Blockchain technology has the ability to transform the retail and consumer goods value chain. The blockchain’s ability to track and trace products and record transactions and contracts will lead to widespread adoption in these two sectors in the next five years, with those companies which fail to leverage this new technology risking falling behind. This is according to a report by Deloitte which cites changing consumer demands as a key reason for both industries to turn to blockchain technology. In its report titled “New Tech on the Block”, Deloitte also revealed that it is developing its own blockchain solutions to help address challenges in these sectors.
The Potential To Disrupt
Not only will blockchain tech solve many of the existing challenges, it will also foster innovation which will solve challenges that we didn’t even know existed. Deloitte’s report broke down blockchain utilization into three levels, with the first being the storage of digital records. The peer-to-peer exchange of digital assets without trusted intermediaries was identified as the second level, while the automatic execution of smart contracts was identified as the third.
Quoting a survey by Gartner that estimated the enterprise blockchain industry to be worth $176 billion by 2025, the researchers expressed optimism that in the next five years, blockchain will be a standard tool for many enterprises, with early adopters likely to stay ahead in the long run.
The retail and CPG supply chains have continued to uphold tedious paper-based processes which limit transparency and collaboration between stakeholders. The blockchain will change all this through its four main advantages, which the report identified as auditability which facilitates traceability, smart contracts which enhance flexibility, immutability which enables compliance, and disintermediation which brings about effective stakeholder management. The blockchain’s biggest impact on the retail and CPG supply chains will, however, relate to traceability, an issue that costs these sectors millions every year and which undermines their integrity. The blockchain is able to provide a full audit trail which will protect end consumers from counterfeit products and also give enterprises confidence in the authenticity of goods.
The Power Shift
The biggest beneficiary in the long run will be the consumer, with blockchains facilitating a significant power shift from the retailer to the consumer. With blockchain tech facilitating peer-to-peer transactions, there will be a great reduction in the need for intermediaries between producers and consumers. The result will be a restructuring of the existing market setup in both industries. However, the CPG industry must strive to take advantage of this change to establish better and more direct relationships with consumers. On the other hand, retailers must use blockchains to serve their customers better or risk facing extinction in the same way online retailers are slowly pushing traditional brick and mortar stores out of business.
Blockchain technology should not be looked at as a tactical response to a standard technological problem, the report maintains. Rather, it should be combined with other emerging technologies in order for enterprises to reap maximum benefits. Industries that have prior experience in such technologies as big data, the Internet of Things, and artificial intelligence are likely to build successful blockchain applications.
So, what are the practical applications of blockchain technology in the retail and CPG sectors? The report identified the use cases as falling into three categories: consumer, supply chain, and payments & contracts. In the consumer use case group, some of the applications include locating stolen products, smart loyalty programs, and targeted recalls of defective or unsafe products. In the supply chain use case group, applications include verifying the authenticity of products, curbing fraudulent transactions through smart contracts, tracking deliveries, and real-time inventory management. Transparent and auditable digital advertising, faster and cheaper payments, and consumer protection through the maintenance of an immutable digital ledger are some of the identified use cases in the payments and contracts use case group.
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