MARKNetwork Blockchain Use Case: Retail
Is Retail industry ready for Blockchain?
As the underlying state of the economy is becoming sound, the 2019 retail sales are expected to reflect growth of 3.8% to 4.4%. The bullish stats reported by the National Retail Federation (NRF) forecast the overall retail sales in the US to reach $3.8 Trillion.
The online retail sales will be the major contributor with 10-12% anticipated growth rate. Right now the consumers are in better shape to fuel the growth that will ward off the effect of some uncertainties like the current trade war with China and US government shutdown.
The market is ripe but the challenges spread out across the supply chain, taxation and customer identity are curtailing the growth of retail players. The retailers need to keep pace with the technology advancement to emerge as leaders on the global map.
The IT strategy of a retailer is significantly going to impact the growth as the legacy architecture and enterprise resource planning (ERP) systems are not able to meet the changes in the buying behavior and customer expectations.
Blockchain technology is appropriately equipped to address the soft spots of the retail industry. The adoption of new-age technology is going to bring in more transparency and establish a provenance-based ecosystem that will work in favor of all the stakeholders.
According to the e-tailer policies in the EU, all sellers are required to maintain a clean record of sales tax by paying the VAT (value-added tax). The sellers in the UK need to pay 20% VAT while in Germany it is 19%. As per the recent reports by EU commission thousands of online vendors on Amazon and eBay not paying VAT. The aggregated tax frauds due to non-VAT paying online sellers reached around $5 billion.
The unregistered taxpayers on these platforms are primarily Chinese sellers who are penetrating the market with lesser prices thus undercutting the local in-store an online sellers. Germany is planning to roll out tougher rules for the online marketplace to combat the tax frauds. Such regulations can hamper the growth of the online retail industry with increased administrative burdens.
The existing IT infrastructure used by compliant sellers is not efficient enough to record the tax payments leading to confusions and felony charges. The blockchain is an ideal technology solution that can maintain the tax records for global transactions in an immutable digital ledger. This innovative use case will benefit all the stakeholders- the tax regulatory bodies, e-tailers and even consumers as all the taxation data will be stored in a secure and transparent manner to avoid frauds and expedite the tax refunds.
For online retailers, the blockchain will record all the transactions in real-time saving time and lead to lower cost of accounting. The speed of transfer of tax payments between government and retailers will be expedited.
Blockchain projects like Tencent have partnered with Chinese tax regulatory bodies to track and reinforce tax payments automatically.
As per the Global Brand Counterfeiting report, the global counterfeiting market in 2017 reached a colossal figure of 1.2 Trillion USD. The figure is anticipated to surpass 1.82 Trillion USD in 2020. With the rising incidents of counterfeits that are spread across retail pharmaceuticals and defense sectors not only the profit margins but brand reputation is at stake.
As consumers are becoming more informed, they need a retail industry that supports product provenance.
Blockchain technology is the only panacea for the plaguing issue of counterfeits. The blockchain aims to digitize all the retail products and assign a unique identifier to each product. Thus the brand and end consumer has access to the shared ledger that is a single source of truth of products authenticity. Blockchain projects like Blockverify are harnessing the DLT to determine counterfeits, diverted goods, and stolen merchandise.
The online retail sales recorded in 2018 across the globe were $2,489 Trillion. These sales were primarily driven by the personalization offered by online retail brands. Around 33 percent of online retailers are already providing customers personalized buying experience and almost 40% plan to do it soon.
Customers trust retailers with personal data over a centralized ecosystem. 44% of online buyers do not trust retailers with their personal information because of the data privacy issues and rising cyber hacks.
The blockchain provides the much needed trustless mutual platform for retailers and consumers where the retail related data can be stored and accesses without any manipulation. Utilization of smart contracts will make it easy and simple for the consumers and retailers to lay out the requirements, handle the payments and manage the shipment logistics.
Giants like MasterCard are using blockchain to create on-demand travel contracts. Blockchain projects like Shopin are building a highly secure blockchain-powered universal shopper profile.
Micropayment industry revenues soared up to tens of billion dollars. It started with one million music lovers downloading songs into iPods for 99 cents. The micropayment has spread across Play Store where the premium version of games like Candy Crush is downloaded at just $1.14. Adding micropayment to retail website and marketplaces has become a rising trend as these payments add up to billions of dollar sales.
Blockchain technology supports cryptocurrencies that make micropayments easy at low cost to both retailers and consumers.
Transparent Supply Chain
A successful supply chain is strengthened by the transparency and traceability it offers. As complex as the ecosystem is the supply chain needs to keep track of assets, investments, and partners of multiple stakeholders. With the globalization of businesses, a number of entities involved in the business have gone up tremendously directly magnifying the discrepancies along the supply chain. Frauds, recall issues and visibility issues are plaguing the supply chain.
The blockchain is offering a perfect track and trace opportunity to retailers by recording each move on an immutable digital ledger. The early adopters of the technology will have a definite edge over the competitors as the blockchain will help brands preserve their image but combatting counterfeits. Blockchain finds its use in the sourcing process, across the distribution channel, and in the production process. The projects like Fr8 Network are trying to address the issues by tracking and tracing the shipping data on the blockchain.
Decentralization of consumer data
Retailers often store the crucial consumer data in centralized data repository which is susceptible to cyber hacks. Home Depot suffered a major consumer data breach and ended up paying $19.5 million as compensation. Such attacks do not just cause monetary losses but earn retailers a bad name in front of the consumers.
The increasing sophistication of cybercrimes is making it impossible for the in-store and online retailers to ensure 100% data security. The blockchain is the right disruption that will insulate the data from any kind of data attacks or manipulation.
Blockchain technology is taking the center stage when we talk about the improvement the retail industry is looking forward to. The streamlining is a much achievable task with blockchain. It is noteworthy that all the retail data will be recorded on blockchain and will be accessible to all in a trustless ecosystem which promises the highest level of data integrity. MARKNetwork is part of the blockchain sphere by contributing market-ready solutions that will make adoption of blockchain a frictionless task for retailers.
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