Rumor has it that retail is dead. Some are even referring to the collapse of the traditional retail industry as the “retail apocalypse”. With the growth of e-commerce, it’s not surprising that retailers and merchants are having a tough time adjusting to the shifts of the industry. According to Survata, 96% of the American population currently shops online, with the number rapidly increasing across the world. Over 2.1 billion people are expected to shop online by 2021. So, what does this mean for the future of your friendly neighbourhood retailer?
The rise of e-commerce isn’t necessarily a negative thing, it will just take some time getting used to. In fact, the industry shift could be very beneficial to traditional retailers. The problem is that, unfortunately, the space has become extremely centralized, creating a situation in which a select few e-commerce giants dominate the entire industry. The issue with the centralization of the e-commerce space is that there is very little room for merchants and independent brands to succeed. In order for these merchants to stay alive, they have to adjust to the modernity of business, which, in most cases, means they must move to the digital world.
For brands and merchants to sell online, they usually have to go through a third party. Going through a third party forces sellers to conform to the rules and regulations of the platform owners. According to CPC strategy, 55% of all product searches are through Amazon, resulting in around 4 million merchants relying on a single centralized platform. This creates a problem for merchants who are trying to define their own brand. We can’t just sit back and point our fingers at e-commerce giants such as Amazon and Alibaba, but what we can do is provide an alternative selling platform for merchants who are trying to make it in this competitive market.
When using a centralized platform, sellers are unable to create their own conditions and rules, and therefore can’t fully determine the future of their business. Merchants are paying unnecessary and hefty fees to third parties in order to operate on their platform, and are watching a large portion of their profits go to the middleman. Not only that, but many e-commerce giants have started to create their own in-house brands for lower end products. They can take something as simple as a lightbulb or a pack of batteries that you would normally buy at your local grocery store, but sell them for much less, and at a much lower quality. If merchants and traditional retailers are going to have a shot at survival, a widespread solution must be put in place.
Due to the centrality of the e-commerce space, the solution lies in creating an environment that will help to distribute the power, putting the control back into the hands of merchant owners. How will we reach a situation in which monopolies no longer have leverage over merchants? The answer is, by creating a decentralized marketplace through the power of blockchain. Independent retailers need a place where they can further develop their brand and launch their product into the international market, and operating on the blockchain allows for this to happen in a secure and productive way.
The incorporation of blockchain will help revamp the current governance structure of marketplaces. A decentralized marketplace will help drive traffic to the merchants in addition to their own offline or online store. This will help jumpstart the drive of valuable traffic for merchants from the beginning. A blockchain-based marketplace will also be governed by smart contracts, with no decision making unit other than the owners of the marketplace themselves. Rules and regulations are programmed into smart contracts so that transparency, trust and sustainability are guaranteed for all parties involved.
Another huge advantage of blockchain is absolute transparency and immutability of records, which eliminates the risk of manipulating individual records. This type of ecosystem will help build trust and confidence with all stakeholders involved. Additionally, the current centralization of power means that the availability of users’ information is extremely unbalanced. Current marketplaces have the ability to collect and control large quantities of information about the lifestyle, habits and other personal preferences of their clients. This means that buyers have very little privacy and security. Operating on a decentralized server will help to protect and empower the buyers’ data privacy.
The current state of the e-commerce space has caused the retail world a whole slew of problems, which is a shame because it has so many inherent benefits. Shifting the control of the space could really help drown out the negatives and help merchants to succeed in this competitive industry. Retail isn’t dead, nor should it be; it just needs a new approach. Blockchain at its core is all about spreading the power so that no single entity is in control. With this, merchants will be able to define themselves so that they can prosper on their own terms.
About Luis Krug
Mr. Krug, CEO of GAMB, is one of Europe’s e-Commerce pioneers, having started his first company at age 25. Founder of Redcoon, the e-commerce project that invoiced over 500.000.000 € annual turnover, Mr. Krug knows how to start and scale e-commerce related projects. He has also participated in Rebelio, BuyVip and Pixmania. Furthermore, since 2003 he been running the technological Incubator INCUBOUT out of Barcelona, having invested in more than 15 digital startups. His current portfolio includes projects such as Kinoheld.de, Edit.org and Comandia.com