Everyone is talking about Bitcoin, but the currency is just the visible edge of a technological iceberg. Beyond the noise and hum, we are just barely scratching the surface of uses for the underlying technology, blockchain. The opportunity for retailers is really interesting. Blockchain in the supply chain is one useful tool. Customer engagement is the bigger opportunity.
I was a CIO in Boston during the heady days of the dot-com expansion. I heard stories of VC companies pestering their new start-ups…”Have you used up the $25 million I gave you yet?” and wondered what the heck they were thinking. I also knew I was missing something. I wanted in, but a CIO was not desirable in the dot-com space at that time. CTO’s were the rage.
Certainly, we can say that over the past twenty years, the world of the internet has stabilized. Particularly in the world of retail, digital channels are generally a part of a retailers’ overall strategy. And as an excellent recent New York Times article argues, while the open protocols underpinning the internet still exist, at the next layer, proprietary protocols and standards have filled any gaps in the original standard. So Facebook, with more than two billion users, has become a de facto personal identity standard. LinkedIn aspires to be the de facto business identity standard. And Amazon, well…you know. It would like to rule the commerce world entirely.
So, in many ways, aspects of what was meant to be standard and widespread have become consolidated and proprietary. As such, they are also open to attack and/or coopting, as Facebook apparently was, by foreign agents seeking to influence the US elections. This has proven to be more than a little problematic.
The world is changing again. This past week in Miami, I think I got a sniff into what I missed in the 1990’s, as I found myself in the middle of a feeding frenzy, the North American Bitcoin Conference, now a part of the World Blockchain Forum, Investments and ICO’s. For the uninitiated, an ICO is an “Initial Coin Offering.” There were a lot of ICO offerings in the midst of the speeches, and truly, Venture Capitalists were panting over the possibilities. I was sitting at one booth where quite literally, a Venture Capitalist introduced himself as such and basically said “I want in. Who do I give my money to?”
I should mention four years ago I went to the Bitcoin conference in Miami, and it was not part of anything else. It also was attended by about 600 people (mostly young guys), in a very warm room upstairs from the Miami Beach Convention Center. The Bitcoin was worth $600 a coin at that time. This year’s conference filled the 4,600 seat James L. Knight Center in downtown Miami and additionally filled about 50,000 square feet of exhibit space (all booths were 10*10, for reference). It’s true that after a crazy ride, the Bitcoin is settling in at around $11,000 per coin, but that no way dampened enthusiasm. The event is still not NRF Big Show size, but it’s pretty big, and the investment money was flowing like water.
In fact, the Bitcoin conference re-branded as a part of the World Blockchain Forum actually tells you a lot. Behind the noise, blockchain is the crown jewel of this new era. So while the world at large is focused on Bitcoin’s wild valuation swings, and no less than Jamie Dimon, CEO of J.P. Morgan Chase’s announcement that he regrets calling Bitcoin a fraud, they might miss the second part of his statement, “The blockchain is real,” and they miss the way dollars and fiat currencies in all flavors are flowing into blockchain-based start-ups. In fact, J.P Morgan Chase announced a blockchain based system last October that will significantly reduce the number of parties needed to verify global payments, reducing transaction times from weeks to hours (and no doubt making their transactions more profitable).
IBM has thrown money behind blockchain, so has JDA. But there are boatloads of start-ups out there, and there is a lot of work to be done, particularly on the ledger’s ability to process a lot of transactions at the same time (scale).
Blockchain is distributed, which is to say it is replicated in multiple locations around the world, and activity/transactions are irrevocable. The distributed aspect has both positive and negative implications. Because the entire chain is distributed (i.e. lives in more than one place), it has latency built in. That is to say that it takes time to replicate transactions into every blockchain ledger around the world. That’s the downside. But because it is distributed, it is also hard to destroy, just like the internet. Just as the internet was original designed by the defense department to avoid single points of failure, a blockchain is hard to destroy.
Because transactions are irrevocable, debates about who did what to whom, when, tend to disappear. It is meant to be the true “permanent record.” As such, it is designed for exchanges between parties that do not trust each other and who would be happy to be anonymous.
Now that I’ve presented this probably overlong explanation of blockchain, I want to describe one blockchain-based retail application that could solve a somewhat intractable problem: the desire for consumers to experience more personalized offers from retailers, coupled with their desire to maintain their privacy. In other words, I’m talking about customer engagement. By all accounts, personalization is a Holy Grail in retail. Today’s consumer simply doesn’t want to see extraneous “stuff.” She wants to see things that are relevant to her lifestyle, budget and overall tastes. But she’s not keen to “open the kimono” and let you know everything about her.
Enter Shopin. It’s early stage, and just now took its Initial Coin Offering live. It is actually being called a “private token pre-sale.” The concept is simple.
I spoke with Shopin’s Blockchain Technology Officer, Jeremy Harkness, at the show. Shopin has modified blockchain to have qualities of both a ledger (the original blockchain design), and a database. It is built on Ethereum, which appears to be the most widely used blockchain implementation (with an associated cryptocurrency, of course). According to Harkness, Shopin’s implementation can process millions of transactions. They have clocked it at between one million and two million transactions per second, so it should be adequate for retailers. It’s an interesting concept.
The consumer owns the key to her data and can permission it out if she wants to. If she agrees to permission it out (and she could theoretically be given Shopin tokens by the retailer for doing so), the retailer is given anonymized information so it can understand the shoppers needs and wants. The technology will include a bit of Artificial Intelligence (AI), so that it can match up what a retailer has available for sale with the shopper’s tastes. At any point along the way, a Shopin token can be exchanged either as a reward or as an incentive.
The retailer only sees what the AI engine’s recommendation is, based on what’s in stock vs. what the customer’s past purchase history is. Privacy is maintained, relevancy is achieved.
Shopin also plans to include a wallet, which would give the consumer a single sign on and one click checkout. Two-factor authentication is included to help insure privacy and accuracy.
I initially had some concerns about data accuracy, since having looked at Acxiom’s aboutthedata.com I discovered numerous errors in their recording of my tastes. I also know a core tenet of blockchain is irrevocability. However, I would later see from looking at Shopin’s web site, that they plan to allow the consumer to pre-enter her own tastes along with reviewing previous purchase data passed into the system. In other words, the consumer is in control, and the retailer can respond accordingly.
This is an interesting way to get to personalization without sacrificing privacy. It’s important because notwithstanding continual statements that “Millennials don’t care about their privacy,” most studies seem to tell us that they certainly do. Really, what they want is control.
Shopin isn’t fully ready for prime time, but it does give you a taste of the possibilities. Couple with that some of the core tenets of blockchain: distributed data, knowing no geographic borders or fees and fundamentally almost impossible to hack and it starts to become intriguing.
Long story short, blockchain offers a lot of possibilities to fulfill the original promise of the internet. It beats back arbitrary geographic and political boundaries, so it is of great interest to populists and anarchists alike. It’s private, safe and in no one individual’s control. The promise is huge.