Why Does Grocery Retail Need Blockchain?

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Expert opinion by Peter Fedchenkov, INS Ecosystem Co-founder and CEO.

The global consumable goods market is growing quickly, but is also facing serious efficiency problems. Proper development in grocery retail is hindered by an excessively complex goods delivery system, the large number of middlemen, excess production, and the unreliability of existing solutions. We are convinced that the future of retail is closely tied to blockchain, which will help solve the problems that have been accumulating for decades.

Interactions Between Contracting Parties

Right now, the producer of a product is separated from the end consumer by suppliers, retail chains, and logistics companies. The goods have to travel a long way to reach the buyer’s table. Each stop on this journey includes inspections and a myriad of documents: waybills, invoices, certificates, and so on. This drags out the delivery process and therefore increases the cost of the goods. The final price at the supermarket includes all the logistics and documentation costs. Due to that and several other factors, the markup can be up to 50%. The human factor impacts quality in filling out documents: they may be improperly filled out or even lost entirely.

With the help of blockchain, a single ledger could be created for all the participants involved in the process. The ledger would contain complete information on the status and location of the goods. Product movements could be tracked in mere seconds, while the decentralized system would ensure that information cannot be lost or changed. Not having to draw up documents would speed up delivery and lower logistical costs.

Quality Control

In a literal sense, poor-quality goods are retailers’ most costly problem. The difficulty of obtaining accurate information on the provenance and condition of goods leads to significant losses. The cost can soar into the millions of dollars, not to mention reputational damage. Blockchain platforms can help monitor the entire goods delivery process, including discovering and eliminating infected products in time.

Blockchain-based solutions will also help stop the distribution of counterfeit and bootleg products. Since all the data will be stored in the system, it would be practically impossible to transport an illegal shipment.

Simplifying the Delivery Cycle

We envision an even more perfect future for grocery retail: blockchain can free the process from retail chains and other middlemen who decrease overall efficiency and increase the cost of goods. Five major retailers control half of the consumable goods market, which will be worth over $8.5 trillion in three years. A system can hardly be called efficient when thousands of producers and millions of buyers are under the strict control of a couple dozen middlemen.

Blockchain-based online platforms would allow producers, buyers, and delivery services take control over their trade and financial relationships. The use of smart contracts would help build a transparent payment system, even out risks, and lower costs. Eliminating middlemen helps avoid the problem of excess production, which is a major issue in today’s grocery retail industry. There will be exactly as many goods as the customer orders. Buyers will not be forced to choose from a specified selection, and producers will be able to fully control the selling process. According to our estimates, this system would save up to 30% on daily purchases.

Furthermore, blockchain platforms for retail would help conduct more appropriate ad campaigns and launch effective loyalty programs. The system would give an accurate view and understanding of the target market.