Why Walmart made the move to Blockchain (and other American retailers will follow)
Three reasons this mega-retailer is considered a holy grail of 3rd generation blockchain use-cases
Walmart just became the biggest American retailer yet to adopt blockchain, this time IBM’s Food Trust Solution, a breakoff of Hyperledger. Walmart wants its produce suppliers to shift to blockchain to better track supplies after an E. coli outbreak from lettuce sold in their stores in April. The company believes that a system like this could have had a significant impact in limiting the impact or even preventing an issue like this.
But supply chains are just the tip of the iceberg. The wide range of American retailers could find valuable blockchain applications to dramatically improve elements of their business. Which application could come next?
1. Loyalty Programs and Coupons
Loyalty programs are notoriously limited in the way they can be used, reducing the potential value to the consumer and ultimately the impact these programs have on increasing ‘stickiness’. Why keep using a loyalty program if the actual value it can produce is so limited. Blockchain-based coupons would be tokenized, allowing for trustless partnering. Mastercard already has a patent on the books for such coupons.
Trustless partnering allows businesses to work together, for instance Walmart and an airline, to bring greater value to a loyalty program in an effort to expand the wider pie. The ability to have full transparency in this operation is critical towards widening this loyalty net. By creating a network with real and ongoing value to a wider group of consumers, businesses can increase their audiences by tapping into partner networks, better serve existing customers and create loyalty programs that actually drive — you know — loyalty.
The same argument could also be true of affiliate programs — a key area of weakness for most non-Amazon retailers. These programs might also see an increase in traction with tokens, encouraging customers to shop within a network of partnered retail chains and stores.
Other benefits of the technology include making coupons usable at any outlet, constantly recoverable (impossible to lose), and their value and end dates indisputable thanks to information that can’t be changed.
2. Provenance and Recalls
Just like food, tracking any product back to its original sources is key for some retailers to understand what they have been sold. This would both quicken the execution of product recalls and, in many cases, significantly limit the extent of the damage when one is needed.
This could have implications for ethical sourcing, such as avoiding sweatshops in clothing manufacturing or factories that don’t abide by certain standards. Even if ethical sourcing isn’t the main focus, it helps a major retailer avoid a massive scandal that it can prevent by knowing their suppliers around the world better.
Walmart illustrates well the benefit blockchain can have on recalls, but it goes beyond food. Everything from toys discovered to have led paint to home appliances that cause electrical shorts could be isolated based on the original source of the faulty batch of toys or parts involved in assembling a given appliance, can help brands restrict the impact on their bottom line as well as more quickly identify the ultimate source of the product’s problem. This would allow them to either improve their supply chain by eliminating an errant supplier, or allow a good-faith supplier to fix this problem once informed about it.
Sometimes retailers’ revenue depends on big brands, either because of the brand’s marketing power or its known quality vis-a-vis competitors. But knock-offs can still be a problem, and can still dent a retailer’s bottom line even if they have found a way to keep fakes off their own shelves. With the proliferation of online shopping, especially manufacturer-direct shipping from China, the chance that potential customers might spend money on fakes instead of the real deal at a given retailer is higher than ever.
“Sometimes the [Chinese] factory will produce 10,000 of a product and then make 2,000 on the run and sell them off cheaply,” Cassandra Hill, a lawyer at Mishcon de Reya specializing in intellectual-property litigation, told Vogue UK last year.
Blockchain technology would allow for online verification of a product from these new sellers. With this extra blockchain certificate of authenticity, major retailers can build trust with consumers and compete better with the counterfeit market.
Companies like Invox, Paypie, Hive, and Populous are just a few of the players trying to move the service to distributed ledgers. Blockchain can verify invoices, prevent double billing, and of course speed up the flow of funds for all involved.
An non-siloed problem can slow down the entire economy
Walmart will tell you that this will better pinpoint future spoiled produce by isolating suspect shipments from similar supplies bought from different suppliers. In April, Walmart was forced to destroy an entire shipment of lettuce when blockchain tracking might have narrowed things down further.
But the problem goes well beyond Walmart. The FDA investigation into the lettuce included many dead ends. Lettuce shipments from different suppliers are often mixed together, either in restaurants or on shelves. When the FDA managed to narrow down the suspect crop to Yuma, Arizona, it sent out a general warning to consumers about produce from the area.
The problem? About half of the country’s lettuce is grown in Yuma. Almost all American lettuce comes from this area and the Salinas Valley in California, with Yuma growing the bulk of the fall’s and winter’s crops and California the majority of the spring’s and summer’s. Since most people couldn’t tell where their lettuce was grown, they threw it out regardless of the time of year and original source.
With better information tracking, the problematic batch could have been isolated more quickly and avoided a cumbersome and error-prone investigation that caused massive losses in the American produce industry.