Information Technology

Blockchain For Retail: A Multi-Franchising Concept

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<p><span style="font-size: 12pt;">You have heard hundreds of times about Blockchain, but do you really know how it works? Well, the truth is that the relevant thing is not to know the technicality but to understand the logic in order (to try) to implement them or even find new use cases and be the next Unicorn in town.</span></p><h2 style="text-align: justify;"><span style="font-size: 14pt;">Blockchain</span></h2><p style="text-align: justify;"><span style="font-size: 12pt;">Blockchain refers to technologies that allow to keep an inviolable transaction record, represented online as a "block". This transaction is unhackable, not only because it is encrypted but also because the Block is broadcasted in a network of billions of nodes that validates the transaction. Add the Block to the Ledger that they keep from all previous transactions, adding this "Block" to the previous ones, evoking the metaphor of a chain of blocks.&nbsp;<br /></span></p><p style="text-align: justify;"><span style="font-size: 12pt;">This is extremely useful to divide things that physically are difficult to divide (metals, buildings, fine art, etc.). In the same cases, it reduces the bureaucracy or avoids centralization of the decision-making (that's why it is called to be the model for decentralized economies - and precisely the scary thing for governments and regulators). Each "piece" in which we divide an asset with Blockchain is a token that will be the object of the transaction, as explained above.&nbsp;<br /></span></p><p style="text-align: justify;"><span style="font-size: 12pt;">Many things are susceptible to being "divided" into secure tokens that can be traded: Bonds, Equity, Debt, Fine art, Metals, and Real Estate. At this point, it is easy to understand that Blockchain is much more than just cryptocurrencies.</span></p><p style="text-align: justify;"><span style="font-size: 12pt;">For our retail subject, there are many use cases. I will focus on the most relevant ones, in my opinion, for the (potential) impact on the business for both brands and customers.</span></p><h2 style="text-align: justify;"><span style="font-size: 14pt;">Applications Of Blockchan Related to the Product&nbsp;</span></h2><p style="text-align: justify;"><span style="font-size: 12pt;"><strong>Traceability</strong></span></p><p style="text-align: justify;"><span style="font-size: 12pt;">At first, what probably comes to your mind is to prevent bad practices and abuses in terms of Corporate Social Responsibility (CSR), prevent accidents like the one it happened with the crazy cow meat in Europe, and guarantee that Sustainability is not simply a marketing claim.&nbsp;</span></p><p style="text-align: justify;"><span style="font-size: 12pt;">Sustainability has been linked almost exclusively with how the product is produced: recycled fibres, eco-responsible manufacturing process, and compliance with corporate social responsibility policies.&nbsp;<strong><br /></strong></span></p><p style="text-align: justify;"><span style="font-size: 12pt;">A french start-up that I am part of the Advisory Board, e-SCM, has developed a solution that enables customers to learn about all the production details of a garment by simply scanning a QR code with your smartphone from the store. To be consistent, the information inside must be reliable. To do so, retailers can link it to an NFT passport certifying each phase of the production chain.&nbsp;<br /></span></p><p style="text-align: justify;"><span style="font-size: 12pt;">This guarantees that the process is indeed being done. Being dishonest in communicating and overselling sustainable practices can penalize companies with terrible repetitional problems. This has recently been the case for H&amp;M, Boohooo, ASOS and Asda, facing greenwashing accusations. That's why you need to prove that the process is not corrupted.&nbsp;</span></p><p style="text-align: justify;"><span style="font-size: 12pt;">In terms of CSR, imagine a fire in a manufacturing plant, and your brand is accused of being responsible for poor conditions. Last but not least, in the case of food intoxication among the population, a traceable, secured process will prove in a matter of minutes where the problem lies (this can be done without BC), but most importantly, that this info has not been manipulated, so you followed the rules, and you were not responsible for that accident (the temptation to manipulate the evidence would be too high).</span></p><p style="text-align: justify;"><span style="font-size: 12pt;">But it is not all about traceability, and I am not referring (only) to the famous NFTs. The relevance of Blockchain in the circular economy is enormous.</span></p><p style="text-align: justify;"><span style="font-size: 12pt;"><strong>Unique Product Ownership</strong><br /></span></p><p style="text-align: justify;"><span style="font-size: 12pt;">Another french start-up with which we partnered at Varenna, Trust Place, is revolutionizing the luxury industry by allowing retailers to prove unique product ownership and authenticity anywhere, anytime.&nbsp;</span></p><p>This makes it feasible to trade with these products (wholesales, resales, gifts), guaranteeing customers that they are buying original ones, preventing fraud, and counterfeiting, and increasing indirect customers' knowledge about brand product life (history, provenance, etc.).&nbsp;</p><p>It also makes a product exclusive, allowing brands to launch a limited edition, providing a unique DNA and even introducing hyper-personalization and brand values. Imagine ZARA guaranteeing its customers to produce exclusive designs limiting the amount of 500 units per country to be shopped only on some event days in their flagships where some influencers would be broadcasting the party LIVE.