I was visiting Lush – a fresh handmade cosmetics store along with my daughter and felt that the shopping experience compared with the past is changing in a noticeable way, in particular when it comes to interactions with the store workforce. I came to know that Lush employees typically go through extensive training to ensure they have the tools and knowledge to deliver this kind of service. At Lush the digital technology offers a replacement to the information usually found on packaging – the Lush Lens app uses machine learning to recognize products, meaning customers can simply scan ‘naked’ products to discover key information about them. Hence the retail workforce is upskilling to add value beyond the digital offerings.
This blog post is a result of the experience above. Global Retail and e-commerce leaders reimagining their business models in digital evolution and which is further changing workplace practices. I can say from my vantage point that digital, social and environmental developments are shifting the needs of the retail workforce. It is evident that device and sensor proliferation is aiding retailers to experiment intelligent and connected methods to innovate new business models to try new markets, offer new services and create rich & compelling customer experiences. The new-age developments listed below reflects the continuous transformation of the retail workforce
Knowledgeable workforce offering personalized shopping experience:In a world where just about any product or service is instantly available online, shoppers visit a physical location is driven by specific needs. It means recognizing that shoppers would make the trip because they need something more than what they find in the digital world: face-to-face contact, empathy, and deep expertise. Whether they want to figure out how to hook up a smart home, what dress to wear to a formal dinner, or what to pack for that dream wilderness vacation, they want to talk to someone who can offer them more knowledge and personal understanding that they can find with a quick online search.
Fitment of the retail workforce in experience economy:Stores just can’t be product-fulfillment centers. In both the physical and virtual worlds, product fulfillment is fast becoming the domain of AI and robotics, with retailers, consumer products companies and e-commerce platforms racing to develop the best systems to anticipate consumer needs and deliver products to meet them. What technology cannot fulfill, however, are human needs that remain unmet today and will continue to evolve in the future. One thing I’ve learned through my work is that as technological connections grow, so does the human need for meaningful connections. This need is what’s driving the experience economy. Whether in restaurants, travel groups, shared workspaces, yoga studios or spin classes, people are actively seeking intimate connection with other people and finding it in spaces and communities like these.
Uplifting workforce skills is the need of the day:Process improvement, speed, and efficiency are at the core of successful online businesses. With online infiltrating over to brick-and-mortar sales it’s a mismatch in areas such as supply chain, inventory management, trend identification, competitive pricing analysis, etc.; for example, the ability to automate 99% of pricing decisions, not only offers a real-time advantage, but it also eliminates hours and hours of manual work per week. Hence the use and mastery of algorithms is a key tool of the buyer in successful online companies, a skill that is not as prevalent in brick and mortar;
With the advent of modern technologies bringing e-commerce intelligent systems that make running a retail store more efficient, my experiences with retailers progressed on leveraging in-store data. Having the right retail workforce management solution can take care of tedious administrative tasks across the board, while simultaneously collecting data to instantly improve in-store operations. With this schedule, store managers can be confident knowing that the most knowledgeable and high performing sales assistants are on the shop floor during times of high customer traffic, enhancing the shopping experience and resulting in more sales.
As retailers continue to evolve in experience economy continuum, it’s the value that a capable retail associate can add – the expertise, social sensitivity, and problem-solving skills – that will differentiate the good stores from the bad, the stores that will endure from those destined to fade from the scene.
CPG Supply Chains are undergoing an unprecedented change looking out for new ways of improvement. I am focusing on this blog on how net-new technologies including Blockchain is transforming the CPG supply chains. Evaluating few real-life examples in CPG space triggering a discussion on Blockchain relevance in CPGs.
CPG sectors that benefit from Blockchain are widespread. Fashion products, which is one of the prime CPG sectors ripe for Blockchain adaption where supply chain provenance plays a significant role. The other product classes include garment or makeup products, fine wine, art, luxury items or for that matter diamonds that can benefit from Blockchain adaption. I have been evaluating on how CPG companies can promote an “ethical fashion” or “ethical products” with Blockchain based applications. Let us dive into details.
Blockchain relevance to CPGs:
Focus areas chosen are supply chain provenance, transparency, counterfeiting, and sustainability. The enterprise-wide Blockchain platform could help to increase business velocity, create new revenue streams, and reduce cost and risk by securely extending the supply chain to drive tamper-resistant transactions on a trusted business network.
Provenance & Transparency: Do you agree that the relationship between CPG supply chains Transparency (access to information) is not always linear & straightforward with Traceability (provenance)? Let us look into how to build a Blockchain based solution for CPG supply chain provenance.
Blockchain could help in improving the transparency of the fashion supply chains, promoting sustainability and addressing fashion companies’ lack of ethical supply chains that are contributing to >10% global emissions, and as well in combating to counterfeiting.
Blockchain can play a role in transparency in transforming fashion supply chains through technologies such as track and trace and inventory management. With Blockchain, it is possible to create physical – digital link between goods and their digital identifiers. Cryptographic seal or serial number can be used as a physical identifier linking back to the product’s digital-twin. An example to quote is “Better Kinds”, with a focus on decentralized manufacturing allowing everyone to know where your clothes come from.
