After finding your “cheese” as an e-commerce entrepreneur, it’s wise to follow the same cheese-getting routine until something disrupts the process. In this context, “disruption” means that somebody moved your cheese, and you need to switch things up or risk extinction.
The latest “cheese mover” in the online sales space is blockchain technology. Some analysts call it a passing fad, but others are calling blockchain the “e-commerce killer.” So what’s the bottom line? Should we get ready for the game-changing potential of “The Blockchain?”
Before we thoroughly address this question, let’s start with a simple explanation of blockchain…
What Is Blockchain Technology?
A “blockchain” is a ledger, not that different from a spreadsheet. According to Motley Fool, “it’s a brand-new way of transmitting money without the need for traditional banking networks, as well as a means to store data in a transparent and unalterable way.”
The blockchain ledger is viewable and shared by countless users. In the case of a cryptocurrency, the ledger records how much currency each account holds. Blockchains can hold other types of data too—including the computer code that makes up a fully-functioning application (these are called “dapps”).
Unlike a normal ledger or database managed by a centralized authority, blockchains benefit from a decentralized management system based on the use of cryptographic keys. A network of computers run special software to maintain the blockchain by verifying cryptographic keys of individuals who want to make changes to the ledger.
A centralized authority can still maintain a blockchain, but the most “disruptive” applications of this technology do not require a single authority to keep the ledger up to date. Because of that, blockchain tech could render countless organizations—like Google, Amazon, eBay and Alibaba—completely obsolete.
The Downsides of Centralized E-Commerce Marketplaces Like Amazon
The other reason why blockchain could disrupt the e-commerce space is because sellers and buyers get the short end of the stick when using platforms like Amazon, eBay and Alibaba. These centralized corporations skim enormous profits off every transaction. But there’s more. The downsides of using e-commerce marketplaces are numerous:
- You don’t own the product information you list: You don’t own the product descriptions, pictures and reviews on your seller page. Ecommerce platforms like Amazon own this information, and other sellers can use it to compete against you.
- You pay high fees for selling products: Selling fees are costly for retailers using e-commerce platforms. For example, a platform may charge a percentage fee for every sale, a fee based on total revenue or both. These fees—as much as 10 to 50 percent of each transaction—result in higher prices for consumers and lower profits for sellers.
- You have limited contact with your customers: Amazon and other e-commerce marketplaces limit the communication between retailers and customers. This prevents Amazon sellers from building brands and developing client relationships.
- You’re bound to strict rules: Another potential problem related to centralized online marketplaces is the complication of the rules. If you break a rule as a merchant, you could be blocked from accessing your sales page— and your source of income—forever.
Until recently, the downsides of centralized e-commerce marketplaces have been worth it. After all, companies like Amazon and Alibaba put your products in front of millions of potential buyers. But what if a blockchain-based e-commerce solution could do the same thing for virtually free?
The E-Commerce Blockchain Revolution Has Begun
The most exciting benefits of cryptocurrencies and blockchain technology seem ready-made for application in the e-commerce space. As an e-commerce entrepreneur, imagine how the following could disrupt the industry:
- Decentralized e-commerce marketplaces with virtually nonexistent fees: A decentralized and blockchain-based e-commerce space would allow you to buy and sell any product without a centralized, third-party sales hub (like eBay and Amazon). Buyers and sellers could list products, shop for merchandise, read reviews for popular sellers and communicate with each other, all through this decentralized system. Furthermore, using cryptocurrencies for payments would liberate the marketplace from fees associated with centralized payment providers (like Visa and PayPal).
- Instant, nearly-free international payments: If you want to pay $50 for a product in Hong Kong, you can make a bank transfer with a high fee and a long wait time. Or, you can pay faster by Western Union or PayPal, but also at a considerable cost. But what about sending Bitcoin at a price that’s virtually free? With cryptocurrency, a merchant can receive your payment instantly anywhere in the world. Which option would you prefer as a merchant or buyer?
- No middleman required for publishing and selling information, media and software: If you want to publish and sell a “dapp” on a decentralized blockchain marketplace, you don’t have to use an app store controlled by Google or Apple. A decentralized blockchain marketplace allows you to publish software, media, pictures, e-books, music and movies—and receive compensation directly from customers without a third-party intermediary taking a fee.
- Investment exchanges with minimal fees: Decentralized financial exchanges already exist through which users trade cryptocurrency investments. No single authority controls these exchanges, and the transaction fees cost next to nothing.
Even though blockchain tech is still in its infancy and it could be years before a decentralized marketplace takes on Amazon, the potential for destabilization is there. Moreover, countless blockchain-based e-commerce projects are already in development. These include names like Blockmarket (Syscoin), Origami Network, FundRequest, Ink Protocol (Listia Marketplace), Bounty0x, ModulTrade, OpenBazaar and more. Could one of these be the next Amazon?
Conclusion
If you’re a corporate giant that manages a centralized e-commerce marketplace, you should be worried about blockchain tech. If you’re an e-commerce entrepreneur who sells through Amazon, however, you might enjoy the disruptive, decentralized future to come.
In the epic book “Who Moved My Cheese?,” author Spencer Johnson describes the inevitability of change. He says we should anticipate these moments of disruption, see them as opportunities and, most importantly, “move with the cheese.” Although blockchain hasn’t moved your e-commerce “cheese” yet, the tremors have already begun. Therefore, the mice who know what’s best might want to try a decentralized blockchain marketplace once the opportunity presents itself.
References:
https://www.fool.com/investing/2018/04/25/explaining-blockchain-in-1-easy-to-understand-sent.aspx
https://hackernoon.com/blockchain-will-kill-traditional-e-commerce-heres-why-4cc07a2f4c06
https://www.investinblockchain.com/decentralized-marketplaces/
