The newest technological buzz is on the blockchain, which has the potential to transform the e-commerce business completely.
Statista states that the worldwide blockchain technology industry will reach $2.3 billion in 2021. Blockchain’s potential to address e-commerce difficulties is undeniable, from removing intermediaries to simplifying procedures and decreasing complications.
Current E-commerce Industry Challenges
The e-commerce sector has been very competitive, with businesses of all sizes providing comparable goods and services. Companies must continuously accept better business models and technology to grow in competition, yet there are various challenges:
- Traditional business strategies include intermediaries that take a large part of the profits made throughout the selling process.
- Consumer data security is a critical problem since businesses must earn their consumers’ confidence and guarantee that their personal and financial information is secure. Typically, sellers must spend considerably on data encryption and other security measures to avoid hackers and secure customer data.
- E-commerce selling is a multifaceted process that includes supply chain, transportation, payments, and other activities. Another problem for the sector is managing these activities and the intermediaries involved.
Blockchain as a Solution
With multiple high-profile data breaches in recent months (particularly Facebook’s privacy problem with Cambridge Analytica), privacy worries are weighing heavily on the minds of internet users throughout the globe. As these issues overburden vendors, they want a single system capable of resolving all security-related concerns. Fortunately, they have discovered the ideal answer in blockchain, which, as a decentralized technology, provides several advantages to the sector.
A blockchain is a database that connects pieces of information (or blocks) (in a chain). Because several parties share and control the database, abnormalities are quickly detected, making it a very reliable system. And although blockchain has long been linked with Bitcoin transactions, other sectors now see its potential. According to Gartner, the corporate value-add of blockchain will exceed $360 billion by 2026. Blockchain’s key characteristics include the following:
- Without the need for a central authority, blockchain delivers transparency and consensus-based trust.
- The decentralized ecosystem provides a robust framework that is almost hard to attack.
- It allows customers to interact with businesses or consumers, removing the need for intermediaries.
- Blockchain technology expands the capacity to convert insights into immutable assets, giving more control over data utilization.
- It may assist businesses in reducing their costs by up to 90%.
How Blockchain Will Impact E-Commerce
Despite the beneficial influence that blockchain has had on the global economy, things have not been looking well for the e-commerce sector, and problems have plagued it since its creation. The industry has been yearning for a solid technical backbone for years, which blockchain will finally provide.
The efficiency of Operations
The decentralized nature of blockchain is capable of simplifying processes and increasing efficiency. Because the technology allows for interaction with various management systems, it may aid in regulating and streamlining processes with intermediaries such as logistics and payment processing partners.
Another critical benefit of blockchain in e-commerce is that it provides the necessary amount of transparency in transactions, which promotes confidence. Because each transaction is recorded in an open ledger, that cannot be changed. This level of security and openness enhances transaction processing time and assures traceability.
E-commerce businesses may use blockchain-powered bitcoins and other cryptocurrencies to access low-cost digital payment options. Blockchain decreases transaction and processing expenses by eliminating mediators and intermediaries from the payment process, enabling merchants to become more cost-effective.
Because a single data breach may lose an e-commerce merchant millions of dollars in income and much more in brand authority, blockchain provides a degree of protection that retailers cannot afford to forego. Blockchain is based on distributed ledger technology (DLT), which provides the most significant degree of security for online database systems accessible.
Check out this video for more on blockchain in e-commerce:
E-commerce Blockchain Applications
As the online sales sector continues to embrace and profit from distributed blockchain technology, how sellers may operate and service their clients — and their bottom line — will expand. Here are a few examples of blockchain uses in e-commerce:
It is one application that may greatly benefit from the usage of blockchain. For example, by implementing blockchain into inventory management, businesses may drop things from inventory as traditional shopping carts do. Still, they can also purchase replacement stock when pre-defined criteria are met. This ensures that the online business never runs out of items while preventing extra inventory from accumulating.
Ownership of Digital Assets
The e-commerce platform owns hundreds of high-quality images, product videos, reviews, and other information essential to every e-commerce website. Retailers, on the other hand, may have total ownership of all digital assets, including digital storefronts, product photos/videos, and reviews, thanks to blockchain. This ownership will be transparently documented on the blockchain.
Loyalty Reward Schemes
Customers may benefit from customized offers and loyalty reward schemes thanks to blockchain. Personalized recommendations and loyalty reward programs may be automated inside the blockchain by securely collecting purchase history and preferences on the blockchain. Because every transaction is recorded in the chain, creating a smart contract that offers a discount or awards reward points to consumers who exceed particular spending levels is simple.
As more and more individuals do transactions online, the digital footprints they leave behind are staggering. When customers submit their personal or bank information to a web3 e-commerce website for payment reasons, the data is kept on multiple internet databases subject to security breaches. Blockchain may assist merchants in developing robust authentication methods and encrypted digital identities for enhanced identity management by safeguarding individual identities from theft and abuse.
Supply Chain Monitoring
Every e-commerce site relies on the dependability of its supply chain; a dependable supply chain procedure informs the shop operator of what stock is in the pipeline and when new stock will arrive, as well as ensuring that suppliers produce the specific items required. By utilizing blockchain to follow the supply chain, e-commerce enterprises can guarantee that suppliers adhere to agreed-upon standards and do not switch things without notice, maintaining transparency throughout the process.
Consumers and businesses are often frustrated by the loss of paper receipts and the inability to confirm warranty coverage. Retailers can and effectively maintain warranty information using blockchain; manufacturers, retailers, and consumers can access the data, enabling warranty information to be readily accessible and certified.
Blockchain has enormous potential, and as more businesses adopt the technology, its effect will only rise rapidly. The introduction of blockchain has already begun to alter the e-commerce business, and it will fundamentally disrupt the online buying scene in the coming years. Customers will have direct access to merchants thanks to the technology, eliminating intermediaries and making the process more streamlined and effective. Furthermore, with cybercrime damage costs expected to exceed $6 trillion per year by 2021, blockchain will improve the transparency and security of e-commerce transactions.
With the e-commerce sector expected to expand by 50% per year by 2020, it is critical for existing businesses and e-commerce startups to stay up to date on the newest trends and incorporate future technologies such as blockchain on their platforms for improved operations.