Counterfeiting: Blockchain solution as well helps fashion CPGs in combating counterfeiting by recording on blockchain every time goods change-in hands. The chain of custody on blockchain provides a record of the last party to gain custody of the product, showing where the counterfeit product slipped in, or an authentic product got diverted. Read my blog post, Combating Counterfeiting With Blockchain Technology
Sustainability: The promising outcomes of Blockchain in this space include, sustainability gains in the form of reduced environmental impact and better assurance of human rights and fair work practices. Having a clear record of product history helps product buyers to be confident that goods being purchased are coming only from sources that have been recognized as being ethically sound. More accurately tracking substandard products and identifying their occurrence further upstream in supply chains will help reduce the scope of rework and recalls, providing considerable greenhouse gas reductions and other resource savings. the ultimate goal of Blockchain will be improved supply chain optimization gaining access to a more complete longitudinal supply chain datasets eliminating redundancies and bottlenecks, and ultimately, decreases in resource consumption.
Blockchain implementation process for CPG Blockchains:
Blockchain solutions could help fashion CPGs in their brand positioning as environment-friendly and tech-savvy. Existing technologies like ERPs, Enterprise Data Warehouse, Integration Technologies, and existing e-commerce website can enable provenance, but with practical limitations. That is where new technologies including Mobile App Development, Public/Private Blockchain Platform, Crypto-Fiat payment gateways & wallets, Digital-Twins, Artificial Intelligence and Advanced Analytics, IoT Sensors, Robots & New Handheld device Hardware etc.
Blockchain implementation for CPGs is an art. The new technology adaption process includes building a public or private blockchain network bringing connecting all key stakeholders using a DLT. Create a token that promotes the use of such application and potentially incentivize the users and suppliers. Create wallets to store tokens and collect incentives. Integrate with payment gateways and exchanges. This forms the Blockchain Core. Then build business and application logic with workflows that support the provenance functionality. Integrate the Blockchain core with back-end transaction systems and ensure seamless flow of information ensuring the data integrity and privacy. It may be a good idea to consider a second layer solution for improved transaction rates and at the same time confining certain confidential information, in this case, supplier data to open access to all competitors via a blockchain. Developing a mobile app and lastly, integrating UI, Application (Blockchain Core) and back-end systems. A brief description of 3 layers of foundational architecture is provided below.
User Interface: Customer experience plays a significant role in provenance applications. Should have access to a friendly UX that should support consumers to be able to walk into their favorite retailers, use phones and scan the tag on a garment or makeup product to be able to pull up full supply chain information.
Application Logic: Build business and application logic with workflows that support the provenance functionality. This is the core platforms that developed and rolls out provenance application.
Data and Back-end Transactions: Brands should get a better handle on what’s really happening in their production processes and chosen technology should relieve a logistical headache by streamlining the record-keeping and verification processes. Second, it requires brands to voluntarily invite their suppliers (who will need to in turn invite their own suppliers, and so on down the chain), to adopt the technology.
How to calculate ROI for CPGBlockchains?
Setting up a Blockchain based application for CPG supply chain provenance involve a capital investment for infrastructure and development costs and ongoing maintenance costs. ROI is a derivative of whether such application attracts more consumers demand and/or willingness of consumers pay additional fees for access to truth and sustainability and/or reduced costs of the current supply chain with streamlined operations. Hence ROI should be computed as “[ Increased revenues from consumer demands & adaption + Premium fees consumer willing to pay + Reduced costs of supply chain operations – Total Investments & Costs (CapEx+OpEx)]
The real ROI of Blockchains come from handling the volume of CPG products and transactions having a second layer solutions to offload/ off-chain transaction volumes from core Blockchain. Estimating components is a challenge in computing Blockchain ROI. But there exists an opportunity to estimate parameters with a degree of accuracy. Such parameters include,
Improving the efficiencies of running workloads. Smart contract automation can save significant time in real life transactions avoiding manual interventions
Cost reduction is a great value in horizontally integrated supply chains. Blockchain can easily create a global view without expensive third parties
Increased trust among key stakeholders that would improve supply chain performance
CPG/Retail plastic/waste management can be incentivized leading to a better sustainability
Let us examine use cases:
The following two case studies offer a great insight into how Blockchains can enable provenance. From these examples, taking a value chain based approach for identifying incremental benefits along various supply chains components could fairly offer potential ROI perspective from Blockchain adaption.
Examining the Everledger based blockchain application for traceability of diamonds. The key challenge of the diamond industry is certification of the ethical origin of the diamond. Noticed that Everledger has been trying to create a database of diamonds registering on the blockchain to certify the final cut diamond was ethically-sourced from “conflict-free” regions. Such examples can be used to create an anti-counterfeit database for other valuable goods such as fine wine and art.
