The retail sector has seen some tough times of late; and even big names like Mothercare, House of Fraser, Debenhams, and Marks & Spencer have been struggling. But, as Simon Dunleavy (pictured below), director of cloud services, Maginus, explains here, there is hope. Emerging technology, such as Blockchain, offers retailers new opportunities to differentiate on trust, provenance, and transparency.

Many consumers, especially millennials and those from more affluent socioeconomic groups, are looking for more from their retailers. They want closer bonds of trust – especially in the online world.

First, they want reassurances that the item they’re paying for comes as described. If a luxury item is listed as a "hand-made Italian leather purse”, they want to know for sure that it’s made from high-quality leather by craftspeople in Italy, and not stitched together using cheaper materials in a factory in Shenzhen. Was it assembled in Italy but actually made elsewhere? Even worse, was it produced in a factory or part of the world known for child labour and abusive working conditions?

Think of this as a kind of evolution in capitalism. There was a time, just after the Second World War, when the citizens of the UK would probably have been thrilled to eat real eggs, whatever their origin, following years of rationing. Today, you’re just as likely to see shoppers peering hard at the side of egg cartons to discern their provenance. Increasingly, we are what we buy – but retailers just can’t provide the kind of transparency that consumers are demanding. Research from Nielsen has claimed that two-thirds of consumers are willing to pay more for products and services from firms committed to a positive social and environmental impact. And, separately, 94% said they’d be loyal to brands that can provide total transparency.

Part of the problem is that retailers themselves have poor visibility into supply chains. That can sometimes make it tough to deliver assurances about the authenticity of items and the ethical background of producers and manufacturers. But it’s an even bigger challenge for logistics. There’s zero transparency at the moment, if you’re buying from certain parts of the world like China. That can have a huge potential impact on your reputation and bottom line.

Simon Dunleavy,director of cloud services, Maginus

Why blockchain?

Blockchain is not a silver bullet, but it offers a tantalising glimpse into a more transparent, automated, and streamlined future for the retail sector – where early adopters could grab market share by building that all-important consumer trust. At its heart, it is a distributed ledger platform, a digital record of data and transactions laid out chronologically, presenting a single version of the truth from which all parties can work. Updates are made in real time across the ledger and can’t be edited or deleted, allowing retailers and customers to see the full history of a product and its constituent parts, for example.

Blockchain gives rise to so-called 'smart contracts', which add further value by automating transactions between two parties in the supply chain, without the need for a middleman. These transactions are also irreversible and auditable, adding more transparency and control. All of which means retailers get much greater visibility into their supply chain from a logistics point of view – especially useful for those dealing in perishable items. Plus, the retailer can track and prove the validity of an item’s origin, its constituent parts, and the ethical credentials of its manufacturers.

Happy customers, bigger profits

The impact of such systems could be massive, helping retailers to differentiate on quality, trust, and social responsibility, as well as run more efficient supply chains. Online marketplaces could consider introducing blockchain as a means to tackle counterfeit products. And brick-and-mortar stores could use it to empower staff to behave more like brand ambassadors, promoting the quality and provenance of items – especially in the luxury goods space.

We could go further still: just consider consumer electronics and household appliances. One major drawback for the customer at the moment is the time and effort required to register items with the manufacturer and validate warranties. Many of us simply forget altogether. But by using smart contracts agreed with manufacturers, retailers could offer their customers products that automatically register and begin warranty as soon as they connect to the internet for the first time. Firms like Amazon have done brilliantly at the whole buying and delivery experience, right up until the product reaches our door. But that’s only part of the story. There’s a huge opportunity here for retailers to go one better, by offering streamlined, personalised after-sales services on top. There could even be upselling opportunities here to notify the customer when their warranty is about to expire and that it might be time for an upgrade.

Blockchain could also enable retailers to minimise their data breach risk exposure. In our new highly regulated, GDPR-era world, the focus for all businesses that handle customer data is to minimise the data they collect and to drive accountability, transparency, and trust by ensuring it is only used for the purpose for which it is collected. This fits perfectly with the benefits of blockchain. Customers could issue a kind of temporary blockchain-based 'trust certificate' valid for the use of specific data by a retailer for a specific purpose, like a marketing campaign. This helps to build trust between both parties: the consumer doesn’t get bombarded with spam and the retailer’s marketing department gets access to a high-quality lead. More importantly, the retailer itself would not need to store the data at all, greatly reducing its GDPR exposure.

Time for change

Online retailers should be leading the way here, because it’s in the internet world that securing customer trust is most important, but arguably hardest to achieve. Of course, it will be resisted by some retailers who have, to an extent, benefitted from the opacity of their supply chains, piling it high and selling it cheap regardless of quality or provenance. But with greater adoption, transparency should become the norm, not the exception.

To an extent, many retailers are waiting for others to make the first move. It’s time to stand up and take the first vital leap that will catapult blockchain into the mainstream. The benefits could be enormous.