- Retail and e-commerce will realize a projected $164 billion in “probable” business value by 2030 due to a rise in the number of blockchain projects that are initiated and commercially deployed, according to press release from IHS Markit. IHS Markit defines business value as the cost savings and efficiencies resulting from incorporating blockchain into business strategies.
- A lower “downside” forecast by IHS Markit sees this value increasing to $49 billion by 2030, while a higher “upside” prediction sees it rising to $264 billion, the IHS Markit report said. The business value of blockchain in 2017 for retail and e-commerce was $38 million. For all businesses, the report predicted that this business value will increase from $2.5 billion in 2017 to $2 trillion in 2030. Put in context, 10% of global gross domestic product will be stored on blockchains or related technology by 2025, according to a 2017 World Economic Forum report cited by IHS Markit.
- Initially, the use of blockchain in retail and e-commerce will be in such applications as trade promotions, decentralized marketplaces, payments, smart contracts and supply chain, the report said. Large retail companies that deploy blockchain and distributed ledger technology (DLT) will gain efficiencies and reduce costs.
The savings and efficiencies brought by the implementation of blockchain, or distributed ledger technology, will accelerate dramatically in the coming decade, said IHS Markit in its just published “Blockchain Vertical Opportunities Report — 2018.”
Blockchain will allow for the emergence of decentralized marketplaces, the IHS Markit report also said. Retailers will own all digital assets, including digital storefronts, product photos and videos, and reviews. In short, incorporating blockchain into retail could reduce the time delays, added costs and human errors that plague transactions today. It could also automate inventory control and streamline fulfillment processes, the report said.
This confirms earlier studies, such as one from Deloitte that said blockchain would “revolutionize” the retail and consumer packaged goods industries, two segments that are among the best positioned to take advantage of the new technology. While blockchain is known to most as the backbone of cryptocurrencies like bitcoin, more broader-based applications are on the horizon.
Retailers are moving to integrate blockchain tech into their operations. Walmart has filed patents for expanding the use of blockchain that mention applications such as vendor payments and digital shopping. American Express is launching a blockchain effort with Boxed to customize rewards for cardholders. Starbucks is piloting a program to create transparency by tracing coffee beans from Costa Rica, Colombia and Rwanda. JD.com has launched AI Catapult, an accelerator for the development of artificial intelligence and blockchain technologies.
One example IHS Markit detailed of how blockchain could benefit retailers is by reducing the inefficiencies in trade promotion spending, currently 17% of manufacturer sales. With a decentralized ecosystem like blockchain, consumers could save as much as 30% in their everyday shopping. Additionally, the e-commerce payment process now involves more than 10 steps to settle transactions, with 15 separate fees for payment gateways. As a result, transaction fees range from 2% to 6%, and blockchain could reduce these. By using blockchain for payment processing, there could be significantly higher speeds and lower prices, the report said.
“Using blockchain within the retail and e-commerce sector can lead to a direct relationship opportunity with the customer, providing companies with greater understanding of their needs and behavior,” said Don Tait, senior blockchain analyst, IHS Markit, in the press release. “Blockchain and smart contracts can also provide the tools and framework to create a new generation of marketplaces where the supply and demand sides can engage in trusted trading transactions, according to various business rules, without the need for a central brokerage entity.”
The impact of blockchain on supply chain and logistics efficiencies was also covered by the IHS Markit report, which noted that by reducing barriers throughout the supply chain, global GDP could potentially increase by 5% and raise total trade volume by 15%, according to a World Economic Forum report.