“There’s certainly a lot of hype around the tech, and granted, there are some situations in which it’s being marketed where it’s probably not needed. To outright call it nebulous technology, though, would be blatantly false when we’re already beginning to see use cases materialise that solve real problems,” says Alastair Johnson, CEO and Founder of e-commerce payments and ID platform, Nuggets.
Indeed, the business value of blockchain in retail is projected to reach $164 billion by 2030, according to a new report from IHS Markit. “Early adopters of blockchain have mostly been companies in the financial services industry, which use it mainly in payments-related solutions,” says Don Tait, Senior Blockchain Analyst, IHS Markit. “However, the technology is poised to ripple through virtually every industry, affecting almost all organisations in the coming years.”
Initial uptake in retail and e-commerce is projected to be led by trade promotions, decentralised marketplaces, payments, smart contracts, supply chain and other applications. “Using blockchain within the retail and e-commerce sector can lead to a direct relationship opportunity with the customer, providing companies with greater understanding of their needs and behaviour,” says Tait.
“Blockchain and smart contracts can also provide the tools and framework to create a new generation of marketplaces where the supply and demand sides can engage in trusted trading transactions, according to various business rules, without the need for a central brokerage entity.”
Crypto critics have dismissed the use of Bitcoin for payments due to its volatility. Late last week, Starbucks announced that it was partnering with Microsoft, BCG and New York Stock Exchange owner Intercontinental Exchange to create a new venture, Bakkt.
Maria Smith, Vice President, Partnerships and Payments for Starbucks, commented: “As a leader in mobile payments to our more than 15 million Starbucks Rewards members, we are committed to innovation for expanding payment options for our customers.”
Various news outlets took this to mean that the retailer would now accept Bitcoin payments in-store. Alas, no. “It is important to clarify that we are not accepting digital assets at Starbucks. Rather the exchange will convert digital assets like Bitcoin into US dollars, which can be used at Starbucks,” it said in a statement. “At the current time, we are announcing the launch of trading and conversion of Bitcoin. However, we will continue to talk with customers and regulators as the space evolves.”
But whilst Starbucks is not yet getting onboard, the retailer’s flagship role in Bakkt and refusal to rule out a move could see Bitcoin break through as a mainstream currency.
Elsewhere, Greenwich Village, New York restaurant, pokee, recently announced that it was adding Ethereum, Omisego and Iostoken to its payments mix, alongside cash, cheques and cards. Founder, Sa Wang, believes that, “a lot more businesses will begin to accept cryptocurrencies as the tech becomes more accessible.”
There is a rapidly growing consumer base that is passionate about this and looking for businesses that support their interests, Wang argues. “Accepting cryptocurrencies is relatively easy to set up and harms no-one. Also, blockchain technology represents the promise of lessened banking fees. For so long, businesses have had to partner with credit card companies and accept their charges. Cryptocurrencies offer the ability to maintain the easy transactions that customers desire, without having to allow a third party to take a percentage from every transaction. If we can cut out a middleman, we will pay fewer fees, that’s just common sense.”
Initially, she expects it to be fairly niche and cites economic data from Southeast Asia which shows a massive disparity in phone purchases between the East and the West. “The gap is beginning to close, however, and we’ve already seen a drastic shift in NYC as many businesses have stopped accepting cash in recent years. A rise in cellular payments is the logical progression and as the West begins to catch up with the East in this metric, we expect crypto and apps to play a large role in securing those cellular payments.”
Ones to watch
Elsewhere, the secure storage of data is a pressing issue that needs an answer, according to Nugget’s Johnson. There’s a seemingly unrelenting flood of data breaches, wherein sensitive user data – phone numbers, card details, physical addresses – is being siphoned from centralised servers, he observes. Companies maintain enormous data silos, filled with information that makes them an ideal target for hackers or malicious parties wishing to leverage this data to sell on.
“But now, we have the technology that allows us to disrupt this broken model,” he says. “Decentralisation allows individuals to opt out of a system where they are essentially entrusting personal information to a company in order to use its services. Instead of trusting single points of failure, we should be aiming to harness encryption and mechanisms like the aforementioned zero-knowledge storage to empower individuals. I fully believe that this is the real ‘killer app’ for blockchain tech: self-sovereignty of data.”
As for the most interesting recent implementations of blockchain technology in retail, there are quite a few projects Johnson is optimistic about. “Many are still in alpha, but I have no doubt we’ll see them roll-out soon. I feel that Storiqa has identified a very relevant niche: it aims to eliminate barriers to entry for SME retailers, providing its own wallet that holds a range of cryptocurrencies (making for low fees), and a blockchain-based mechanism for preventing fake reviews.”
He adds: “Devery is another initiative I’m very interested in. Blockchain technology in supply lines has long been one of the possible use cases discussed, and this is something they’re refining to cater specifically to the retail sector. The Devery system is attempting to bring a much-needed level of transparency to ecommerce supply chains, helping to prevent counterfeiting and ensuring that goods are delivered in an acceptable condition. I’m a fan of their open source protocol which is built so as to allow developers and enterprises to build decentralised applications on top of it.”
Exciting times, then. Accusations of ‘all hype, no substance’ will doubtless persist, but with big hitters like Starbucks getting involved and more and more compelling use cases emerging, we say, buckle up and place your bets on blockchain.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.