Moving on to another example, Blockchain enabled traceability application for yellowfin and skipjack tuna fish. The Etherium based platform trying to track the entire supply chain from fishermen to distributors. End users could track the source of their tuna fish sandwiches via a smartphone. This platform would enable determination of information about the producers, suppliers, and procedures undergone by the end product. allow confirmation of a given fish’s origin tracking the supply chain. Such a solution would present a viable model for product certification to an end consumer.
The complex blockchain solutions will provide an unprecedented level of transparency and traceability, to build the highest level of trust in the sustainability of the CPG supply chains. The CPG products are able to be traced on the blockchain through their unique tracking code with the information collected from linking all information sources within the global supply chain covering from the source through the production process up to the final point of sale as described in the case examples above.
Working as a single source of truth, Blockchain can change the way business transactions take place. From a supply chain perspective, such visibility will help ensure efficient transactions, while promoting safety, efficient recalls, the elimination of counterfeits, and the assurance of ethical trading.
I continue to research further on Blockchain relevance to CPG supply chains. While the core principles of Blockchain are being established, the companies adopting the new technology progressively evolve alongside. ABC (AI+Blockchain+Crtptocurrencies) continues to significantly alter Retail / CPG business models.
Reach out to me for further discussions @ firstname.lastname@example.org.
Last week, I published a blog post titled “Blockchain Boosting Customer Loyalty Programmes”. In continuation of views on Blockchain relevance, highlighting the following 4 aspects of gift cards industry that encompasses open & closed loop cards, new age innovative cards such as gift cards for stock, lottery retail gift card, donation gift cards etc.
1) Transaction fees
2) Seamless redemption
3) Consumer wallet spends
1) Transaction fees: Gift cards market in the USA alone is estimated >$170 billion and growing at ~20% CAGR internationally across channels of stores, web, mobile, incentives, employee engagement etc. As per GiftCardsdotcom, processing fees on various types of gift cards range from 1.4% to 3.94% and lower the value of card higher the fees even touching double digits. This as a result of cumulative effect of various stakeholders in the value chain including the issuer, distributor, reseller, buyer, & receiver. Can we bring them on DLT to checkout fees?
2) Seamless redemption: Gift card industry is set up to hide identities of unspent balances on gift cards called “breakage”, which accounts to ~20% total spend i.e. $34 billion. Combining gifts, rewards, loyalty and coupon credits in one place/platform, making them available for immediate use can be one solution to this. Such platform as well can enable auctioning, trading, regifting and donating to charity features creating value for unwanted cards that expire. Can blockchain technology be leveraged for generating net new revenues from seamless card redemption?
3) Consumer wallet spends: Lack of single source of truth and shopping data has been limiting the scope of consumer wallet spend expansion. Overspend dynamic is really an upside, and analysis shows that when consumers shop using gift cards they spend an average of 30% to 40% more than the face value of the card credit. How about combining AI+Blockchain+Cryptocurrency (ABC) to increase the effectiveness of advertising by retailers to increase consumer wallet spend?
4) Fraudulence: “Return fraud – thieves simply walk into Walmart, Target, Home Depot, Lowe’s or another big-name retailer, steal an item, return it at a different store without a receipt and receive a gift card in return, which they can then turn around and sell to a pawn shop or secondary store for a lower price” (dangerous than cyber fund) is a new form of fraud in Gift Cards environment. Retail return losses total of $9 to $15 billion per year, 2017 survey by the National Retail Federation. >50% of companies reported fraudulent gift cards or store credit in one or more locations. How about applying blockchain technology enabling people who don’t trust one another share valuable gift card data in a secure, tamperproof way making it extremely difficult for attackers to manipulate?
Blockchain technology precisely addresses these factors and fuels the growth of gift cards industry leapfrogging customer loyalty experience and enhancing gift cards value proposition.
Getting little bit into history, reward programs spans over a century (~120 years) with S&H Green Stamps in late 1800’s, the launch of modern programs by the airlines ~35 years ago, and to the recent coalition programs like Plenti’s initial marketing partners that include Macy’s, AT&T, Exxon Mobil and Rite Aid.
According to the 2017 Colloquy Loyalty Census, there are 3.8 billion individual loyalty memberships in the United States increasing from 2.6 billion in 2012. Every day we come across some sort of customer loyalty and reward programs in our daily lives while consuming products and services across industries that represent the spread of memberships in retail – 42%, travel & hospitality – 29%, financial – 17%, media & content, the cross-section of these industries and as well as others representing remaining 12%.
With that being said, loyalty and reward programs are facing the underpinning threats as well as bundled with few opportunities as described below. In view of this, Providers of loyalty programs should focus on their long-term sustenance and growth strategies. The following metrics are compiled from Kobie and Colloquy reports.
