Retail is one of America’s most important industries. The COVID-19 pandemic left the trillion-dollar retail industry vulnerable to theft in-store.
Findings from the National Retail Federation’s 2022 Retail Security Survey show Retail losses due to stolen goods rose to $94.5 billion in 2021 from $90.8 billion in 2020. Some retailers also have to lock away certain products to prevent theft, which may lead to decreased sales due to consumers’ inability to access goods.
Retailers are looking to blockchain for solutions to retail theft
Many innovative retailers are now looking to technology to stop retail theft because of these extreme measures. For example, Lowe’s, an American home improvement retailer, has 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 tech wing that developed Project Unlock — told Cointelegraph that Project Unlock aims to explore emerging technology to help curb theft while creating better customer experiences.
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To accomplish this, Shabtai explained that RFID chips are used to activate specific Lowes’ power tools at the point of purchase. “So if a customer steals a power tool, it won’t work,” he said.
Shabtai mentioned that RFID chips can be used by many retailers to prevent theft. According to the National Retail Federation’s 2022 Retail Security Survey, 38.6% of retailers already implement or plan to implement RFID systems. Shabtai said that retailers can combine RFID systems and a blockchain network to create a transparent record that is tamper-proof, which allows them to track in-store sales. He stated:
“Through Project Unlock, a unique ID is registered and assigned to each of our power tools. The RFID system activates that power tool when the product is purchased. At the same time, the transaction can be viewed by anyone, since that information gets recorded to a public blockchain network.”
Mehdi Sarkeshi is Project Unlock’s lead project manager. She told Cointelegraph that Project Unlock was built on Ethereum. Sarkeshi explained that every product under Project Unlock is linked to a preminted nonfungible token, or a digital twin that will receive status changes upon purchase.
“A product’s NFT undergoes a status change when it is either sold by Lowe’s, if it has been stolen, or if the status is unknown. All of this information is publicly visible to customers and resellers since it’s recorded on the Ethereum blockchain. We have essentially built a purchase authenticity provenance for Lowes’ power tools,” he said.
The concept behind Project Unlock may seem innovative for a large retailer. However, David Menard of asset verification platform Real Items told Cointelegraph his firm is currently exploring a similar solution. “Traditionally, RFID tags prevent theft, so this problem has already been solved,” he said. Menard said that Real Items is a digital identity system that combines physical products with digital identity to make sure that stolen items can always be traced. He stated:
“If physical items are paired with digital twins, then retailers can know exactly what was stolen, from where and from which product batch. Retailers can understand this with more clarity versus information generated by RFID systems.”
Menard said that Real Items has an agreement with SmartLabel. SmartLabel is a digital platform that generates QR codes to allow brands and retailers to provide detailed product information to consumers. He shared that Real Items plans to implement “digital product passports” with SmartLabel products in the future. “We view digital product passports as the foundation for storing information about a product throughout a product’s life cycle,” he said.
Menard also explained that Real Items uses Polygon’s network to store product data. It’s important to point out that this model differs from Project Unlock since a blockchain network is only used here to record information about a certain item. “We use a product’s digital twin — also known as its NFT — for engagement. It can be tied to anti-theft, but it’s more about providing retailers with useful data.”
While the solutions being developed by Lowe’s Innovation Labs and Real Items could be a game-changer for retailers, the rise of the metaverse may also help curb retail theft. According to McKinsey’s “Value Creation in the Metaverse” report, by 2030, the metaverse could generate $4 trillion to $5 trillion across consumer and enterprise use cases. This includes the retail sector, according to the report.
Marjorie Hernandez, managing director of LUKSO — a digital lifestyle Web3 platform — told Cointelegraph that designer brands like Prada and Web3 marketplaces like The Dematerialised, where she is also CEO, are already using NFT redemption processes.
Hernandez explained that this allows people to buy digital goods in a metaverse like environment. These can then be exchanged for physical items in stores. She explained:
“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. This also creates a new and direct access channel between creators and consumers beyond point of sale.”
Hernandez believes that in the future, more retailers will look into digital identities to sell lifestyle goods. “This allows brands, designers and users to finally have a transparent solution for many of the problems facing the retail industry today, like counterfeit goods and theft.”
Are retailers going to adopt blockchain solutions for fighting theft?
While blockchain technology could be used to solve in-store theft, some retailers might hesitate to adopt it for a variety of reasons. For instance, blockchain’s association with cryptocurrency may be a pain point for enterprises. Recent events such as the fall of FTX only reinforce this.
Yet, Shabtai remains optimistic, noting that Lowe’s Innovation Labs believes that it’s important to consider new technologies to better understand what is viable. “Through Project Unlock, we have proven that blockchain technology is valuable. We hope this can serve as a proof point for other retailers considering a similar solution,” he remarked. Shabtai added that Lowe’s Innovation Labs plans to evolve its solution beyond power tools moving forward.
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Sarkeshi noted that although it is notable, consumers may not be able to fully grasp the benefits of blockchain transactions. “For instance, if I’m a customer buying a second-hand product, why should I care if it was stolen,” he said. Sarkeshi believes this is why a change in customer mindset is necessary for such a solution be successful. He stated that:
“It’s a culture building challenge. Although some customers may not be comfortable with the idea of buying stolen products, we need to spread this message across the board. Customers need to understand that when a product gets stolen, everyone in the supply chain is affected. Building that culture may be challenging, but I believe this will happen in the long term.”