The advantages of blockchain have already been recognized throughout the world, and it is actively being studied by corporations, major banks, and government agencies. Originally, blockchain was associated with finance and IT, but it soon became clear that the technology can improve processes in other industries as well. Grocery retail is one of the economic sectors where blockchain-based solutions could be the most beneficial, according to Peter Fedchenkov, INS Ecosystem cofounder and CEO.
Problems in a Growing Market
Despite the general economic downturn after the 2008 economic crisis, the consumable goods sector has been growing year after year. According to estimates by the American research company Persistence Market Research, in three years the volume of the grocery retail market will surpass $8.5 trillion. The industry is marked by high competition, domination by major retail chains, low margins, and a vast network of middlemen.
The industry is in dire need of new technological solutions. The delivery system in grocery retail has essentially remained unchanged for decades. Applying an outdated approach to organizing trade has a negative effect on the efficiency of the process, on quality, and on the cost of goods. Producers take on losses, millions of dollars worth of unsold goods spoil in retail chains, and end consumers spend up to 50% more on goods over their prime cost.
The need for change in retail has coincided with rapid development in blockchain technology. The use of blockchain platforms and smart contracts could fundamentally change the market for consumables. A blockchain-based solution would address the central problems that the industry has been unable to tackle through traditional methods. The idea is to simplify the delivery of goods from the supplier to the buyer, lower logistics costs, establish fair prices, and set up a more efficient system of production and consumption.
Blockchain Ensures Quality
Retail chains lose from tens of thousands to millions of dollars every year on recalls of poor-quality products. Blockchain can be used to monitor the quality of goods, obtain information on provenance and storage conditions, and discover and eliminate infected products in time. One of the world's leading IT companies, IBM, is working with major producers and retailers to test a blockchain platform that could increase the safety of food delivery. A decentralized system in which information cannot be falsified would also be useful in detecting counterfeit products.
How to Lower Costs and Prices
Right now, the goods delivery cycle is a long process involving a large number of middlemen. Retailers, transport companies, and regulators stand between the producer and the end consumer. Each step of the way is accompanied by comparisons and signings of numerous documents. First, this significantly slows down the delivery of goods. Second, documents could be lost or errors could be made in filling them out. Blockchain would allow for a single information system to which all participants in the process would have access. The path of the goods could be tracked or data on their status could be obtained at any time, in just a few seconds. This would save massive amounts of time and money.
Further blockchain development in retail could eliminate unneeded middlemen from the chain entirely, leaving only the producer, the logistics operator, and the buyer. This is the idea at the root of the global project INS Ecosystem, which is being developed by the creators of Instamart, Russia's largest food delivery service. The project consists of a decentralized platform that removes retailers from the buying process. The buyer makes an order through the online platform, and the seller fulfills it with the help of a delivery service. The absence of retailers makes it possible to lower prices, decrease marketing costs, avoid excess production, and provide all producers access to the platform. The transparency and reliability of transactions will be ensured by smart contracts.
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