Only 46% of loyalty memberships in the USA are active leaving behind more than half of all memberships inactive
Over 70% of consumers in the age group of 20 to 34 years old said they would change where they shopped to get more loyalty rewards
34% of USA consumer say they are loyal to a brand because of its loyalty program
Loyalty/reward programs with integrated sustainability, contribution to the environment and quality of life are scoring more than the rest
In the above context, Blockchain technology can play a significant role allowing the providers to integrate store locators, payment vehicles, loyalty programs, even games, in a platform that enables information always to be at the consumer’s fingertips. The blockchain based platform can offer convenience, rewards, ease of use and customer experience combine to build consumer loyalty, engagement, and advocacy.
Traditionally most rewards programs use a proprietary “points system”. Customers can accumulate points for purchases at a rate that was set by the issuer and finally uses the points to purchase merchandise at a redemption ratio set by the issuer which is somewhat regulated. 3rd party fulfillment usually handles the redemption hosting the user redemption via an online web framework, maintain and keep the catalog of rewards, administer point balances, manage promotions, ship rewards, and deduct the points in a systematic manner. As you can realize by now the multi-party loyalty systems are somewhat circumvented and that leads an opportunity for disintermediation. The recent developments with blockchain technology seemingly offers an effective alternative to run loyalty programs.
As depicted in the diagram above, the entire ecosystems of loyalty & rewards programs including providers, channel distributors, customers, incentives & payments firms can be seamlessly integrated onto a blockchain core to enhance the overall value proposition. Blockchain can enable a ledger of transactions to be shared across a network of participants. When a loyalty point is issued, redeemed, or exchanged, the blockchain’s AI algorithm-generated unique token could be created and assigned to that transaction and distributed across the loyalty network, updating every ledger simultaneously. Loyalty participants can validate the new transaction and link them to older transactions, creating a strong, secure, and verifiable record of all transactions, without the need for intermediaries or centralized databases. However, for security and privacy of loyalty programs, it may be logical to design a closed-loop rewards program, where only those parties involved in the loyalty program, issuers and merchants, would be allowed, which resembles a private or a permissioned blockchain.
If you can visualize, in loyalty platform backed by blockchain, the points associated with the rewards systems can be deposited by the issuer in a customer crypto wallet that would be available to immediately spend at any of the merchants that accept that cryptocurrency and participate in that closed blockchain. The issuer would no longer need to carry the liability for all unused points on its books, which is estimated at ~10% leakage of rewards that expire and can be written off with no redemption costs. To compensate this blockchain based systems can deliver cost savings in redemption by eliminating the third-party fulfillment function, along with the associated fees for those services. The cardholder would no longer need to log in to the fulfillment website to redeem points for merchandise or travel. Instead, the rewards currency could be used to purchase from any merchant, e-tailer, travel site or brick and mortar that accepts that rewards currency. Presumably, this would be a closed loop of possibilities, to avoid the problems that merchant consortiums such as Plenti had to deal with. Each merchant would then need to balance their prices, in the rewards cryptocurrency, in order to increase the potential for the cardholder to spend with them, but still maximize profitability. The inefficiencies arising from the issuer paying fees to a third party could be put back towards the issuer’s reward program, the payback for giving up the “breakage”. This, in turn, would allow the issuer to increase its rewards.
One would think now about how to handle a sporadic crypto price fluctuations? One way to address this is by keeping the rewards currency, not as a tradeable token on exchanges making the blockchain a permissioned network allowing only issuers who participate in the program, and merchants who are willing to redeem could be nodes keeping the expense and time delay of each transaction to reasonable costs and near-real-time. The participating nodes can be designed to perform a proof-of-cooperation calculation to maintain the integrity of the transaction.
To sum it up, leveraging customer loyalty blockchain platform, the issuer no longer sets redemption ratios in the future-generation model of card rewards & redemption, removing any ambiguity as to what each reward point is worth. This allows merchants to price their goods at market rate to encourage purchase, removing hidden markups and resulting in loyalty truly becoming a currency.
Let’s visualize, you walk into a jewelry store and see a very aesthetic diamond necklace you were dreaming to buy to your fiancé on Valentine Day. What if you have a technology at hand that make sure the jewelry is authentic. Self-authentication is seemingly the need for many consumers buying various products before making a purchase to avoid fake in a world of counterfeiting. As per OECD estimates, global trade-related counterfeiting accounts for 2.5% of world trade, or 461 billion USD in 2016.
Going back to the diamond necklace purchase scenario, let us visualize that you have an application on your phone and scan the necklace. The application tells you if necklace is real or not. Further to that application (a DApp on a Blockchain) displays a video of the designer explaining why you should select that precious necklace. You may find out that the necklace you like is a very limited edition and only 50 persons on the globe can have such a necklace. You can’t resist anymore and you just buy the necklace. After buying it, you ask the seller to transfer the ownership to you. They show you a QR-code, for instance, on their phone, you flash it with the app and declaring to everybody in the Blockchain that this necklace, one of few of the limited edition, only 50 pieces in the world, belongs to You.
