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Blockchain poised to disrupt traditional retail operations

Nov 02, 20173 mins
InternetTechnology Industry

Smart contracts and a blockchain-based decentralized database platform could provide direct sales to consumers and reduce prices by 30%.

The demise of retail grocery stores might be just around the corner.

The founders of Russian grocery delivery company Instamart claim to have signed non-binding memoranda with consumer goods giant Unilever, major Dutch dairy co-op FrieslandCampina, and U.S. food products manufacturer Mars, among others. INS’s objective is to build a blockchain-based food-supply network to connect manufacturers with consumers — thus bypassing retailers and wholesalers altogether. Massive consumer price cuts are promised.

“INS is a decentralized ecosystem that enables consumers to buy directly from grocery manufacturers, bypassing retailers and wholesalers, at prices up to 30 percent lower than in supermarkets,” the company says in its press release. The firm will be releasing a token sale at the end of this month — the first stage of its launch planned for Q4 2018.

There’s a market. The global grocery market is estimated to grow to $8.5 trillion in 2020, according to Persistent Market Research, quoted by INS. Online groceries will make up $300 billion of that. The U.S. online market is expected to be $18 billion by 2020, according to IDG figures used by INS.

INS says “abuse by grocery retailers” pushing brands and goods at consumers and maximizing profit rather than providing what consumers really desire is why interaction should occur directly between consumers and manufacturers.

“We also want consumers to have unimpeded access to independent and local manufacturers, including farmers that do not fit retailer supply-chain or procurement terms and can’t get their goods on retail shelves,” INS says in a white paper (pdf).

Consumers are paying too much right now, the company says. Current grocery trade promotions are flawed for the consumer and create costs. INS intends to replace them with consumer loyalty marketing based on cryptographic tokens and smart contracts that allow manufacturers to reward its consumers — similar to how a frequent flyer program works.

Currently, trade promotions occur predominantly between manufacturers and national retailers. In fact, manufacturers spend up to 17 percent of their sales on trade promotions, INS says. That’s wasted money, it says.

Eliminate supply chain inefficiencies, reduce costs

Supply chain inefficiencies will also be thwarted by the direct sales provided by decentralized database marketing, INS claims. Food miles, or the distance between farm to plate could be reduced and the savings passed on. Waste on shelves could be reduced because the need for spoil-inducing, visually appealing, always-stocked shelves becomes redundant — there aren’t any shelves.

INS plans to use a selection of smart contracts to run operations. The company will take a transaction fee of 1 percent. In return, it promises speedy customer feedback for manufacturers, the aforementioned ability to market straight to consumers, and manufacturer control of pricing.

The consumer gains groceries at a price lower than in-store, along with massive choice, and supposed ease of purchasing. User wallets will preserve all of the data held in decentralized databases; websites or apps will provide the interface. Independent, possibly already existing, fulfilment centers will accept the products from manufacturers. Those items are then delivered by independent couriers. New York and Los Angeles are among the preliminary list of 10 global operational cities.

The supply chain, payments and smart contracts all utilize blockchain, the company says.

I’ve written about how blockchain could revolutionize elections in the future and can be used for IoT security and monetization, among other uses. If successful, this radical, big-brand, grocery-pitched thrust by INS could decimate a supermarket industry already beholden to price-sensitive and quality-demanding consumers.

It could also open the floodgates for other retail-geared database blockchains, and it could all be happening much sooner than anyone thought.


Patrick Nelson was editor and publisher of the music industry trade publication Producer Report and has written for a number of technology blogs. Nelson wrote the cult-classic novel Sprawlism.

The opinions expressed in this blog are those of Patrick Nelson and do not necessarily represent those of IDG Communications, Inc., its parent, subsidiary or affiliated companies.