Using Blockchain Technology to Combat Theft in Retail
Retail is one of the most important trillion-dollar sectors of the United States economy.
However, the crisis caused by the COVID-19 pandemic has touched it too. The steadily declining prosperity of the nation has made the retail industry vulnerable to shoplifting.
The National Retail Federation's 2022 Retail Security Survey results show that retail losses from shoplifting have increased to $94.5 billion in 2021, up from $90.8 billion in 2020.
To prevent mass theft, especially of high-value items, some retailers have to lock up these goods.
This leads to lower sales because customers don't have access to these items.
Blockchain can help solve the retail theft problem.
Given the depressing statistics of increasing theft and a worsening overall economic situation in the country, many innovative retailers have begun to look for new and progressive technologies to combat retail theft.
For example, Lowe's, a U.S. home improvement retailer, recently introduced a proof-of-concept called Project Unlock that uses radio frequency identification (RFID) chips, Internet of Things sensors and blockchain technology.
The solution is currently being tested at several Lowe's stores in the United States.
Project Unlock aims to explore new technologies that will help prevent theft without inconveniencing bona fide customers.
To accomplish this goal, RFID chips are used to activate certain Lowes power tools at the time of purchase. If a customer steals a power tool, it won't work.
At the same time, it should be noted that RFID chips are an inexpensive solution. Because of this, many retailers use them to prevent thefts.
According to the National Retail Federation's 2022 Retail Security Survey, 38.6% of retailers are already implementing or plan to implement RFID systems.
Combining RFID systems with blockchain technology will give retailers a transparent, tamper-proof record for tracking in-store purchases.
The transaction can be verified by anyone, as the information is recorded in a publicly accessible blockchain.
Project Unlock is based on the Ethereum network. Each good within Project Unlock is linked to an NFT, which changes its status when it is purchased.
If an item is stolen, then its status is unknown. All of this information is publicly available to customers and retailers because it is recorded in the Ethereum blockchain.
This technology is an authentication system for purchasing power tools of Lowes.
Despite the novelty of the technology, large companies are already interested in it.
Asset verification platform Real Items is exploring a similar solution using RFID tags to prevent theft.
Real Items combines digital identification with physical goods to ensure that stolen items can be tracked.
When physical items are paired with digital twins in the form of NFTs, retailers can verify exactly which item was stolen, where it came from and from which batch.
Retailers can determine this with greater precision than the information generated by RFID systems.
Real Items is currently cooperating with SmartLabel, a digital platform that generates QR codes for brands and retailers to give consumers detailed product information.
As part of this collaboration, in the future, the Real Items platform plans to introduce "digital product passports" as the basis for storing product information throughout its lifecycle.
Real Items uses Polygon blockchain to store product information.
This model of product theft protection differs from Project Unlock in that the blockchain network is only used to record information about a specific item.
It uses a digital (tokenized) twin of the product in the form of an NFT to interact with the blockchain. This technology can be used both to protect against theft and to provide retailers with all the information they are interested in about the product, its authenticity and status.
While the solutions being developed by Lowe's Innovation Labs and Real Items could be a game changer for retailers, the rise of the metaverses could also help prevent retail thefts.
According to McKinsey's "Value Creation in the Metaverse" report, metaverses could generate $4 to $5 trillion by 2030, depending on consumer and business use options.
The report notes that this includes the retail sector.
Designer brands such as Prada and Web 3 marketplaces such as Dematerialized are already using NFT redemption processes.
This technology allows communities to purchase digital goods in a metaverse environment, which can then be exchanged for physical goods in-store.
This redemption process allows retailers to use new ways to authenticate products online and provide a more sustainable production process based on order demand.
It also creates a new channel of direct access between creators and consumers outside of retail outlets.
Given retailers' experience with the use of blockchain technology, more retailers will apply digital identifiers for products in the coming year.
This will provide brands, designers and users with a transparent solution to many of the problems facing the retail industry today, such as counterfeit goods and theft.
The existing problems
While blockchain may help solve the problem of in-store theft in the future, retailers have been slow to adopt the technology for several reasons.
Blockchain's association with cryptocurrency and its negative reputation may halt the technology from being put into practice. Recent events, such as the collapse of FTX, reinforce this feeling.
Nevertheless, there is no stopping the development of the technology, and it is important to consider the benefits that the technology offers in order to understand how viable it is.
Project Unlock's experience has proven that blockchain technology is valuable. The experience of a positive blockchain implementation at a big retailer can serve as a testament to other retailers considering a similar solution.
Lowe's Innovation Labs also plans to expand the use of its solution beyond power tools in the future.
Consumers may find it difficult to understand the value of using blockchain to record transactions.
If a person buys a used item off-hand, he doesn't care if it was stolen.
In order for such a solution to be fully successful, the mindset of customers needs to change.
It is necessary to create an appropriate culture. It is necessary to ensure that customers don't buy stolen goods and know that when a product is stolen, everyone in the supply chain suffers. Creating such a culture can be challenging, but it will happen in the long run.