As Bitcoin and ICO bubbles are winding down, it seems as a good time to have in depth look at the real potential of applying blockchain technology to different aspects of Ecommerce. As Ecommerce is based on transactions while blockchain’s promise is to make transactions faster, simpler, and safer, there should be multiple opportunities to explore.
The realization that blockchain could very well be the next big thing for Ecommerce has already dawned upon the biggest industry players, with E-Commerce giant JD.com launching Blockchain Startup, Alibaba’s T-Mall platform adopting blockchain technology in its cross-border supply chain, and major Ecommerce companies such as Walmart and Unilever starting a blockchain collaboration with the tech giant IBM.
So, let’s explore what applications of blockchain can benefit the industry in the short term, which could prove their potential in the future, and what is nothing more than a hype.
Payments seems to be the obvious place to start our journey. Some payment providers have implement support for cryptocurrency payments and have integrated them into Ecommerce platforms. For example, Shopify documentation says its merchants can use Coinbase Commerce, BitPay, GoCoin, or CoinPayments to accept payments in digital coins.
One of South Korea’s largest e-commerce platforms Wemepu (WeMakePrice) is integrating 12 cryptocurrencies including bitcoin, Ethereum, and Litecoin in collaboration with Bithumb, the country’s largest cryptocurrency exchange.
Despite all these efforts, the truth of the matter is that most consumers are not using cryptocurrencies to pay online. They are too volatile and transactions are slow.
This is now. Will cryptocurrencies become more acceptable in the future?
LendEDU has conducted an interesting survey. They polled 1,000 consumers who purchased something from Amazon in the past 30 days to ask how likely they to use a cryptocurrency introduced by Amazon. “Amazon-coin” anyone? Results are telling. More than a half of respondents in the LendEDU survey said yes to the idea of using an Amazon-created cryptocurrency for purchases on the site.
More than 58 percent of Prime users said they would consider using “Amazon Coins” and about 45 percent are even open to the idea of using Amazon as their primary bank account as well (financial industry—take notice).
Request Network is built on top of Ethereum and has an ambitious goal to create a decentralized network of payment requests for online payments, invoicing, audit & accounting. They promise to eliminate multiple steps in exchanging payment details and process all types of payments as a simple three step process.
Let’s keep an eye on their progress, especially in B2B.
IoT brings another interesting use case where payments in cryptocurrency are done between a human and a machine.
Source: Accenture Insights
You can imagine a car or hotel room holding a digital wallet. User pays and it unlocks itself.
Crypto-currency based solution can also get adopted for merchant to merchant payments.
While mass adoption of crypto payments is not here yet, it will come sooner or later. You cannot use Bitcoins to pay for coffee yet, but, preparing for the future, Starbucks has just announced that together with the Intercontinental Stock Exchange, BCG, and Microsoft, it is entering into a joint venture Bakkt to create a “seamless global network” for spending digital currencies. Soon you will have your morning purchase of Late Macchiato burned into a blockchain for eternity.
Monetising Digital assets
Blockchain also has a potential to solve the problem of creating, managing, and monetising digital content that you find on any given Ecommerce product page. These high quality photos, product videos, reviews, and other information are created at great cost by the store owner, to increase sales and reduce return rates. However, the ownership of the content belongs to the E-commerce platform the merchant is selling on.
Blockchain technology allows for creators and merchants to retain the ownership and to share & sell content via peer-to-peer networks.
Cappasity is a new platform for democratization of 3D content creation for Ecommerce. The online retailers and web developers can create, share and monetize new 3D images without a centralized entity profiteering from their efforts. A number of different start-ups are active in that area—Photochain is applying blockchain to stock photography business, while ContentBox promises to empower the entire digital content industry with a solution that is going to support a fast and secure blockchain to carry out multi-party contingent payments.
The Blockchain technology seems like a natural fit to revolutionize loyalty programs. Loyalty points are already used as some form of currency. Customers are compensated with them for their support and can use them on future purchases.
Deloitte report on a potential of Blockchain powered Loyalty Programs says that “blockchain will allow instantaneous and secure creation, redemption, and exchange of loyalty reward points across programs, vendors, and industries through a trust less environment using cryptographic proofs in lieu of trusted third parties and administrators.”
Japanese Ecommerce giant Rakuten is planning a new cryptocurrency called Rakuten Coin—built on the blockchain technology to combine it with the company’s existing loyalty program—Rakuten Super Points (1 trillion points awarded since its start). The company wants to add Rakuten Coin to all of Rakuten’s businesses—some of which have loyalty programs today and some of which do not. This will encourage customers to buy goods across different Rakuten services and markets.
