Business

How Blockchain is Redefining E-commerce

From asset ownership verification to blockchain-based parcel tracking; e-commerce platforms, retailers and users can benefit from lower costs and increased operational efficiency.  

E-commerce has seen rapid growth rates over the last decade and accounted for 14% of total retail sales in the US in 2018. As the industry keeps growing, a handful of players have gained monopoly status; in terms of both, sales and user data collection.

Historically, technological innovation has been the prime disruptor that has defeated many monopolies – and often replaced them with new ones. In 2007, Nokia was the king of mobile phones. Apple came along with new technology and who talks about Nokia in 2019?

Blockchain technology could be an e-commerce monopoly breaker. The power of giants such as Amazon, eBay and Alibaba lies in centralization and data superiority. Meanwhile, blockchain is about decentralization and shifting data ownership back to the user, thus completely changing the way business is done. There are three major challenges in the industry that can be overcome by applying blockchain technology: storefronts, payment processing, shipping and order fulfillment.

Lower fees and ownership of digital assets

E-commerce platforms are usually not retailers’ friends. Fees can be as high as 50%, and ownership of digital assets such as pictures, videos, etc. belongs to the e-commerce platform – although the retailer pays the cost of creation. The exacerbated fees mean that sellers have little access to a broader audience. Decentralised blockchain-based marketplaces are coming to replace the entire infrastructure dominated by Amazon and eBay – third party approval is no longer needed.

On ECoinmerce, a blockchain-based e-commerce platform, retailers own their digital assets including stores, product pages, brands and more, while using the blockchain to determine ownership rights.

As the platform provides a decentralized peer-to-peer system, fees will be less than 0.1%. Retailers can also launch ICOs directly on the platform and distribute tokens among their customer base. That provides a way to increase customer loyalty and incentivize regular shopping.

Cheaper, faster and more secure payments

Most e-commerce platforms offer credit card and PayPal as payment methods. Both come with high fees, ranging between 2% and 6%. Cryptocurrencies could eliminate the middlemen and thus cut down costs substantially.

OmniBazaar for example, allows customers to pay with Bitcoin, Ether, or their own OmniCoin. Keyrpto wants to enable customers to pay with any major cryptocurrency.

Cryptocurrencies could also increase transaction speed. While Bitcoin has so far not excelled in this regard, e-commerce platforms could in the future leverage the Ripple network to achieve faster payments.

Using digital currencies, users would not have to expose their credit card information anymore, leading to more secure payments. Considering that roughly $30 billion got lost through credit card fraud worldwide in 2018, increased security is needed. For sellers, the waiting period has been shortened – crypto payments are near-instant means of receiving money.

To facilitate the transition from traditional to e-commerce, Waves offers a low-cost and user-friendly blockchain-based platform for e-commerce integration. The platform not only provides a fast network for token management, but it also enables merchants to receive crypto payments and create their own digital currency.

Waves made available an option that is quite popular in this sector, crypto plugins. Last year, Coinbase, one of the largest cryptocurrency exchange platforms, introduced a new plugin that allows e-commerce stores to accept crypto payments.

More efficient logistics and supply chain management via smart contracts

A blockchain-based e-commerce platform could enable retailers to manage their supply chain via smart contracts. Inventory management, blockchain-based product tracking, automated dispute resolution, blockchain-based warranty management, product review verification, and counterfeit prevention are potential use cases.

TIPO – the Tipping Point of E-commerce on Blockchain – is a business-to-peer-to-peer blockchain-based e-commerce platform that offers full-cycle supply chain solutions and blockchain-based smart contracts for business process optimization.

Eventually, blockchain technology can also enable e-commerce companies to venture into new industries that traditional e-commerce has not yet successfully penetrated.

Honeywell, for example, recently announced the launch of its online buying and selling platform for new and used aircraft parts.

So far, less than 2.5% of transactions in this space are done online, because buyers need to ensure the parts are authentic and that they are getting the best prices while protecting themselves from scams and potential problems.

Honeywell believes blockchain offers the solution.  Thomas Noonan, director of material and part sales, says, “This technology will help propel the aviation industry forward into the realm of other e-commerce sites that many of us use each day without a second thought.”

Peer-to-peer transactions will define e-commerce

Limited by the platform acting as “gatekeepers” that ensure the trades don’t happen outside the platform, merchants have limited communication with their customers, preventing them from building a loyal clientele. Blockchain can remove these restrictions and provide trust throughout the entire process, from browsing to shipping.

Blockchain also restores control of purchasing data to the customer. The current e-commerce systems rely on consumers’ habits to remain lucrative while “improving the customers’ experience.” Blockchain offers the opposite – since there is no central power observing and collecting data, consumers are secure and have the choice of what to do with their information. Due to the decentralized nature of blockchain, hacks and data theft are no longer a concern – and that would be a welcomed improvement today, where data leaks are more than familiar.

If it’s a creation of an entire marketplace on the blockchain or a cryptocurrency plugin, the technology is disrupting the industry from top to bottom. These platforms provide a secure alternative to the traditional e-commerce giants, where users’ data is protected, and transactions fees are low. The disruption course is set, and the transformation has begun. It is only a matter of time before the pace of adoption increases and the marketplace is diversified and decentralized.

Lukas Hofer

Lukas J. Hofer is a business writer and has years of experience in financial services and international business. He has a proven track record working with leading international companies and currently works as independent business consultant in Asia.

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