The use case explained above is very much coming into reality with Blockchain enabled ant-counterfeiting platforms. Startups like Everledger, veChain, Chronicled, BlockVerify, Digmus etc. are offering Blockchain solutions for anti-counterfeiting. In today’s world counterfeiting plagues supply chains affecting consumers and businesses in many ways including the product under your possession can be a counterfeit or a products on the go can get diverted to a new destination or products gets stolen or products tied to fraudulent transactions / money laundering. Counterfeiting is widely present across industries ranging from luxury goods, diamonds, pharmaceuticals, wines/whisky, electronics, semiconductors, many retail products.
Why Blockchain Technology is promising in anti-counterfeiting?
Counterfeiting is basically a double-spend problem – the very problem the initial bitcoin blockchain was designed to solve. Blockchain offers a transparent environment where it is impossible to duplicate products. Enterprises can create registries of their products and monitor supply chains leveraging cryptographically secure mechanisms for anonymously transferring the identity of products as they move through multiparty supply chains.
Anti-Counterfeiting Blockchain Platform (ACBP) primarily has two key constituents. One is a Blockchain that acts as the storage of unique products identifiers and history of product transfer between parties. Blockchain technology can check the brand authenticity, issue crypto certificates and stores product information and additional data to verify authenticity. The second constituent is offering better UX to end user with a DApp which will be used to verify the product and provide verification for additional authenticity. With the advent of core technology and UX, ACBP identifies the product as it moves through the supply chain and alert the blockchain network if a duplicate shows up to the existence and location of a counterfeit.
Challenges of Blockchain anti-counterfeiting platforms and future focus areas:
Enterprises and blockchain communities have t aim overcoming the following potential challenges to deploy Blockchain Technology for anti-counterfeiting solutions.
High volumes and underlying transaction fees:Blockchain comes very handy for very high value goods with low volumes without above said problem. But for Anti-counterfeiting blockchain platform to scale up to serialization in overcoming counterfeiting, it has to provide individual tracking of high-volume items with relative low value may not be viable. A potential solution to this is moving certain types of transactions into off-chains where they are processed, freeing up the blockchain for its primary role as a distributed ledger. The popular off chain solutions being piloted recently are
Lightening Network for Bitcoin
Plasma & Raiden Network for Ethereum
Public vs private blockchain for anti-counterfeiting:As decried above limitations of public blockchain like Bitcoin Blockchain is lack of handling high volume (consider a manufacturer producing a millions of products per day) at speed and underlying fees for these transactions would be several hundred thousand USD per day. However, going with private Blockchain has its downside: it give an opportunity to fiddle with data in some scenarios. To get the best of both worlds – performance and low cost of private Blockchain, and trust of public Blockchain, is a hybrid blockchain. Data is kept in a private Blockchain, but on regular intervals the control checksums of private Blockchain are persisted in a public network, which makes it is impossible to corrupt or modify existing records.
Data Privacy: Anti-counterfeit systems need to find a balance between privacy and transparency. Blockchain was designed having transparency and anonymity in mind, while leaving enough freedom for developers to decide on the level of anonymity and transparency Blockchain-based solution should have. Finding the right balance is one of the toughest challenges, as increase in transparency kills anonymity and vice versa. One way to handle data privacy is separating public data that is necessary to validate product from sensitive data. Sensitive data is then encrypted and securely stored off-chain. This way only users who possess eligible identity, such as representatives of governments or controlling organizations, are allowed to read protected data.
To summarize, Blockchain enabled distributed ledger technology can provide a way for large groups of unrelated companies to jointly keep a secure and reliable record of their products and transactions.Reducing costs and time by eliminating the need for third parties that administer ledgers and clear transactions has business benefits that can improve the profitability of blockchain adopters for anti-counterfeiting. The promising features of blockchain is undoubtedly positioning this new technology a means for anti-counterfeiting.
As Blockchain Technology is gaining a broader acceptance, one of the lingering problem is on mainstream adoption of new technology. Blockchain as a technology can be used as an exchange network to complete transactions, move value and assets amongst peers on the network without the need for any 3rd party intermediary to validate or maintain these movements, and presumably at a lower underlying fees.
The core principles of blockchain sound great promising the blockchain technology’s viability across many fields with an opportunity to serve part of $3 Trillion global markets as follows,
Address part of global remittances which are of the magnitude of $444B annually (2017 world economic forum data),
Online/ecommerce payments of $2.1+ Trillion (based on latest data compilation from Invesp),
Global micro transactions of magnitude $500B+
Think of transactions of 2B+ unbanked people as per World Bank statistics.
While blockchain technology has potential in shaping the various markets and industries, let us dive deeper into finding pragmatic approach to adopting this new technology, key areas of concerns and evolving solutions in an attempt to sustain the innovative edge.