&nbsp;</p><p>Today retail is about stories and making the customer feel special. Blockchain in luxury is critical also for Returns/care and repairs optimization and acceleration, as some counterfeits can be very difficult to catch for staff at the store.&nbsp;</p><p><strong>Low-Impact Carbon Footprint</strong></p><p>Another interesting thing besides the paperless solution that Blockchain adds is that Trust Place is using a low-impact carbon footprint Blockchain, which is very controversial these days for the negative carbon impact of most big Blockchain platforms.&nbsp;<br />&nbsp;<br />Beyond the buzz and speculation around NFTs, the NFT passport should be an actual link between the real world and the metaverse. As Didier Mattalia, co-founder at Trust Place, points it: "It unlocks new data, anticipates new trends, and reinvents the customer experience."</p><h2 style="text-align: justify;"><span style="font-size: 14pt;">Applications of Blockchain Related to Expansion in the Physical World</span></h2><p style="text-align: justify;">An alternative to traditional funding for store openings, in two ways. First, there are some locations where rent is not an option but buying the building would be a solution. There are already Real Estate companies working on private crowdfunding by tokenizing Assets to:</p><ul style="text-align: justify;"><li style="list-style-type: none;"><ul><li>Avoid bearing a huge debt in their Balances</li><li>Be able to access much more credit than would be possible with a traditional bank</li><li>Avoid paying interest. The investors would be betting on the valuation of the building</li><li>They would have some more oxygen to rump up business</li><li>They could eventually also finance the refurbishment, or, at least, the structural conditioning of the building</li></ul></li></ul><p style="text-align: justify;">&nbsp;</p><p style="text-align: justify;"><strong>Multi, Micro Franchising Concept</strong></p><p style="text-align: justify;">A second way to finance the Expansion would be a Multi, micro franchising concept. The idea would be to find partners to open your new flagship store in Dallas, who otherwise would have to wait at least one or two more years to be opened. Imagine that you are Offwhite or any other brand growing so fast that it literally does not have enough resources to grow at the path the market would allow you.&nbsp;<br />&nbsp;<br />In both cases, Blockchain technology would help the brand reduce its CAPEX to expand its physical stores by "crowdfunding" tokens of a flagship store. Then the company could rebuy those tokens later at a given interest, and in the meantime, the investors could trade them.<br />&nbsp;<br />Same concept for Fundraising at an early stage, successful start-up brands. VCs are not showing a huge interest in fashion and retail lately, and neither are the crowdfunding platforms like Kickstarter, which are more technology oriented. Reversely, fans of a given new fashion concept would be delighted to invest in these brands they believe in.&nbsp;</p><p>Through the Blockchain fundraise platform Neufund, the start-up Greyp Bikes made the full cycle, from issuing tokenized shares for retail investors, through corporate governance on Blockchain, to the exit of Porsche.<br />&nbsp;<br />Unfortunately, regulatory issues are blocking Neufund and most of the rest of the use cases named above. Isn't it contradictory?&nbsp;</p><p>Bitcoin and cryptocurrencies are already established in our economies, but the rest of the use cases that would definitively help to reduce costs, secure, reduce beaurocracy and provide transparency are blocked by the governments of the leading economies.&nbsp;</p><p>Workarounds like the .org domain that made it possible for some projects like Ethereum to become a reality (now too big to get rid of it) are not longing to work. Like Zoe Adamovic puts it in her article "Why we're shutting our successful fundraising platform" in the magazine CoinDesk, the system is encouraging blockchain initiatives to move on without asking permission until you are too big to be ignored, instead of trying hard any possible legal way, as they did.&nbsp;<br />&nbsp;<br />I am convinced that technology will survive beaurocracy and that all these use cases will be routine for all retail brands very soon.</p><p><span style="font-size: 10pt;"><em>This article was contributed by our expert <a href="https://www.linkedin.com/in/felix-de-iturriaga-2861b91/">Felix De Iturriaga</a></em></span></p><p>&nbsp;</p><h3><span style="font-size: 18pt;">Frequently Asked Questions Answered by Felix De Iturriaga</span></h3><h2><span style="font-size: 12pt;">1. Why should businesses accept cryptocurrency ?</span></h2><p>Businesses should adapt to the new age, and as Cryptocurrencies are a reality, it does not make sense to avoid them as a valid payment method. Having said that, it is impossible to accept them all, but only the widely used ones, starting obviously with Bitcoin. Also, it cannot be applied to any kind of goods. It is absurd to buy a Coke with Bitcoins.</p><h2><span style="font-size: 12pt;">2. What are the advantages of a multi-unit franchise ?</span></h2><p>In my use case, it would be like franchise crowdfunding. So basically, the advantage would be to have access to Capital to expand your brand, as resources are limited for any brand, and have an army of local customers promoting it, which is probably the most amazing part of this idea.</p><h2><span style="font-size: 12pt;">3. How are brands using NFT ?</span></h2><p>Everyone is talking about NFTs for Digital designs created for the metaverse. Some offer the digital versi&oacute;n of a real, limited edici&oacute;n design, which I find very interesting! The NFT passport to verify the authenticity of a luxury purse or garment is brilliant, and it is what Solutions like Trust Place are securing. I do not believe these extravagant skins will persist in the long run as the metaverses become more realistic.&nbsp;</p><p>&nbsp;</p>
KR Expert - Felix De Iturriaga