowing companies to act faster and protect the livelihoods of farmers by only discarding produce from the affected farms…. For pork in China, it allowed uploading certificates of authenticity to the blockchain, bringing more trust to a system where that used to be a serious issue. And for mangoes in the U.S., the time needed to trace their origin reduced from 7 days to mere 2.2 seconds(3).”

Blockchain can also promote responsible sourcing of products. Every product is assigned a barcode (digital identifier) and all transactions related to the product movement through its lifetime are recorded in a sequential fashion. For example, Moyee, a coffee roastery based out of Ethiopia(4), uses innovative blockchain technology to track the farmers compensation and makes an attempt to keep as much of the profits as possible in Ethiopia, which is one of the world’s poorest country. To track sourcing from the farmers, each farmer is assigned a unique digital identity.

Further, each buyer has access to the price at which the beans are sourced from the farmers, with prices set at 20% above the market rate. In the future, they also intend to use the blockchain platform the tip the farmers. Likewise, some of the best wool brands in Australia are attempting to ethically source wool by adopting blockchain-based farm management tools. Using a mobile device, they collect information on animal vaccinations, use of pesticides in the farm, stock movement and securely transmitted back to the consumer’s smartphone(5).

While convenience pushes retail sales and customer shopping experiences, it also increases the complexity and challenges in serving the omnichannel customers. Although blockchain seems like a promising solution, it is still in its infancy. First, a shared vision among the participating entities needs to be established and the data entry need to be automated. Moreover, there are some lingering questions: Is blockchain really safe? Is it scalable for large applications? We have to wait and see if blockchain is the silver bullet to the retailers’ challenges.

 

References

Mark Treshock, Is Blockchain the Next Big Thing in Omnichannel Technology?, July 2016.

1 https://www.newsbtc.com/2018/11/30/report-blockchain-in-retail-to-grow-from-80m-to-2-3b-by-2023/

2 https://www.businessoffashion.com/articles/fashion-tech/how-luxury-fashion-learned-to-love-the-blockchain

3 https://www.hyperledger.org/resources/publications/walmart-case-study

4 https://www.reuters.com/article/us-ethiopia-coffee-blockchain/the-coffee-farmers-betting-on-blockchain-to-boost-business-idUSKCN1Q7039

5 https://www.sheepcentral.com/blockchain-technology-coming-to-merino-flocks-in-may/

 

Please note: This is a commercial profile

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Associate Professor
Ross School of Business, University of Michigan
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Assistant Professor
Ross School of Business, University of Michigan
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Indian Institute of Management Ahmedabad
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