Blockchain in E-commerce: How Can Technology Transform the Industry for the Better?

Why Trust Techopedia

Blockchain's potential in e-commerce goes beyond financial transactions. By automating record-keeping, it can streamline supply chains, lower costs, and increase transparency for businesses of all sizes. However, a gradual and careful implementation strategy is essential to address complexities, infrastructure costs, and regulatory concerns.

Blockchain has long been recognized as a boon to e-commerce. Streamlining all the processes required to complete financial transactions, it increases revenues and ensures payments are made accurately and on time.

But the distributed ledger technology (DLT) at the heart of blockchain has applications far beyond finances. In fact, it stands to re-invent a wide range of commercial functions, not just for industry giants like Amazon and Walmart but the smallest mom-and-pop stores as well.

Blockchain to the Rescue

The key to this transformation lies in the way blockchain automates the record-keeping process, which is at the heart of all business-to-consumer (B2C) and business-to-business (B2B) relationships. Using a trusted digital ledger that is robust and tamper-proof, e-tailers gain the ability to ramp up both the speed and scale of transactions, all while ensuring a more accurate accounting of each step in every process.

The supply chain, for one, is ripe for a blockchain-fueled upgrade. Most supplier contracts are complicated and subject to a wide range of checks and approvals. As software development firm Acowebs notes, blockchain brings transparency to this process, allowing suppliers, distributors, e-tailers, and customers to quickly assess the status of orders, shipments, and fulfilment.

This also helps lower shipping costs, which are a major factor in bulk and unit pricing. Effectively implementing blockchain has the potential to cut the price of goods and services even as it increases profit margins for sellers. There is also the potential to cut out the middlemen that inhabit most distribution channels today.

With automation taking over many of the transaction processes, both raw materials and finished goods can make their way from source to consumer with less intermediation.


The Personal Touch

Blockchain can also help sellers provide customized products that appeal to unique tastes or functional requirements. Amit Samsukha, CTO at digital solutions provider Emizentech, says this is not only effective at creating customer profiles from general data like buying histories and credit scores, but it also allows users to exercise some control over the data they provide voluntarily in order to obtain discounts and other tailored offerings.

At the same time, blockchain provides customers with a trustworthy means of assessing the vendors they do business with. To ensure it meets the buyer’s requirements, product information becomes more reliable, and customer reviews of businesses, products, and services can be verified, benefitting both the provider and the user.

International Acumen

Selling on a global scale has also been a bane for smaller e-tailers, which generally lack the resources to manage the logistics of cross-border shipments, along with regulatory compliance and tariff structures of many countries. Blockchain can put an end to this, says Retail Info Systems’ Maodong Xu, in part by decentralizing the process and building transparency into transactions.

Most international trade is beset by third-party payment service providers (PSPs) that manage things like payment options, currency exchange, and final authorization and confirmation. Usually, this comes at a steep price, both in fees and delays in completing transactions – which can take several days in some cases.

National boundaries do not restrict blockchain, allowing banks and other financial institutions to connect directly and enable real-time settlements at a low cost to both buyer and seller.

And with robust automation, this process can take place at any time, not just during the working hours of any given time zone.

Learning Curve

Efficacious as it is, blockchain is still a complex technology that requires a fair amount of skill and knowledge to manage correctly. Andrii Horiachko, a co-founder of software developer Softermii, notes that the pros of streamlined supply chains and greater transparency are countered by the cons of significant infrastructure costs and performance lags at scale. And even though the regulatory framework around blockchain is relatively light right now, there is every reason to believe new rules are in the offing, particularly as legal disputes or cases of fraud start to mount.

Rather than jump head-first into end-to-end blockchain operations, then, Horiachko recommends a gradual transition, starting with a few key processes that stand to provide the greatest benefit from a more streamlined, open environment.

From there, scale up gradually, taking care to comply with all regulatory requirements and implementing the appropriate support structure and security tools as needed. And if the costs of implementing blockchain outweigh the revenue it is generating, it might be time to rethink the implementation strategy.

The Bottom Line

Success in e-commerce relies largely on the same mindset as success in traditional commerce – the customer is always right.

At the moment, the biggest consumer criticisms of e-commerce sites, from Amazon on down, is that they are difficult to navigate and unresponsive when it comes to resolving problems. Both of these issues stem from a lack of clarity into the inner workings of the business. And sometimes, even the business owner or operator cannot peer into their digital operations deeply enough to troubleshoot problems or resolve customer complaints.

Blockchain excels at shining a light on these processes in ways that are both accurate and secure. At a time when buyers are becoming increasingly sensitive to rising costs and inconvenience, blockchain can help reverse these issues.

And the best part is it can do this while increasing the profitability of online commercial business models.


Related Reading

Related Terms

Arthur Cole
Technology Writer
Arthur Cole
Technology Writer

Arthur Cole is a freelance technology journalist who has been covering IT and enterprise developments for more than 20 years. He contributes to a wide variety of leading technology web sites, including IT Business Edge, Enterprise Networking Planet, Point B and Beyond and multiple vendor services.