Blockchain adoption approaches:
The anomalies and contraries of public vis-à-vis private blockchain plays an important role in evaluating adoption approaches. The optimal adoption approach of blockchain depends on the nuances within the context of a company or group of companies or industries. The top two characteristics that drive the adoption is utility and speculation. While utility is to do with means of enabling transaction of buying or selling products and services, speculation comes from the investment eye of user/investor in terms of returns expected from adoption of technology. We drive deeper on these characteristics in determining the pragmatic approaches in adopting blockchains. Refer to my blog page to brush up on basics of private vs public blockchain @ https://akshinthalakk.com/blockchain/
“Public Blockchain” offers an ability in maintaining both anonymity and transactional transparency. Most popular public blockchain like Bitcoin blockchain facilitates Monet-over-Internet-Protocol (MoIP) with progressive track record of use cases in B2B payments, remittances, online payments etc. Cryptocurrencies or “Coins” such as bitcoin are just value exchange applications built on top of blockchain technology. Cryptocurrencies were instrumental in demonstrating the power of blockchains and the many applications that blockchains will support and power. Due to technical limitations of Bitcoin blockchain like lack of coding Loops that limits proliferation of distributed applications on Bitcoin and complexities of UTXOx (Unspent Transaction Outputs) that makes implementation of smart contracts tougher, led to other popular public blockchains like Ethereum blockchain. Ethereum enables ease of creation of smart contracts and democratize application on top of underlying blockchain. Similarly the race for privacy has led to other public blockchains like Monero, ZCASH and DASH. All the above public blockchains underpins both utility and speculation. Utility by virtue of completing transactions and moving assets paying premium for utility with localized cryptocurrencies bitcoin, ether, litecoin, monero etc. and drive speculation with sheer value appreciation of cryptocurrencies over time. Collectively there are close to 900 “Coins” are available to steer the public blockchain adoption by incentivizing the utility and as well as fueling the speculation.
“Blockchain Platform” is another means of driving the public blockchain momentum. Platform allows development of various applications (a.k.a dApps) serving numerous use cases. Any of the above public blockchains can offer Platforms for the development of dApps, but the technical limitations of Bitcoin as narrated above allowing Ethereum to drive the momentum of public blockchain adoption with robust community building applications on the Ethereum platform. Alongside Ethereum, there are a variety blockchain platforms came into brining decentralized ledger technology (DLT) one step closer to the reality. As per the Coinmarketcap.com data, there are more than a dozen blockchain platforms like Counterparty, NEM, NEO, Omni, Waves etc. exists today for the user and business to choose from based on their specific needs of privacy, security, scalability and gas requirements. When adopting to these Platforms, blockchain community got another flexibility in terms of “Tokens”. Tokens differ from cryptocurrencies. Instead of developing application leveraging native cryptocurrency based public blockchain platforms, nonnative currencies known as tokens can be used to incentivize the utility of the Platform. Such tokens are EOS, TRON which are used as an alternative to “ether” currency on Ethereum platform. Collectively there are nearly 540 tokens available across 13 Platforms as of Jan 2018 that could potentially expedite the adoption of public blockchain. By embracing the full power of tokenization and platforms lead communities to deliver on the full promise of blockchain technology and ultimately, the allure of the public network.
Let us look at potential real life use cases of public blockchains. What if a vending machine that can monitor and report its own stock, and accept bids from distributors and make payments automatically via micro transactions for delivery of new SKUs? Bitcoin acceptance for online payments at many mainstream businesses such as Microsoft, Dell, OpenBazar and Overstock are few real life examples. This is how public blockchain may drive value convergence in future endeavors.
“Private Blockchain” becomes relevant if anonymity in transactions is not the top priority for companies or group of companies. Private blockchain can be secured by the familiar model of user rights and secrets that organizations are comfortable with over a longtime while still maintaining many kinds of partial guarantees of authenticity and decentralization that blockchains provide. Another use of private blockchain is for testing and experiment purposes. Private blockchain mainly focus on utility with or in most cases without any incentives and without aiding speculation as there need not to be an underlying “Coin or Token”.
Private blockchain can be started as a first step in blockchain adoption. Enterprises with a private blockchains start operating like distributed databases and notary services, often with very specialized objectives, such as tracking product origin and status. Private blockchain ca reduce transaction costs and data redundancies and replaces legacy systems, simplifying document handling and getting rid of semi manual compliance mechanisms. While private blockchain can be a useful start, but not a permanent solution as at maximum it offers hacker-proof database, where the software replaces a central bank as the intermediary of choice. Another downside is with write permissions being kept centralized to one organization and read permissions may be public or restricted to an arbitrary extent, the owner with a master key defeats the purpose of having a blockchain database in the first place. In a way private blockchain can be compared to an intranet with private LANs or WANs instead of using the public Internet and not leveraging full potential of blockchain technology. Private blockchains typically start with a single application and progressively extended to building interfaces across multiple applications and then extending to bigger ecosystem of cross-company landscape. That being said let us examine some private blockchain examples.
MultiChain is an off-the-shelf platform for the creation and deployment of private blockchains, either within or between organizations. It aims to overcome a key obstacle to the deployment of blockchain technology in the institutional financial sector, by providing the privacy and control required in an easy-to-use package. The other one is MONAX open platform private blockchains.
