Blockchain technology is bringing the power back to shoppers30th March 2019
Blockchain technology is bringing the power back to shoppers
eCommerce marketplace giants such as Amazon, which alone takes up to near 50% of the U.S. eCommerce market share, have transformed the way people shop: empowering shoppers to easily make cross-border purchases, compare and select goods from multiple vendors on a single platform.
Consumer behaviour has also shifted in this evolution of the digital environment, with 64% of respondents in a global Amazon and Pymnts.com survey stating that they begin product searches at marketplaces, citing product variety and price as key motivators.
With the evolution of the eCommerce industry and more discerning shoppers with no lack of choices, this presents a new set of challenges and opportunities for industry players. In this competitive landscape, much can be done to improve current systems to maximise business efficiencies and opportunities.
Blockchain technology — a perfect fit for the eCommerce industry?
Enter blockchain technology — a distributed ledger technology steeped in immutability and transparency with the potential to streamline the eCommerce industry’s complex system of supporting multiple players. Blockchain technology will not only enable varying businesses to enjoy different advantages, but also help enhance the buying experience for shoppers in areas such as:
- Cost efficiency: By enabling a distributed peer-to-peer network, unnecessary intermediaries are removed, therefore reducing merchant mark up costs, which translates to cost savings for shoppers
- Convenience: Providing a borderless payment solution through tokenization
- Reliability & security: A decentralised network removes the need for the middleman, protects user data and privacy by preventing any centralised access with its distributed nature. Smart contract technology also helps to enable automated escrow services, preventing any cases of fraud
Here, we further explore some current pain points shoppers face and how blockchain technology could help bring the power back to the people.
“ I wish there was a way to forgo expensive third-party payment charges…”
Online transactions are typically fraught with extra charges and hidden fees, including transaction, currency conversion and merchant mark up fees, which shoppers are often unaware of. To optimise this process, many companies have explored means to bypass external payment gateways and their limitations, while shoppers have looked into bank alternatives such as Transferwise and Xfers.
The reduction of intermediaries, such as third party credit card transaction fees, will enable merchants to reduce costs, which translates to lower mark up prices and in turn leads to more cost savings for shoppers. More companies are also exploring alternatives such as proprietary payment services, with Singapore mobile marketplace startup Carousell launching Caroupay last year, a native payment gateway which offers an integrated payment solution in the ecosystem to simplify the payment process for both buyers and sellers.
Asset tokenization, which issues rights to an asset through a digital representation of it could be a way to enhance shoppers’ experience by simplifying and making the payment process more convenient. Through placing it on the blockchain, it comes with the added advantages of traceability, immutability and irrevocability in the system.
QuuBe, e-commerce site Qoo10’s new blockchain-powered counterpart, is one example where shoppers can pay with Q*Coins, their native digital token, which removes the need for third-party fees such as transaction and service fees thus bringing cost savings to shoppers.
Blockchain smart contracts, which are digital protocols developed for automated proofing conditions of a contract between two or more parties (or otherwise best described as an automated vending machine on simpler terms), could also help eliminate the need for costly intermediaries and prevent fraud.
ArcadierX, a blockchain-based project by Arcadier, a leading online marketplaces builder utilises smart contracts in its ecosystem to facilitate peer-to-peer transactions with the options of funds escrow, eliminating the need for costly intermediaries.
“Is my data safe here?”
A 2018 global survey on Internet Security and Trust has found that over half of internet users are discouraged by the lack of trust online, being cautious about online transactions due to privacy and security concerns.
In 2014, an eBay data breach compromised 145 million users’ private information, while Marriott International shockingly had an undetected data breach of 500 million customers for 4 years from 2016 to 2018. Such cases highlight the reality and the growing threat and impact of business data breaches.
The growing global average cost of a data breach (defined as both direct and indirect costs to the business) has risen up by 6.4 percent in 2018 over the previous year to $3.86 million. This highlights the importance for the eCommerce industry to take action and explore ways to improve the current system before any potential oversight cause irreversible damage to their business and reputation.
Blockchain offers an opportunity to securely manage eCommerce databases through distributed ledger technology, where data and transactions can be stored in a distributed, immutable and irrevocable ledger. Through this decentralised peer-to-peer network, any single point of failure that is present in traditional centralised databases can thus be fully eliminated.
Openbazaar is an example of a fully decentralised peer-to-peer only marketplace where data is distributed across the network instead of being stored in a central database, so the power is transferred from a central authority to individuals. Although this helps to minimise cases of data breaches and fraud, it also shifts the responsibility of ensuring safety and security to the individual.
Of course, there are also current limitations of blockchain technology with regards to issues of speed and scalability in a decentralised network that companies have to take into consideration. For instance, some companies are choosing to integrate blockchain technology to proven areas such as data storage and payments while industry standards and technology continue to mature. Storiqa, an eCommerce marketplace, is enhancing their platform with blockchain technology — building its decentralised infrastructure on top of its centralised base, in areas such as payments, data verification and smart contract execution.
“ Fake reviews, sellers not delivering the products, counterfeit goods… [there’s] too many reasons not to trust the current system!”
The growth of the eCommerce industry, with retail sales projected to rise to US$4.88 trillion in 2021 (a threefold increase from 2014) presents lucrative opportunities for players looking to capture a slice of the market.
With that growth, however, comes more bad players in the market looking for ways to exploit the system. Fake reviews is a huge issue, with the Federal Trade Commission recently bringing its first case against an Amazon merchant’s fake reviews and the rise of counterfeit goods in the industry
Ironically, this is where trustless systems could help play a part in demystifying and rebuilding trust in the industry. As a distributed ledger system, blockchain enables a systemised way of ensuring provenance through a decentralised peer-to-peer ledger which enables the tracking of transactions and the flow of goods.
Tmall Global, Alibaba’s international e-commerce platform, has integrated a global tracing system “Traceability for TMG” using blockchain technology set to be able to trace imported goods every single step of the process, where users can simply scan a QR code and receive all information regarding the product. Likewise, Reebonz, an online luxury marketplace, has also recently signed a Memorandum of Understanding (MoU) with blockchain startup Vechain, to tackle fraud cases by enabling tracking and authentication for the luxury goods sold on its platform.
The benefits are not limited to the transaction of goods and services but also in other areas such as eCommerce ratings and reviews. For example, on ArcadierX, the distributed nature of blockchain technology would help prevent fake reviews and even allow sellers to bring their reputation with them on multiple marketplaces. Similarly, NeoPlace, another decentralised marketplace builder, is hoping to enable a transparent and automated escrow system through using smart contracts built on the Ethereum blockchain.
Empowering shoppers through rebuilding trust
Blockchain technology represents a paradigm shift in the system, transforming shoppers’ role and experience in the eCommerce ecosystem. No longer are they passive consumers, but rather active participants gaining back control of their data and privacy through decentralisation.
As the technology continues to mature and gain traction, shoppers can look forward to more impactful innovations and disruptions that could further enhance their shopping experience.
(The writer is the CCO & Co-Founder at ArcadierX)
Disclaimer: Nothing written, posted or said by representatives of ArcadierX, its community managers, or community members should be interpreted as, taken as, or constitutes investment advice. All written comments are opinions of individuals and any investment is a risk that individuals take themselves.
ArcadierX is leading marketplace builder Arcadier’s blockchain initiative to onboard users with a blockchain enhanced platform. For more insights and developments about blockchain and eCommerce, check us out on Medium.
What are some other ways blockchain technology can disrupt the eCommerce ecosystem? Continue the discussion with us on Telegram.
Blockchain technology is bringing the power back to shoppers was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.