The retail & eCommerce business might benefit greatly from blockchain technology. Let's take a look at the function of blockchain in the retail industry in more detail.
Even before the epidemic hit the world last year, the retail industry was thriving. Even though many retail companies provide internet shopping, their physical stores generate the majority of their revenue. Following the epidemic, however, retailers faced several major challenges, including maintaining the supply chain, selling products, operating stores, and keeping all customers and employees safe.
However, this could all be prevented if this industry embraced blockchain technology from the beginning. In truth, blockchain's dependability, sustainability, and quality of tracking and helping in management procedures may provide the ultimate digitalization that retail sectors require.
As a result, it's about time for the retail industry to take blockchain more seriously and begin integrating it into their old systems. Therefore, we'll go through why the retail business needs blockchain and how this advanced technology can address all of the industry's difficulties in this guide.
1. What are Some of The Challenges in The Retail Industry?
It is reasonable to ask if this industry requires blockchain or not. In truth, in comparison with other sectors, the retail industry looks to be doing very well. But there are a lot of internal problems that must be resolved sooner than later in this industry. This is the main reason why this sector is currently in need of blockchain transformation. Let's look at the probable issues.
a. Poor Inventory Management
Currently, the information is stored by every stakeholder in the retail market in two ways:
- Personal systems that do not allow other stakeholders access to them.
- A centralized server that is hack-prone.
In addition, with the rising demands and complexity of stock-keeping unit management, the performance of sales prediction has become challenging. The typical retail system, therefore, demands an innovative solution for improving its inventory procedures.
b. Poor Customer Loyalty Maintenance
A positive customer experience is needed to create good brand loyalty. In truth, one of the most common problems faced by retailers is the practice of abandoning former clients because they believe they can be readily replaced. We understand that interacting with customers can be difficult at times. However, letting go is a behavior that will only come back to haunt you in the future.
If you retain this mindset, for example, scaling your business will be more difficult. Although promotions, sale offers, and special discounts might make your existing customers feel valued, they are insufficient at the present because most shops fail to give tailored offerings.
c. Fraud and Counterfeit Goods
The rising number of fraudulent operations and counterfeit goods is one of the industry's major challenges. Not only are there too many counterfeit items on the market, which damage the retail company's reputation, but internal fraud activities also take a toll on the revenue as well.
Counterfeit items are getting increasingly difficult to detect, resulting in increased consumer discontent. Both the client and the retailer will continue to lose money if the problem is not adequately addressed. As a result, retailers must act quickly to resolve this problem.
d. Cyber Hacks
Another obstacle for retail companies is the rising frequency of cyber attacks. In truth, most retail businesses utilize a standard client-server networking paradigm, which is, to be honest, pretty susceptible. As a result, it is extremely trivial to hack into the systems and steal vital information. Furthermore, because every retailer stores data on its consumers, it is quite simple to alter that data and gain access to their credit card or bank account information. This can easily escalate into a major security breach, resulting in significant financial loss. Furthermore, it implies that consumers do not trust you with their data, which is not a good impression for your business.
2. How Blockchain Can Help To Resolve Problems of The Retail Industry
a. Enhancing Inventory Management
Retail companies, as you already know, require proper inventory management if they want to enhance their overall efficiency. In truth, there isn't any disadvantage to it. The firms can only profit since inventory management will allow them to keep track of items, expiration dates, and customer preferences.
In the retail industry, blockchain can help companies manage their inventories more effectively. It will also save them a lot of money since it can automate the process of product scarcity or surplus based on consumer demand in real-time. We believe it is an excellent application for the retail industry.
b. Boosting Customer Loyalty with Smart Loyalty Programs
Using blockchain technology offers instant and accurate data integrity. It is largely applied to data-reliant customer loyalty schemes. The nature of blockchain ensures data capture at every stage of customer interaction. This will help businesses improve qualitative analysis and customer modeling capabilities. Retailers make use of blockchain for customer loyalty programs. They give consumers the option of storing ubiquitous loyalty points with a single wallet rather than accumulating them in isolated membership schemes. This way, customers will be more engaged with loyalty programs as they can easily track and redeem points and rewards. Technologies like big data analysis and artificial intelligence also help create personalized communications for each customer.
Blockchain in a retail business can also assist with loyalty programs. At the moment, many retail firms have loyalty programs in place that allow them to interact with a much larger audience while still keeping their existing customers satisfied with their brands. However, inefficiencies exist in loyalty schemes as well. Most of the time, they provide contradictory restrictions that prevent the consumer from obtaining the reward points.
In addition, due to system mismatches, a consumer who is entitled to points may not get them in many situations. Retailers, on the other hand, may automate the entire process by utilizing blockchain's smart contracts. They may simply pre-program the rules in a smart contract, and if a customer fulfills every rule, he or she will receive the points immediately.
c. Preventing Counterfeit Goods and Fraud by providing Product Provenance
Another advantage of blockchain in retail is the prevention of fraud and counterfeit goods. In truth, the retail industry lost $62 billion in 2019 due to fraud alone. Furthermore, high-end retail firms lost roughly 30% of their earnings as a result of their lax return policies and large margins. The issue, however, is not the loss, but the harm is done to the brand by continuing to sell counterfeit goods.
Using blockchain technology, businesses can trace their items from the factory and verify that they are receiving the genuine product every time. Furthermore, this might assist them in dealing with counterfeit items in the long run.
Another aspect of blockchain use cases in the retail industry is the ability to track goods’ origin. Consumers are currently suspicious of anything they purchase. And that's understandable given that people have a right to expect more when they pay for it. However, retail firms are unable to provide any provenance other than the seal on the container that reads "manufactured in xxx."
So, by utilizing blockchain, businesses can finally provide provenance by allowing consumers to monitor or view the complete supply chain of a single product. It will begin with the vendors and finish with the customer who purchased it. It will give the provenance that buyers are looking for right now, and they will be able to spend their money on an authentic product.
It is impossible to use blockchain as leverage without a proper business strategy in mind. To understand more about building blockchain, have a look at our ultimate blockchain implementation approach.
d. Reducing Cyber Hacks
Another major blockchain use case in retail is the prevention of cyber-attacks. As you are aware, the retail business is regularly subjected to security risks. As a result, this might swiftly escalate into a major security breach, resulting in significant financial loss. Furthermore, it will imply that consumers do not trust corporations with their data, which does not bode well for the brand.
However, with the usage of blockchain, in this case, the reality may radically alter. Because blockchain can provide high-security procedures to combat cyber-attacks, no security breach will be conceivable. As a result, by protecting the network from a third-party organization, blockchain can begin to generate profits.
3. Final Thoughts
Blockchain in retail can change a lot of aspects of this sector. Although this sector is already quite strong on its own, it still deals with a lot of issues that can cause problems later in the future. But using blockchain, this industry can overcome all the shortcomings and introduce more features for the consumers.
SotaTek empowers your retail business by providing bespoke data management and tracking solutions based on blockchain technology. Our blockchain development experts are dedicated to accelerating asset digitalization and pushing the boundaries of new client experiences. We assist our clients in constructing blockchain solutions to address major challenges and open up new business opportunities in their industries. If you are in the retail & eCommerce industry, then it’s time to embrace modern technology and all of its advantages. Anyone interested in learning more about how to integrate blockchain into retail operations may contact our team of blockchain development professionals to start your blockchain journey.