Companies worldwide spent more than US$2 billion on blockchain technologies in 2018 and the expenditure is expected to rocket to around US$10 billion in 2021 according to a report from IDC.
Although bitcoin remains as the most widely-used application of blockchain by far, the finance industry has also been successful in making use of blockchain technology in the past few years. However, the technology has the potential to transform many business processes in a number of other industries as well, including retail.
Decentralizing the digitalization of retail operations
Retailing is a tight-margin business faced with rising consumer expectations, a multitude of logistic challenges and all the difficulties of effective digital transformation.
According to OpenLedger [1], the most pressing concerns or pain points amongst retailers include:
- Operational inefficiency — Siloing and static record-keeping being major obstacles to integrated and efficient operations management.
- Consolidated omnichannel retail — Consumers demand omnichannel shopping but retailers struggle to overcome data management hurdles and provide them.
- Consumer participation and tracking — Consumer data collection entails security risks, and can be difficult to compile, share and analyze, thus increasing administrative costs.
- Counterfeit prevention — In 2017, the global market in counterfeit consumer goods was worth $340 billion, damaging brands and degrading consumer trust and revenue.
- Quality, provenance, brand — Consumers are concerned about where their products come from, and mistrust brand-generated claims of ethical sourcing and quality materials or ingredients.
- Regulatory compliance — Current supply chain, production and point-of-sale technologies make it difficult to establish and monitor regulatory compliance.
However, blockchain technology can provide innovative solutions for the retail industry by, for example, enabling end-to-end tracking of goods across the entire production and distribution channels that minimizes chances of counterfeit supplies. In a nutshell, blockchain is a distributed database ledger operating over a network of nodes, following cryptographic protocols for data sharing, validation and authentication. The network maintains an immutable chain of data enabling consensus among trustless parties about existence and status of information stored on the network. Consequently, blockchain can help build trust, improve supply chain transparency from materials sourcing to shelf, counter fake products, and reach new markets rapidly and securely for retail. Blockchain’s immutability also lends itself to the application of proof-of-process for regulatory compliance and reporting. It can also process payments and execute contracts securely and seamlessly, creating an immutable record that is accessible and auditable by all parties. All records are being kept on decentralized, secure and encrypted blockchain, where each party has sovereignty and full control of access over their data. Thus, blockchain offers innovative solutions to the problem of scattered, siloed, incomplete, untraceable and unreliable information that is available to each participant in the supply chain, while making the whole supply chain operations more efficient and cost effective.
Application of blockchain to retail in China
Yikong Chain is one of the first full-service retail outlets in China that utilizes blockchain technology to address the above-mentioned pain points of traditional retail industry in China. By operating under Jingtum’s MOAC public blockchain platform, Yikong Chain empowers the retail stores, wholesalers and manufacturers by connecting them as nodes to the blockchain so that real, accurate, authenticated, secure and immutable transaction and distribution data can be shared between all parties. This not only enables retailers and wholesalers to benefit from the added value created by sharing their data with the upstream manufacturers, but also provides a credible channel for manufacturers to effectively dispense distribution channel support fees to retailers and lays down a solid foundation for risk control by financial institutions in financing retailers in China.
For fast-moving consumer goods (FMCG) manufacturers, things that concern them most is to have timely access to and better understanding of trustable product sales data, competing products, market trends, consumption behaviors of end consumers etc.. Currently FMCG manufacturers have to rely on third party research companies to provide such information and insights. However, because these surveys are based on sample estimation, the authenticity and timeliness of the data often fail to meet the hard demand by the FMCG manufacturers. By integrating the three streams of commodity flow, capital flow and data flow on the whole supply chain, Yikong Chain is able to solve the incomplete information and untrustworthy data problems of the traditional retail industry in China, creatively developing new business models that greatly improve the operational efficiency of traditional retail industry while promoting fair market competition at the same time. With the use of blockchain, Yikong Chain validates the authenticity and accuracy of the industry data that is interconnected on a big data platform, the Jingtum’s MOAC blockchain platform, which is secure and cannot be tampered, successfully taking the commercial application of blockchain technology to China’s retail industry to a new level. The figure below illustrates blockchain deployment along the retail supply chain.
Source: Tata Consultancy Services [2]
Established in 2012, Yikong Chain has been providing products and services to retail stores in China, which are small supermarkets or corner stores seen in local communities everywhere. There are about 6 million such retail stores in the country, with an estimated market size of around 1.5 trillion yuans. So far Yikong Chain has signed up more than 1,500 high-purchase-frequency retail store customers and opened warehouse operation centers in Shanghai and Suzhou, China. The average purchase frequency of retail stores that are running on Yikong Chain has doubled, which is five times that of traditional e-commerce giants. The company has also signed cooperation agreements with well-known FMCG giants such as Coca-Cola, Uni-President, Pepsi-Cola and Nestle.
Yikong Chain was the runner-up in the Finals of the 3rd China Blockchain Technology Innovation Application Competition in 2018. The company chose to operate on Jingtum’s MOAC public blockchain platform because “the MOAC platform is more technically advanced and reliable compared with other public chains that are available,” said Mr. Jianqiang Liu, the founder and CEO of Yikong Chain. Yikong Chain is actively looking to expand the business via cross-industry collaborations such as gaming, video and traditional industries. Such opportunities are only made possible by the rapid development of blockchain technology. MOAC, a public blockchain platform specifically designed for commercial applications, is a decentralized, secure and scalable underlying network that provides scalable and resilient blockchains which support transactions, data access and control flow by way of an advanced layered multi-blockchain architecture. Its uniquely designed multi-layer architecture and micro-chain technology provides the framework for spawning sub-blockchains quickly and easily and allows users to execute Smart Contracts in a highly efficient way.
References:
[1] https://openledger.info/solutions/blockchain-retail/.
[2] ‘Unblocking the Retail Supply Chain with Blockchain’, Tata Consultancy Services.
