Blockchain Hasn’t Taken Over the E-Commerce Industry Yet, What’s Holding it Back?
As the global economy continues to embrace an online and ever-connected framework, there’s one sector growing year-over-year that can’t be ignored, e-commerce. Consumers are always on the lookout for new, innovative ways to complete their purchases and are doing more research than ever when going through the buying process. This means more time spent online and more goods being bought by users from the comfort of their home, rather than from a physical store.
While the majority of retail shopping is still being done in-person in stores (a reality that Amazon is fully aware of and working to adapt to), e-commerce sales are growing steadily year-over-year and are finding deeper market penetration in retail purchasing habits.
US E-Commerce Sales as a % of Total Retail Sales, “A Decade in Review: E-Commerce Sales vs. Retail Sales 2007–2017,” Digital Commerce 360
Though e-commerce continues to grow every year blockchain technology, hasn’t yet disrupted this industry and I’d like to examine why.
Why is E-Commerce on the Rise?
Retail E-Commerce Sales in the United States From 2016 to 2022, Statista
As is the case in many industries, companies are looking to cater to consumers’ needs and desires for their experience. The benefits of shopping online are many, mainly not needing to deal with salesmen, the ability to sit on your couch or at your computer, easily research and compare different products, the comfort of not needing to travel to and go into a physical store etc. E-commerce allows customers to save time, money, and shop a wider inventory than any physical retail location can offer them.
On the other side of the equation, businesses are embracing the e-commerce model because of the countless benefits it can offer them as well. Perhaps the single biggest factor for businesses and e-commerce is the ability to scale. Unlike a traditional retail location, e-commerce businesses can actively sell to any customer nearly anywhere in the world and at all hours.
Rather than gathering the capital required to launch a physical store location, and having massive overhead costs, e-commerce businesses can focus on cost-effective ways to grow their brand, sales, and customer base. Having a strong online presence can be achieved much more easily than building new store locations in different cities. In addition, customers purchasing online often bring with them a tremendous amount of data that can be used by sellers with conversion data being significantly more accessible and easy to interpret when customers go through a digital sales funnel. Using advanced methods for CRM, customer service, and data analytics combined with cost-effective ways to scale a business, it should come as no surprise that e-commerce is growing every year.
Blockchain’s Disruptive Nature
Named by Industry Week as the “2018 Disruptor of the Year,” blockchain technology is taking over a variety of industries. One of the most active companies embracing the new technology, IBM, is finding new ways to implement it for all kinds of business applications. From supply chain management and logistics to handling financial transactions, and nearly everything in between, blockchain is certainly a disruptive force to be reckoned with.
However, the e-commerce industry remains relatively untouched by blockchain’s continuous disruption in the digital space. Why? And is it likely to change in the future? Let’s take a look.
Why Hasn’t Blockchain Taken Over the E-Commerce Industry?
With blockchain technology transforming so many industries, it’s odd to see that it hasn’t affected the e-commerce scene nearly as much. However, there are actually some rather good reasons for it when we examine all the factors which contribute to a successful e-commerce model, the first of which is the entry barriers.
Because blockchain technology, and the industry around it are still nascent, finding talent with the appropriate skills can be difficult for businesses. There is a high demand for blockchain developers and those familiar with the technology who can help with integration, which means that the cost of help is going up as well. While some companies can afford to hand out generous salaries to technically skilled employees, many simply cannot. Adding to that, there are no large scale decentralized e-commerce platforms available yet.
As things currently stand, companies often heavily rely on the services e-commerce companies are able to provide for them. From concerns about payment integration, PCI compliance, website creation, CRM integration, and everything in between, e-commerce brands have a lot to think about besides their core business or product. Because of all the factors which go into making an e-commerce store, centralized solutions are exactly what some online retailers are looking for. E-commerce platforms offer brands critical features and implementation that they would otherwise not have or would need to build from scratch, a costly alternative.
For the time being, many in the e-commerce scene rely on centralized services offering ease of use and low barriers to entry. Until theses benefits can be given a decentralized approach, it’s unlikely that many of the smaller businesses and retailers will be able to make the switch.
Looking Forward: Blockchain in E-Commerce
Though it hasn’t happened yet, there’s no reason to think that the e-commerce world is immune to the disruptive nature of blockchain technology. For the time being, many merchants are likely to continue seeking out centralized all-in-one providers for their online selling needs, but that doesn’t mean it will always be the case.
Considering how young the industry is when it comes to real-world business implementation of blockchain technology, it’s only a matter of time until viable, easy to use solutions are offered from blockchain-based projects. Indeed, the incentive for e-commerce retailers to eventually make the switch is obvious. With no third-parties or middlemen, e-commerce professionals can find more efficient means of engaging with consumers and improving their margins, which is integral to the e-commerce industry. Of course, that’s only the start, the future can include things like sellers issuing their own tokens to consumers to build loyalty, incentivize reviews, share products, etc. E-commerce, while still an industry largely untouched by blockchain technology, is likely due for disruption in the near future. Look out.