4 Reasons You Need To Take Blockchain Seriously
By Sunny Lu, Co-founder & CEO, VeChain
Retailers are bombarded with so many new technologies it’s difficult to keep up. Each new tool or platform makes bold claims of transformative capabilities.
But each technology seems to focus on a single area which creates, rather than abolishes, data silos. And while new opportunities may sound interesting, you already have your hands full solving core problems common to retailers and manufacturers.
If you’re going to invest precious time investigating even one new technology, you need to consider blockchain. Why? Because blockchain is different.
What Is Blockchain?
Blockchain creates a digital ledger or record for an item. Interactions with or transactions about that item are recorded in the ledger, and people and organizations who need to access the data are granted secure private digital “keys” to do so.
While each participant only sees their own copy of the ledger, updates are automatically made to all copies. Why have multiple copies? Because it lessens risks; you can never lose the “master copy” when all copies are identical.
What Makes Blockchain Different?
Blockchain is different because it was created specifically to solve the problem of transparency and trust between multiple parties. While it was initially created to facilitate financial transactions, it’s quickly been adopted by a range of industries which also seek greater transparency and trust. And crucially, it’s a technology that is already delivering real results.
That’s all well and good — but as a manufacturer or retailer, why should you take blockchain seriously? Because it can help you solve four pressing business problems:
- Maximized Supply Chain Efficiency
Standard supply chain systems are sloppy. Typically, they rely on multiple separate systems operated by different suppliers, creating data silos that undermine transparency. When different participants in the supply chain need insight into what’s happening and where things are, they can struggle to cobble multiple data sources together to get the full picture.
A blockchain-enabled supply chain system can bring together data from multiple discrete systems, creating transparency amongst participants. Each item (or box, or shipment) is assigned a unique product identity which is stored in the blockchain and attached to the item with an RFID, NFC chip, or QR code. As the product makes its way through the supply chain, interactions occur via a smartphone app and the data is visible in each copy of the ledger.
When there’s a query about the status of a product or shipment, the transparency of information in the blockchain makes it quick and easy for the participants involved to get data, answer questions, or diagnose problems.
- Improved Materials Traceability And Sustainability Reporting
There’s increased pressure on manufacturers and retailers to comply with environmental legislation, to be able to trace where components come from, and to provide information on product sustainability. While current practices don’t stop you from doing this, it can be labor-intensive and time-consuming, not facilitating the speedy process you need in the face of a contamination incident or public allegations of unsustainable practices.
By extending the use of blockchain to your materials suppliers, you establish true product traceability. Once you define the data to track — for example, specific supplier, batch, harvest or creation date, fertilizers or additives used, and chemical composition — it’s simple to include in the blockchain and interrogate it at a future date.
- Enhanced Anti-Counterfeit And Fraud Protection
In 2015, the global counterfeit trade was estimated to be worth $1.77B. Not only do you need to be sure the goods you’re receiving aren’t fakes, you also have to be verify that returns are real with NRF estimating that holiday return fraud cost US retailers $9.1B in 2015.
Blockchain makes it easy to verify the goods you’re receiving are the real deal because you’re able to track the interactions and transactions from the manufacturer through distribution and delivery. Because the data is held in a secure, tamper-proof way, any anomalies will be visible to all participants and can be quickly dealt with.
At individual item level, blockchain-enabled tagging gives both retailers and consumers reassurance the items are genuine. Assigning each item a unique identity and attaching a QR code, NFC chip, or RFID tag gives you an invaluable item-level view: when it arrived to a particular store; was put on display, sold, returned; and how much money changed hands.
This detailed view makes it simple to defeat fraudsters wanting to return fake or stolen merchandise. Item-level access means a store associate can quickly verify an item is authentic; was bought, not stolen; the amount paid; and when and where the transactions occurred.
Retailers embracing this approach include Direct Imported Goods, China’s largest fine wine importer. Their current pilot puts one million bottles of wine on the blockchain with plans for future expansion on a broad range of consumer products.
- Deeper Brand-Consumer Engagement
In the face of a media explosion, consumers are becoming increasingly media-blind. It’s hard — and expensive — to get their attention. One surefire way to create a positive brand experience is to bring them to a physical store that’s designed to facilitate deeper brand engagement. But the popularity of online shopping continues to increase and many shoppers will never set foot in your physical locations.
Innovative brands are increasingly turning to creating engaging digital experiences with their products. For example, fashion brand Babyghost attached blockchain-enabled NFC chips to their A/W 2017 collection, allowing customers to see “interactive memories” of items as originally modelled on New York runways.
Other opportunities include providing content and offers designed to engage customers, encouraging them to share purchases on social media; register for exclusive access to content, events or offers; or log item ownership. Crucially, the manufacturer or retailer has complete ownership of the product as a channel, which means they have 100 percent share of brand voice.
As the pace of tech innovation accelerates, businesses are under increasing pressure to investigate new technologies. In a very crowded space, blockchain stands out for its ability to help you solve very real, business-wide problems.
The question isn’t whether you’ll take blockchain seriously — it’s whether you’ll keep pace with the leaders and thrive, or fail to heed the signs and be left on the shelf.
About The Author
Sunny Lu is co-founder and CEO of VeChain a blockchain-enabled product management platform. Prior to co-founding VeChain, Sunny was the CIO for Louis Vuitton China where he led the IS&T team in supporting the business growth of over 65 locations, including global and regional compliance deployments. He earned a Bachelors in Electronics and Communication Engineering from Shanghai Jiaotong University.