Understanding Blockchain

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Understanding Blockchain

By Dawn Klingensmith - 10/15/2018

Marketers shouldn’t expect to have answers now for how blockchain will apply to brand and retail marketing going forward, but based on Walmart’s emphasis on the technology, it’s important to pay attention.

By now, most of the retail and consumer packaged goods world has heard of blockchain, but not many fully understand what it is and how it works, and even fewer seem to know what it means for our industry. A third of all senior executives think blockchain is overhyped, and slightly more (39%) admit they have little or no knowledge of the technology, according to a Deloitte report, “New Tech on the Block: Planning for Blockchain in the Retail and Consumer Packaged Goods Industries.”

Know this, if nothing else, about blockchain: Walmart is already heavily invested and, on Sept. 24, gave all of its suppliers of fresh greens a 2019 deadline to join the IBM Food Trust blockchain platform to facilitate traceability. And wherever Walmart goes, the industry eventually follows.

To learn how blockchain might apply to brand and retail marketing going forward, we convened a virtual roundtable discussion with industry insiders, including an expert from IBM to discuss the Food Trust initiative.

Without getting too technical, can you describe blockchain technology and how it works?

Chris Turley: Simply put, blockchain – or distributed ledger technology – is tamper-proof transactional record keeping.

Scott Anderson: There are blocks, and there’s a chain of them. A block is a ledger entry, like a line on a spreadsheet. A block can never be changed once it’s created. A blockchain is stored across a network of computers, so it’s decentralized and self-policing – there’s no master computer, no intermediaries. It’s less important to know how it works than it is to appreciate its function as a way of managing transactions that is theoretically impossible to hack.

Nikki Baird: Another important aspect is that you can automate new things happening based on what gets added to the blockchain. So, for example, if a product is delivered to a customer and that delivery is recorded on the chain, then that could initiate payment without any action required by the customer.

What are the most widespread applications of blockchain in the retail world?

Baird: Nothing is common or widespread; it’s all too new. Payments in Bitcoin (the digital currency that transfers via blockchain) have been around for a while. Supply chain is getting the most focus, with IBM and Walmart taking the lead in partnership with CPGs (Nestle, Tyson Foods, Dole and others, as well as with Kroger). This is about using blockchain to create a universal record of product from farm to fork, basically, for supply chain security, country of origin tracking, and to speed the import process.

Paul Chang: The IBM Food Trust solution is signing on new members, expanding geographically, and has developed several modules to help companies at different stages in the supply chain generate the greatest value from the ability to trace food through the supply chain. One insight we’ve gained is that beyond the ability to execute targeted recalls, having transparency across the entire supply chain creates opportunities for efficiency, process automation, and more timely decision-making that was not possible before the creation of this network.

What are the roadblocks to broader adoption of blockchain?

Anderson: The overriding issue with blockchain adoption is that, regardless of the application, somebody gets disintermediated. Attorneys, accountants, advertising networks, shady product distributors and others see they’ll be shut out, so there’s going to be resistance from certain parties. As for supply chain management, it requires every role-player to cooperate and even invest in technology, so as a practical matter it’s the most difficult mountain to climb and must be driven by a global behemoth like Walmart to force cooperation.

Turley: Integrating legacy IT systems that are siloed and offer limited data exchange is perceived as a challenge although tech companies, including Boxchain, provide application interfaces that can pull data from any existing IT system and integrate it with any blockchain technology.

What other applications besides supply chain management are on the horizon?

Nick Jones: Some of the simplest customer service dimensions, like tracking shipments, can be vastly improved when you combine blockchain with other technologies like artificial intelligence. Blockchain not only could offer real-time tracking but could record information such as whether the product being shipped has been kept at the right temperature. 

Manolo Almagro: Walmart’s work with blockchain has a new, expanded scope as evidenced by a patent filed earlier this year around the concept of a smart package providing traceability and real-time status of a package’s contents as part of an autonomous vehicle and drone initiative.

Turley: Loyalty programs will likely be transformed by blockchain. In traditional loyalty-points schemes, customers often have to wait until points accrue to use them, and they are limited on where they can spend them. By tokenizing loyalty points on the blockchain, retailers can provide customers with instant value and offer redemption on the spot with approved suppliers.

Baird: The customer-facing use cases are the most interesting to me, like Shopin and similar applications that let consumers control what information retailers keep about them and when they want to revoke that. It would give consumers greater control and trust, and would potentially encourage them to share more information with retailers in order to get better personalization.

How might blockchain evolve shopper marketing in particular?

Chang: Marketers can leverage blockchain to gain a line of sight to the end publishers in digital advertising, reduce cost to administer programmatic media buying, and ensure accurate measurement of impressions. With more and more companies spending a larger portion of their marketing dollars on digital, this is critical in providing measurements and ROI. 

Almagro: Blockchain creates opportunities for brands to create authentic dialogues directly with the people that buy their products. This opens up a level of transparency that would be unprecedented, executing campaigns like voting on a favorite product or accessing real-time data regarding customer behaviors via loyalty programs. But though I admire companies and agencies that are pushing blockchain initiatives in the shopper marketing space, scale and adoption rates are critical for blockchain to take, and there just isn’t enough of either to make it worth the investment right now. I think it’s at least five years out before blockchain could have a significant impact on shopper marketing.

What do brand and retail marketers need to understand now about blockchain, even if they aren’t quite ready to dip their toe in?

Turley: It has the potential to transform industries and disrupt current business models, and companies need to be proactive in approaching it alongside other technology developments like AI and Internet of Things. By its nature blockchain requires collaboration. Companies should be talking to their suppliers and partners about their exploration into blockchain; to technology companies who are expanding its use; and, where possible, they should look to join existing use case exploration.

Jones: CEOs and COOs need to get up to speed on blockchain even before marketers. IBM has a vested interest in educating various categories about blockchain, so they produce a lot of white papers and videos as a starting point. The kinds of things marketers should be looking at are how blockchain can establish trust and back up claims in an era when consumers care about product sourcing and sustainability, and whether something is truly organic or locally grown or whatever the claim may be.