Trust 2.0 Series — Blockchain in commerce
Today’s post, third in the Trust 2.0 series (the previous posts are here — 1 & 2), aims to explore various use cases of blockchain technology in the field of e-commerce and offline retail. In yesterday’s post, we saw how different sub-sectors will benefit from the blockchain and smart contract technology. In retail, smart contracts can significantly facilitate the trade by automating a lot of the e-commerce processes, reducing counter-party risk and transaction fees by minimising the human factor in the process. On the offline retail stores, smart contracts can ensure better procurement processes, improved supply chain monitoring and cashflow management.
Over the last few months, we see increased interest and efforts from major e-commerce firms, like Japan’s Rakuten, in developing e-commerce blockchain applications through the launch of R&D labs (Rakuten Blockchain Lab) along with the acquisitions of bitcoin startups (Bitnet).
For the dreamers and believers (like me :) ) below is an interesting futuristic scenario of fully autonomous commerce :
1) Purchase/Lease — Use case №1 of blockchain technology in the e-commerce sector is enabling users to create their own custom marketplaces designed around their branding and products, such as Blockmarket. Another use-case is seamless transfer of ownership. Purchase and lease agreements can be signed via blockchain, for example-Visa and DocuSign unveiled a partnership late last year that used blockchain to build a proof-of-concept for streamlining car leasing, and making it into a “click, sign, and drive” process. The prospective customer chooses the car they want to lease and the transaction is entered on the blockchain’s public ledger; then, from the driver’s seat, the customer signs a lease agreement and an insurance policy, and the blockchain is updated with that information as well. It’s not a stretch to imagine that a process of this type might be developed for any kind of sales, lease and registration as well.
2) Supply chain : One of the most universally applicable aspects of blockchain technology is that it enables more secure and transparent monitoring of transactions. Supply chains are series of transaction nodes that link to move products from point A to the point-of-sale or final deployment. With blockchain, as products change hands across a supply chain from manufacture to sale, the transactions can be documented in a permanent decentralised record — reducing time delays, added costs, and human errors. Several blockchain startups are jumping into this sector: Provenance is building a traceability system for materials and products, Fluent offers an alternative platform for lending into global supply chains, and Skuchain builds blockchain-based products for the business-to-business trade and supply-chain finance market. IBM has also launched a platform for companies to test “blockchain” record-keeping technology in their supply chains and Everledger is building systems to record the movement of diamonds from mines to jewellery stores using the IBM Blockchain.
3) Loyalty Programs & Gift cards: Blockchains can help retailers that offer gift cards and loyalty programs make those systems cheaper and more secure. With fewer middle-men needed to process the issuing of cards and sales transactions, the process of acquiring and using blockchain-reliant gift cards is more efficient and cost effective. Similarly, increased levels of fraud prevention enabled by the blockchain’s unique verification capability also save costs and help prohibit illegitimate users from obtaining stolen accounts. Gyft, an online platform for buying, sending and redeeming gift cards that is owned by First Data, has partnered with blockchain infrastructure provider Chain to run gift cards for thousands of small businesses on the blockchain — the new program is called Gyft Block.
4) Inventory management : Smart contracts can help the retailers manage their inventory in real-time and also automate the processes for smart procurement by keeping in mind the desired qualities of the products. For example, in case of a meat shop, smart contracts combined with IoT can help monitor the freshness of the meat as well as have a detailed history of where the meat was sourced, what processing did it undergo, how long was it in transport, what conditions were maintained in cold storage etc.
5) Payments and cashflow management : As explained in my first post, Bitcoin will provide a faster, secure, tamper-proof alternative to current traditional payment systems. Similar to that smart contracts in e-commerce will play the role of a more secure, intelligent and faster Paypal, which will escrow the money to be paid to the retailer, till the item is delivered as promised. Supply chain financing will also be transformed as discussed in section 2 earlier, and make way for better cashflow management system overall.
Investor Conclusion : There are several clear use-cases for blockchain technology in the field of online and offline commerce as discussed above. However, in India, where the digital infrastructure like UPI, telecom infrastructure like Jio (affordable high-speed internet) and policy infrastructure like GST are still recent developments, e-commerce industry has far more pressing problems to solve. This may either deter/delay them from adopting blockchain or encourage them to solve these infrastructure issues using blockchain. As of now, the situation seems to be the former, as even in 2017, organised retail and the on-line retail together will still constitute just about 11% of the total retail market in the country.
