Blockchain technology has a long way to go to revolutionize the U.S. retail sector, but change is coming fast, experts say. In fact, with the help of research partners like IBM, blockchain is already making fundamental changes in the way large-scale retailers do business.

The latest development is an initiative by retailing giant Walmart to perfect a blockchain-based package delivery tracking system.

The company applied for a patent this month to the U.S. Patent and Trademark Office for a “smart package” using an encrypted device that provides a full record of what’s inside a package, where it came from, where it has been, its environmental conditions and more.

“Maybe it’s not going to revolutionize retail tomorrow, but there are enough changes coming and enough real players involved in innovation and investment that retailers need to pay attention to how it will impact their industry,” Says Nikki Baird of Aptos.

The innovation, if it works as planned, will secure the integrity of delivered packages and, in some cases, guarantee the controlled environments that perishable goods often require.

There’s a whole list of innovations like these in the works to use blockchain to disrupt current retailing procedures, says Nikki Baird, Aptos vice president of retail innovation and a longtime retail industry analyst. Aptos provides analytics, consulting and other services for retailers.

“Maybe it’s not going to revolutionize retail tomorrow, but there are enough changes coming and enough real players involved in innovation and investment that retailers need to pay attention to how it will impact their industry,” she says.

It’s happening most noticeably in the retailing supply chain, Baird says, with developments such as Walmart’s smart package.

“Global carriers like Walmart are the ones most interested in it [blockchain],” Baird says, “because it creates a way of standardizing the paperwork, with the documentation or certification that you need to ship things, especially when you’re talking about moving goods across borders.”

Food Shipping and Counterfeiting

For example, blockchain can solve a lot of problems related to food shipping. Food-borne illnesses have been an intractable problem for years in the U.S., with nearly 28 million people a year getting sick from eating tainted foods.

Last year, Walmart and other food industry companies partnered with IBM to make delivered foods more traceable.

Now, using software developed by IBM, tainted food items can be tracked to their sources within seconds. Walmart tested the new software last year by first having company investigators trace a package of sliced mangos back to their source. It took them almost a week (six days, 18 hours and 26 minutes) to follow the fruit back to a farm in Mexico. Using the IBM software, though, investigators were able to get the same results in 2.2 seconds.

Baird says the only area where retailers are moving faster with blockchain solutions than standard supply chain maintenance is in anti-counterfeiting measures.

Apparel companies such as North Carolina-based VF Corp are moving to protect their brands from illegal knockoffs with identity verification via blockchain, Baird says. VF, whose brands include North Face, Nautica, Dickies, Vans and Wrangler, is developing its own blockchain security system.

“The technology provides provenance,” Baird says. “With the blockchain ledger in place, the merchandise comes with a solid record of where the item came from, where it’s been, at what point ownership changed hands. It’s very, very hard to fake something like that.”

“There is finally a method of perhaps gathering this data from far-flung areas where products are being produced and having that connected to an open ledger that isn’t governed by anyone,” says Jessi Baker, founder of a company called Provenance, a British startup that proposes to use blockchain software to ensure supply chain transparency and product trust.

Facilitating International Transactions

Blockchain also shows a lot of promise in facilitating business-to-business transactions, particularly across international borders.

“One of the biggest problems for retailers is contracting with manufacturers overseas,” Baird says. “You say, ‘I want you to make 10,000 skirts for me that look like this.’ But then there has to be enough trust in order for you to transfer payment.”

Such transactions are usually funneled through banks, with timed escrow payments and letters of credit,” Baird explains. “There are limited releases of amounts of money for hitting milestones [in the manufacturing process].”

Blockchain can make that process easier, Baird says, using digital currencies like bitcoin (BTC), substituting blockchain for letters of credit and cutting down on paperwork. A number of banks and bank consortiums are experimenting with the new technology to facilitate these transactions.

Advertisers also are experimenting with blockchain to solve such problems as human-like bots that click on online ads, faking the amount of exposure an ad might receive. So far, blockchain is secure enough to eliminate the bots but not fast enough to compete in the real-time market.

Consumer Payments Lag

Perhaps the most disappointing result of blockchain problem-solving for retailers so far has been in consumer payments. Using bitcoin or other cryptocurrency in day-to-day transactions is still too unwieldy a process, experts say.

There are some outliers that have found ways to deal in cryptocurrencies, like Burger King in Russia, which accepts payments in bitcoin. TenX in Singapore offers a Visa card to pay in cryptocurrencies. But they are few – and, because of that, money transfers, even for the most enlightened cryptocurency user, tend to come with exorbitant fees.

There was a major bitcoin conference in Miami in January. Unfortunately, the organizers’ plan to let attendees pay for their $1,000 tickets in bitcoin had to be abandoned ahead of time. It was a time of volatility in the Bitcoin market, and transaction fees and processing time were adding too much to the cost of the ticket.

Then conference organizers had to tell customers at a conference-related café that they couldn’t buy their food with bitcoin.

“If you can’t keep cryptocurrency payment acceptance active at a cryptocurrency conference,” concluded Baird, “then I’d say there’s a little bit of a lack of maturity in the market.”

 

Ed Newton
Ed Newton contributes to a range of business and general publications. He was an award-winning staff reporter and columnist for the Los Angeles Times for nearly a decade and later wrote for Reuters and the New York Post.