Federated Blockchains or Consortium Blockchains:
A mid path to public and private blockchain is a federated Blockchain that operate under the leadership of a group or Consortium. As opposed to public Blockchains, they don’t allow any person with access to the Internet to participate in the process of verifying transactions. Federated Blockchains are faster (higher scalability) and provide more transaction privacy. Consortium blockchains are mostly used in the banking sector. The consensus process is controlled by a pre-selected set of nodes; for example, one might imagine a consortium of 15 financial institutions, each of which operates a node and of which 10 must sign every block in order for the block to be valid. The right to read the blockchain may be public, or restricted to the participants. Examples of consortium blockchains include, R3 for Banks, EWF from Energy, B3i for Insurance, Corda etc.
Vitalik Buterin, co-founder/creator of Ethereum said as follows on private/consortium blockchains:
“The consortium or company running a private blockchain can easily, if desired, change the rules of a blockchain, revert transactions, modify balances, etc. In some cases, e.g. national land registries, this functionality is necessary; there is no way a system would be allowed to exist where Dread Pirate Roberts can have legal ownership rights over a plainly visible piece of land, and so an attempt to create a government-uncontrollable land registry would in practice quickly devolve into one that is not recognized by the government itself….
While blockchain adoption approaches of public vs private vs federated is an ongoing debate, leading technology providers has started offering blockchain as a service construct in setting up an environment to test and research blockchain adoption approaches leveraging their cloud offerings. Microsoft has partnered with ConsenSys to offer Ethereum Blockchain as a Service (EBaaS) on Microsoft Azure. IBM(BueMix) has partnered with Hyperledger to offer BaaS to its customers. Amazon announced they would be offering the service in collaboration with the Digital Currency Group
As enterprises mulls on pragmatic approaches to blockchain adoption, from the above description one can draw few primary approaches to blockchain adoption as described below.
“Jump start with ready-to-go public blockchains”. Start developing blockchain using the tools provided by the Ethereum, Bitcoin, Ripple etc. Serves the need of trust less, anonymous, transparent system with low transaction fees.
“Leverage ready-to-develop private blockchain platforms”. Get on to blockchain bandwagon leveraging open development tools of MultiChain and MONAX overcoming a key obstacle to the deployment of blockchain technology in the institutional financial sector, supply chain management, asset origination & servicing, claims management etc. by providing the privacy and control required in an easy-to-use package.
“Adopt industry specific consortiums in building blockchains”. Leverage the vertical solutions offered by industry specific consortiums like R3 for Banks, Clearmatics for building out financial market applications to streamline payments and clearing and settlement processes etc.
“Build-on-demand blockchains with BaaS”. Take advantage of as-a-service models of ConsenSys to try out various scenarios and use cases to evolve the right path of adoption of blockchain technology.
I am publishing this post to highlight few aspects of combined effect of Amazon’s supremacy in online retails sales and its recent acquisition of Whole Foods. Amazon is undoubtedly a retail disruptor and eying for dominant role in pretty much every consumer segment. Based on recent analyst reports, Amazon’s wallet share is about 44 cents out of every e-commerce dollar spent in the USA, followed by eBay (6.8 cents every e-commerce dollar), and Walmart & Apple each at 3.8 cents every e-commerce dollar. Highlighting below Amazon’s impact on CPGs and counter measures
Amazon fueling CPGs Direct-to-Consumer (D to C) channels going forward: Amazon being brand agnostic, promotes them all and let consumers decide the winners and losers. What’s relevant and important, though, is to give consumers the best prices possible. Amazon looks at itself as working on behalf of the consumer. If a CPG company has the resources and patience to work through their D to C strategy integrating with Amazon (probably the largest CPGorganization in the world) it will benefit. Furthermore, if brands are willing to play ball the consumer-oriented way, they’ll win. The losers will be those that don’t know how to play D to C tactics with Amazon, or don’t have the resources.
Amazon acquisition of Whole Foods impacting CPGs: High cost has been Whole Foods’ biggest obstacle to the fresh concept. With Amazon in the picture, more consumer-friendly pricing is already on the horizon. Secondly, along with entry into “fresh” play, Amazon is trying to get a “bite” out of Millennials’ shopping habits. Amazon is looking at grocery as the next step in consumer satisfaction and Whole Foods enables Amazon to have 450 brick-and-mortar locations and multiple distribution centers to enhance its online delivery to the customers who want it.
Combining Amazon online supremacy with in-store experience: We can foresee that Whole Foods in-store experience will evolve as Amazon uses consumer purchase data to reduce inventory levels at Whole Foods making space for Amazon to use Whole Foods stores as showrooms for Amazon products (Books, Kindles, Alexa, etc.) and pickup locations for Prime purchases. CPGs will have to prepare for tighter inventory management, faster shipping, and possible packaging changes to adapt to the new format.
Leading to “Click & Collect” dominance: Amazon can leverage Whole Foods physical stores as pick-up locations for Amazon Fresh Pick-up. CPGs will have to ensure that they achieve full distribution in Amazon Fresh and invest to ensure strong platform visibility.
