Breaking Down Blockchain: Part 2

As retail trading partners continue to discover the numerous ways blockchain technology can be used as a tool to streamline systems both across the supply chain and in-store, Winsight Grocery Business continues to explore its potential benefits in Part 2 of our “Breaking Down Blockchain” series. From cutting out the middleman on the front end to providing transparency on the backend, and onward to improving food safety and learning more about shopper behaviors, blockchain is a word that will be on the tips of retailers’ tongues as the year progresses. In fact, according to a recent report from Market Reports Center, the global market for blockchain in 2017 was valued at $708 million and is anticipated to reach $60.7 billion by 2024. Additional ways the technology could revolutionize the grocery industry follow below.

Keeping Things Fresh and Safe

The pilot partnership between IBM and Walmart that allowed for the tracking of mangoes from Mexico, as discussed in Part 1, can be scaled to track fresh products across the board, helping to further enhance food safety, according to Maxwell Arnold, content producer for Global Blockchain Technologies Corp. Arnold uses the example of the spinach E. coli outbreak in 2006, in which the FDA had to order all bagged spinach to be recalled from shelves, since they couldn’t immediately determine its source. Blockchain technology would have simplified the recall process, traced the contamination back to its source and dramatically reduced the amount of food waste.

Martin Dudley, CMO of Nucleus Vision, says the same applies for any food recall incidents. Blockchain could track product not only back to the farm—and to the block—but also likely to the row the product was picked from, and to the person who harvested it from the ground.

Blockchain technology also offers benefits for growers by preventing in-store food spoilage, says Dudley. He says traceability is becoming a reciprocal critical driver for many suppliers because they want to ensure “from farm to floor,” the product is being monitored and properly handled throughout every step of the chain. “They don’t want their product [deteriorating] in a warm back room of a grocery store when it should be out on the nice, cool floor. That’s a big problem for lot of farmers, who are going to benefit” greatly from blockchain—as will retailers, particularly for e-commerce grocery fulfillment.

“When you think of how blockchain can help visibility when you sell a product online and it’s not a part of your assortment, you want to be keeping track of that. Because even though you’re not touching the product, you’re still responsible for it,” says Michael Halula, retail practice director for the Americas for Teradata. This is why it’s important that retailers ensure they are sourcing from appropriate manufacturers and suppliers, he says.

Arnold predicts that blockchain will become embedded in food safety laws, such as labeling practices and recall processes. Additionally, the type of transparency that blockchain provides will up the standards by which food sellers will be held. “Once the impact on public health that is made by blockchain traceability can be quantified, regulators will soon take this into account as a more informative way to make decisions with regard to food safety,” Arnold says.

Cryptocurrency Considerations

While blockchain is often connected to digital currency, most retailers believe they are nowhere near ready to accept this type of tender. Perry Woodin, founder of NODE40 and chief strategy officer of HashChain—which just acquired NODE40—says some grocers may have already ventured into the world of cryptocurrency and don’t even know it. “A good example is Apple Pay, which is in almost every point-of-sale system right now. But Apple Pay has also started its own digital currency, Apple Cash,” which Woodin says is already being used. “They don’t even realize they’re using digital currency.”

The top thing retailers need to keep in mind about many types of cryptocurrency such as bitcoin, Woodin says, is that when it is accepted as a point-of-sale system, every transaction is a taxable event. Standard payment methods such as cash and credit cards are subject to standard income tax. The difference with digital currency is that it needs to be converted to U.S. dollars, which will accrue a gain or a loss based on the type of cryptocurrency, and will be considered as property be the IRS.

“Tracking that information can be pretty daunting for a retailer,” says Woodin. However, there’s a light at the end of the tunnel, he adds, as companies such as Alt Thirty-Six are beginning to pop up and help retailers sort through these transactions. “They’re a gateway provider, so they provide the hardware and everything that goes along with point-of-sale, and they are starting to integrate digital currency and use our system in order to provide the retailers with the accounting information that they would need,” he says. “Our system itself generates U.S. dollar-denominated ledgers, so it looks just like anything anybody would be used to seeing when dealing with credit cards or dollars.”

Shopper Personalization

While the above primer discusses how retailers can connect with customers through supply chain transparency, what about speaking to them on a more direct level? Blockchain technology on the horizon will allow retailers to keep track of their customers’ preferred products and offer them personalized deals.

Nucleus Vision, for example, has created technology that can recognize shoppers’ international mobile equipment identity (IMEI) and, with their permission, can create personalized offerings for opt-in consumers as soon as they enter the store. The company offers a completely transparent ecosystem that will also reward shoppers with cryptocurrency while giving users control of their data to decide whether or not they want to shop that way.

“A better way of connecting directly to the consumer is giving them the ability to be” reminded about and incentivized to buy products they love, says Dudley. “It’s very exciting from the standpoint of allowing” mutual connectivity with consumers and partners across the purchase path.

Peter Fedchenkov, founder of INS Ecosystem, says another way to use blockchain technology in this way is to think about it as an “if this, then that” agreement that automatically executes when the requirements are fulfilled.

As such, he says, a simple, smart contract may look like this: If buyer X buys three bottles of soda, retailers can reward the buyer with discount Y. “The beauty of the smart contract is that it’s fully automated, and therefore very efficient,” he says. “As soon as the buyer fulfils the requirements, the discount is rewarded—no back office needed, and no one required to count stamps.”

Keeping It Confidential

The buzz about blockchain also includes its ability to keep information extremely secure and ward off hacking. This means that the technology could allow retailers to rest easier when keeping track of sensitive information such as their customers’ credit card numbers and staff members’ personal details.

Karen Caplan, president and CEO of Frieda’s Specialty Produce, says this type of security could be useful for human resources teams, who are responsible for keeping personal information such as social security numbers safe. “HR functions would be a perfect use for blockchain; you store personal files and employee information in a blockchain format and then actually give people access to all relevant information, without divulging the part you want to keep locked up,” she says.

Further, since blockchain allows retailers to share certain blocks of information while keeping other details locked, the technology can also help protect a company’s intellectual property or trade secrets, says Caplan. “There’s so much information as a supplier that we have to have at our fingertips, but that we don’t want to give away,” she says.