The retail industry is one of the most important sectors of the United States economy. Unfortunately, the COVID-19 pandemic has left the trillion-dollar retail sector vulnerable to shoplifting.
Findings from the National Retail Federation’s 2022 Retail Security Survey show that retail losses from stolen goods will increase to $94.5 billion in 2021, from $90.8 billion in 2020. decrease in sales. because consumers cannot access goods.
Retailers are looking to blockchain to tackle retail theft
Because of these extreme measures, many innovative retailers have started looking into technology to combat shoplifting. For example, Lowe’s, an American home improvement retailer, recently implemented a proof-of-concept called Project Unlock, which uses radio frequency identification (RFID) chips, Internet of Things sensors and blockchain technology. The solution is currently being tested in several Lowe’s stores in the United States.
Josh Shabtai, senior director of ecosystem practice at Lowe’s Innovation Labs – Lowe’s technology wing that developed Project Unlock – told Cointelegraph that Project Unlock aims to explore emerging technologies to help prevent theft while creating a better customer experience.
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To accomplish this, Shabtai explained that RFID chips are used to activate certain Lowes power tools upon purchase. “So if a customer steals a power tool, it won’t work,” he said.
Shabtai notes that RFID chips are a low-cost solution that many retailers use to prevent theft. According to the National Retail Federation’s 2022 Retail Security Survey, 38.6% of retailers have implemented or plan to implement RFID systems. However, Shabtai explained that combining RFID systems with blockchain networks could provide retailers with transparent, tamper-proof records to track in-store purchases. He said:
“Through Project Unlock, a unique ID is registered and assigned to each of our power tools. When the product is purchased, the RFID system enables the power tool to be used. At the same time, the transaction can be viewed by anyone, because the information is recorded to the public blockchain network .
Mehdi Sarkeshi, the lead project manager at Project Unlock, told Cointelegraph that Project Unlock is based on the Ethereum network. Sarkeshi explained that each product in Project Unlock is tied to a nonfungible token (NFT), or digital twin, that will receive a status change upon purchase.
“The NFT of a product undergoes a status change when it is sold by Lowe’s, if it is stolen, or if the status is unknown. All this information is publicly visible to customers and retailers because it is recorded on the Ethereum blockchain. We have actually created a proof of purchase for Lowes electrical appliances, ” he said.
While the concept behind Project Unlock is innovative for large retailers, David Menard, CEO of asset verification platform Real Items, told Cointelegraph that his company has been exploring similar solutions. “Traditionally, RFID tags prevent theft, so this problem has been solved,” he said. Because of this, Menard notes that Real Items combines digital identities with physical products to ensure that stolen items can be accounted for. He said:
“If the physical item is paired with its digital twin, then the retailer can know exactly what was stolen, from where and from the product group. The retailer can understand this more clearly than the information generated by the RFID system.
According to Menard, Real Items currently has a memorandum of understanding with SmartLabel, a digital platform that generates QR codes for brands and retailers to provide consumers with detailed product information. He indicated that Real Items plans to implement a “digital product passport” with SmartLabel products in the future. “We see digital product passports as the basis for storing information about products throughout the product life cycle,” he said.
Menard further explained that Real Items uses the Polygon network to store product information. It is important to point out that this model is different from Project Unlock because the blockchain network is only used here to record information about specific items. “We use the product’s digital twin – also known as NFT – for engagement. It can be tied to anti-theft, but it’s more about providing useful data to retailers.
While solutions developed by Lowe’s Innovation Labs and Real Items could be a game-changer for retailers, the rise of the metaverse could also help prevent retail theft. According to McKinsey’s “Value Creation in the Metaverse” report, by 2030, the metaverse could generate $4 trillion to $5 trillion between consumer and enterprise use cases. The report notes that this includes the retail sector.
Marjorie Hernandez, managing director of LUKSO – a digital lifestyle Web3 platform – told Cointelegraph that designer brands like Prada and Web3 marketplaces like The Dematerialized, where she is also CEO, have used the NFT redemption process.
Hernandez explained that this allows the community to purchase digital goods in a metaverse-like environment, which can then be redeemed for physical goods in stores. He said:
“This redemption process allows retailers to explore new ways to authenticate products on-chain and provide a more sustainable production process with made-to-order demand. It also creates new and direct access channels between creators and consumers beyond the point of sale.
Hernandez believes that more retailers will explore digital identities for lifestyle goods in the coming year. “This allows brands, designers and end users to finally have a transparent solution to many of the problems facing the retail industry today, such as counterfeit goods and theft.”
Are retailers using blockchain solutions to combat theft?
Although blockchain can help address shoplifting going forward, retailers may be hesitant to adopt the technology for a number of reasons. For example, the association of blockchain with cryptocurrency can be a pain point for companies. Recent events like the collapse of FTX reinforce this.
Still, Shabtai remains optimistic, noting that Lowe’s Innovation Labs believes it’s important to consider new technologies to better understand what’s possible. “Through Project Unlock, we have proven that blockchain technology is important. We hope this will serve as evidence for other retailers who are considering similar solutions,” he said. Shabtai added that Lowe’s Innovation Labs plans to expand the solution beyond advanced power tools.
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While noted, Sarkeshi pointed out that it can be challenging for consumers to understand the value of using blockchain to record transactions. “For example, if I am a customer who buys a used product, why should I care if it is stolen,” he said. Because of this, Sarkeshi believes that a change in the customer’s mindset needs to happen for the solution to be successful. He said:
“It’s a challenge to build a culture. Some customers initially don’t like buying stolen products, but we need this to resonate across the board. We want customers to understand that if a product is stolen, everyone in the supply chain will be hurt. Building that culture can be difficult, but I believe this will happen in the long run.