Amazon’s acquisition of Whole Foods could influence consumers shift away from pre-packaged foods and center of store items so be prepared for volume declines on brands that aren’t able to be positioned as healthy and all natural. The shift towards healthier, more natural food and personal care products will accelerate. CPGs will need to shift their product portfolio accordingly.
Direct-To-Consumer companies through new retail channels are driving two fundamental changes in the business models fueling next-level growth. 1) Offer shoppers ways to cut out physical store visits avoiding traffic, 2) Enable bypassing middle-man distributors. Innovation in DTC e-commerce and Omni-channel strategies is playing a key role in retail business sustenance and growth. DTCs primarily focus on designing and selling apparel, accessories, and many more directly to consumers through their own online channels. DTCs offer a superior shopping experience, higher-quality goods, cheaper products or greater convenience overcoming the constraints of incumbents monopolistic companies. Let us examine how DTCs enabling next-level growth with few use cases below.
1) Legacy companies usually sit on large profit pool and accustomed to doing business one way being constrained to pivot and think outside the box. Take a closer look at Warby Parker from its emergence in 2010 as it redesigned customer experience featuring home try-on and dramatically reduced price points as compared to dominant industry players. Warby Parker succeeded in establishing a business model to directly reach consumers.
2) Razor market is another classic example. As Gillette having cornered the retail market and established high price points, a DTC subscription model got emerged with upstarts like Dollar Shave Club and Harry’s which succeeded in bypassing the retail channel completely, which enable them to offer hugely discounted prices. And despite Gillette trying to play catch-up with its own DTC offering, its prices are still higher as compared to new crowd favorites.
3) Dental hygiene is a tough market, with just a few familiar consumer brands from which to choose. Goby has circumvented traditional distribution channels by aligning itself with dentists who have come to recommend the product. Goby is aiming to change that paradigm, offering the first subscription-based DTC rechargeable electric toothbrush that’s simpler and half the price of retail brands
4) Fresh start of DTCs enables them with innovative B2C marketing strategies. While Huggies and Pampers have been the diaper mainstay for generations, for example, Honest has been giving them a run for their money, thanks largely to its superstar spokeswoman and brilliant marketing tactics.
5) Take a look at Wine industry. Vying for customer attention with digital-first brands in a highly fragmented industry where brand loyalty is notoriously low. Penrose Hill, which is reinventing the wine club experience through homegrown wine brands offer improved value, selection and convenient delivery formats direct to consumers.
One key take away is DTC companies are less shackled by the legacy technologies, risk-averse cultures that large companies so often are, but on the other hand established players will need to do far more to emulate their DTC counterparts if they want to tap into high-growth market opportunities. The next post in this series focus on DTC business model innovations.
As the supply chains are getting digitally enabled, Internet of Things presents unprecedented opportunities to Retailers and CPG companies by creating solutions combining digital and physical products and services. IoT enabled upply chains surpasses the traditional developments like functional integration of supply chain, improve collaboration with suppliers & customers, and focus on virtually synchronizing the supply chain across players into one logical enterprise. IoT is helping supply chains to further progress with dynamic response by event management, increased visibility, responsiveness and throughput with supply chain control towers.
IoT is disrupting modus operandi of Retail/CPG industries and future shoppers. Device and sensor proliferation is aiding Retailers to experiment intelligent and connected devices to innovate new business models to try new markets, offer new services and create rich & compelling customer experiences building IoT enabled digital ecosystems. IoT adoption is supply chains accelerate with right platform implementation (commercial IoT platforms vis-a-vis indigenous development with multiple vendors), cloud ready infrastructure, building big data and advance analytics capabilities enabling faster and effective business decision making, and robust compliance and security. IoT supports the convergence of the Digital and physical supply chains and following use cases highlights how IoT driving the supply chain excellence of Retail / CPG businesses
Improve customer experience using big data for consumer insights and store-level merchandising. Help companies mine social media trends to showcase types of products that are rising in popularity, and local weather data is compared against historical sales data to boost sales. Also I would like to quote a personal experience with RFID-enabled MagicBand wristbands at Disney that provide theme park access, entry access for guest hotel rooms, and cash and card-free payment food and merchandise. All that activity is also tracked data that potentially helps Disney build a better picture of how guests use services.
Create new service offerings combining IoT potential with real-time view of usability statistics enabling targeted advertising based on instantaneous bidding that creates new revenue streams for retailers. Implementation of lightweight NextGen IoT platform for tracking shifting user behaviors reacting with appropriate business actions.
Help businesses innovate new business models with connected IoT solutions. One example is connected kitchen solution creating consistent brand expanding into quick serve restaurant anywhere in the world across few thousand chains. Through remote management of kitchen appliances automate hundreds of decisions in a day for optimizing energy usage and oil consumption leading improving bottom-line.
This presents an opportunity for supply chain leaders to co-develop new information-based solutions for individual customers or markets. Infusion of IoT in the supply chain as well is creating new challenges and demands on corporate supply chains. IoT offers a great opportunity for the supply chain leaders to play a critical leadership role in defining the overall digital business strategy achieving the next-level of value chain excellence.