BitRewards is a spinoff from SaaS loyalty company GIFTD. Merchants can join for free their Cashback & Loyalty Points crypto platform and reward shoppers for purchases, friends’ invites, or product reviews. Rewards are given with cryptocurrency BIT, that merchant can buy on open market. BitRewards says that their loyalty points have “absolute value for the customers, as they get for their purchases the liquid Ethereum-based tokens, which can be redeemed for purchases or transferred to another crypto-wallet” and may even grow in value instead of expiring.
The key advantage of a crypto based loyalty program is that it can be used across different retailers, enabling a consumer to decide where to redeem rewards.
Usually, we can only assume that the reviews we find online are genuine. But positive reviews might be generated by sellers looking to increase their turnover, while negative reviews could easily be written by competitors. Fortunately, the blockchain technology can help to verify reviews, as is shown by Zapit. This US-based company compensates both review writers and moderators, incentivizing legitimacy and claiming a win-win situation for all parties involved.
Traditional E-commerce platforms offer no incentive for customers to leave reviews or help brands they are already advocates for. Wouldn’t it be nice to get paid for leaving in-depth reviews of a product you enjoy, or make commission from sales that were driven from a social media post you made?
Many of us have experienced the frustration of having lost paper receipts and being unable to prove warranty coverage or even know when warranty expires. This problem is easily solved with storing a proof of purchase with all required details on the blockchain.
Source: Accenture Insights
Manufacturers, retailers and customers would all be able to access the data, allowing proof of ownership to be easily validated.
New Ecommerce Platforms built from ground up on Blockchain
And now we come to the most interesting and intriguing initiatives. There is a number of innovative companies who are not content with enhancing one or another function of an Ecommerce system with the blockchain approach. They are rethinking Ecommerce from top to bottom as a blockchain based system.
They start from the premise that the need for a trusted third-party led to the rise of centralized marketplaces and gave them all the power and revenues. The blockchain can provide the trusted and safe environment without an intermediate and will lead to a new type of a truly decentralized marketplace. Such marketplace can be much cheaper to operate and neither buyer or seller will pay fees to an operating company as, technically speaking, there will be no central company behind it.
While it is too early to say if any of these new startups will succeed, it is fascinating to look at their approaches to get a glimpse of what could come in a near future.
A new project called ECoinmerce has begun preparation for their blockchain-powered marketplace and platform. It is promising to address some current Ecommerce challenges that we have discussed above. Retailers will have the complete ownership of all digital assets including their digital storefronts, product photos/videos, and reviews. This ownership will be recorded on the blockchain and will be 100% sellable, rentable, and tradable. It is also planning to incentivize customers by giving token rewards and commissions for writing reviews, social media sharing, and friend referral. ECoinmerce sees its platforms benefiting sellers and buyer, but also social influencers whose contributions will be recorded and rewarded.
In old time, commerce was a very social activity with buyers and sellers engaging in face to face interactions. Helsinki based Soma wants to bring the social aspect back to the core of an Ecommerce activity. In their own words, Soma “brings a social trading experience to consumers while providing a robust tracking and authentication protocol for business. The integration of social media functionality allows users to monetize social influence and provide value-added services to one another for just compensation”. Its reward system is built to reward every user who contributes to the creation of the social value with Soma Community Token (SCT).
Soma also has an innovative patent-pending feature—Interactive Item Card (IIC). IIC is a digital representation of every physical item that is listed on the site. It preserves all information about the item and everything that happens with it on the platform—price changes, transactions, etc. As IIC accumulates the social value inside the Soma Community through different social interactions from the users, it may be reflected in the value of the physical item. When item is sold, the ownership of the IIC is transferred to a new owner.
Another player in the decentralized marketplace space is Bitboost. It provides a platform that facilitates B2B, B2C and C2C transactions. Buyers and Sellers interact directly with each other and aren’t manipulated in their choices by unwanted algorithmic functions or have to pay transaction fees. An interesting feature is “Protected Funds”. Bitboost can hold funds in escrow and, in case of dispute, buyer and seller can agree on a mediator and make it an Escrow Agent.
OpenBazaar is a peer to peer marketplace and an open source project. It was built to provide everyone with the ability to buy and sell with neither fees nor restrictions. OpenBazaar is in Beta and you can try it out by installing a desktop client. There is no central server, you just add products on your computer and P2P network distributes them to everybody.
While other systems in this review are based on Ethereum, the OpenBazzar is built on Bitcoin.
Blockchain solutions are still in their early stages, some may fail while others could succeed. One thing is for sure, the advance of Blockchain technology into the Ecommerce space will certainly to continue.