Blockchain for E-commerce: Uplift Online Shopping Security

Explore the role of Blockchain for E-commerce.

The global ecommerce landscape is evolving and making strides worldwide. While traditional commerce is still a thing, e-commerce is changing how brands connect with potential customers globally. With many applications, platforms, and marketplaces, ecommerce has improved user experience, meeting the needs of modern-age customers. 

However, the ecommerce industry continues to grow and reach $16k billion by 2032, it needs some improvements to ensure secure, transparent, and seamless transactions. To stand strong in the era of security breaches, identity thefts, and delayed transactions, businesses seek modern technology solutions that promise efficiency and end-to-end security. 

Blockchain is one of the rising trends in the ecommerce industry after AI and ML. it helps businesses overcome existing ecommerce market challenges, including retail thefts and fraud. 

In this blog, you will learn how to implement Blockchain within ecommerce workflows. First, understand the existing challenges of our ecommerce industry.

Challenges of Our Current Ecommerce Industry

The online ecommerce industry has grown immensely in the last few years, becoming the most competitive market. 

Despite this growth, some key challenges are holding back e-commerce growth.

• Fraud could cost e-commerce businesses $343 billion in the next 5 years.
• 14.6% of phishing attacks in early 2022 targeted online retail. This has impacted the trust and loyalty of brands and consumers, impacting sales.
• Traditional business models include intermediary parties that increase delivery costs, making 70% of shoppers abandon their carts because of high shipping costs. 
• The ecommerce industry is complex and involves many parties like supply chain, logistics, payments, and others, leading to delayed deliveries. Only 34% of customers think delivery services have improved.

To overcome these challenges, businesses find blockchain a suitable solution to transform ecommerce. It eliminates intermediary parties, reduces costs, and improves transparency, and security. 

Solution- Blockchain for E-commerce

What drives the need for Blockchain-based Ecommerce?

• Increased demand for transparency
• Frictionless transactions
• Demand for improved customer service
• Fast and cost-effective transfer of assets
• Eliminate paper-based processes, better traceability, and filtering fake goods
• Fraud prevention and detection

Blockchain for ecommerce means securing online transactions and improving user experience. 

It stores each online transaction record on the decentralized network. Users can access these records but cannot change them, ensuring data integrity. Integrating blockchain within the ecommerce landscape benefits businesses in many ways.

Benefits of Blockchain For Ecommerce

Blockchain technology has transformed the entire ecommerce industry for good. Implementing blockchain might be challenging and costly but it will help your business build trust and loyalty in the long run.

Here is how Blockchain helps businesses.

1. Improved Security and Transparency

Blockchain technology in ecommerce has significantly 

• Improved trust and security in online transactions
• Reduced the risk of fraud 
• Prevent unauthorized access
• Secure transactions
• Make records immutable

Blockchain’s immutable ledger helps prevent fraud as it securely records every transaction. Ecommerce businesses can use blockchain for customer authentication, reduce fraud prevention costs, account management, and identity verification processes.

2. Operational Efficiency

Since blockchain is decentralized, it streamlines operations to drive efficiency. It uses smart contracts to automate processes like order fulfillment and payment processing. Not only this, blockchain-

• Uses smart contracts to execute agreements automatically, reducing manual interactions.
• Eliminate intermediate parties to reduce delays and costs
• Improves transparency across the supply chain
• Ensure real-time product tracking, verify product authenticity, reduce counterfeit, and more.
• Secure data management, reducing frauds and disputes.  

Retailers can track goods from production to delivery, ensuring that products are genuine. It reduces costs associated with returns, inventory losses, and delays.

3. Cost-effective Operations

Blockchain can significantly reduce operational costs in the eCommerce industry.

• Eliminate intermediaries like banks, payment processors, and third-party vendors, which reduces service fees. 
• Reduces transaction costs and simplifies processes
• Speeds up transactions by automating tasks with smart contracts, which lowers labor costs. 

Blockchain ensures traceability across the supply chain, providing real-time updates and minimizing fraud, and disputes. With blockchain eCommerce businesses operate more affordably.

4. Faster and Cheaper Payments

Traditional payment systems take several days to clear payments as they involve multiple parties and associated fees. Blockchain eliminates these intermediary parties. With blockchain, businesses can process international payments instantly at lower fees. 

Not only Ecommerce, blockchain is making strides across industries.

Also read- Blockchain Technology in Fintech: Use Cases and Future

The benefits are indispensable. But, how do businesses integrate blockchain within their Ecommerce operations? Understanding Blockchain’s application is important to leverage its capabilities. 

Top Blockchain Applications in the Ecommerce Industry

Blockchain technology has clear benefits for Ecommerce. Let’s understand how businesses can integrate it into Ecommerce.

1. Securing customer’s data

Blockchain helps keep customer data safe in eCommerce. It uses Distributed Ledger Technology (DLT), which makes online databases more secure and harder to hack. This is why blockchain is a good choice for eCommerce businesses.

Blockchain systems are also very secure, with few data breaches reported.

Another key benefit is that blockchain-based payments don’t show personal details. Instead, transactions are verified using a unique ID linked to the user’s wallet. Businesses can use-

• Blockchain-based digital ID solutions
• Blockchain-based features like two-factor authentication (2FA) and biometric verification

2. Smart Contracts for Automating Transactions

Smart contracts are self-executing contracts that execute automatically when a certain condition is met. It eliminates the need for intermediaries, reducing risks and ensuring transparency. 

Smart contract helps ecommerce businesses automate certain tasks, like payment processing, distributing products, and others by setting rules. It significantly reduces manual tasks and the costs associated with them. For example- ecommerce businesses can use DeFi (Decentralized Finance) platforms to use smart contracts to execute payments, and refunds, automatically when specific conditions are met.

This technology can make e-commerce more accessible by lowering costs, so even those who can’t afford traditional platform fees can still participate.

3. Supply Chain Transparency

For any e-commerce business to succeed, the supply chain should be transparent and effortless. An efficient and transparent supply chain helps Ecommerce track their products, manage inventory, track product distribution, and identify thefts, and lost products. But as the supply chain gets bigger, it poses critical challenges.

Supply chain disruptions can cause significant negative losses in terms of finances (62%), logistics (54%), and reputation (54%)

Blockchain can help streamline supply chain operations, ensuring complete transparency throughout. Blockchain helps-

• Improve transparency among customers, as they can track their product across the system
• It reduced fraud and counterfeiting by verifying products
• It streamlines logistics and improves inventory management
• Improves customer’s trust

For example, brands like Walmart use the IBM food trust blockchain to ensure an efficient food supply chain. 

4. Digital Ownership

E-commerce sites invest a lot in creating high-quality photos, videos, reviews, and other content, but the platform usually owns these assets. With blockchain, retailers can fully own their digital content, like product images, videos, and reviews. This ownership is recorded on the blockchain, making it clear and transparent.

• Retailers fully own their digital content (photos, videos, reviews), not the platform.
• Blockchain keeps a clear, unchangeable record of ownership.
• Blockchain ensures digital content is secure and can’t be tampered with.
• Data is transparent and verifiable, building trust with customers and businesses.
• Ownership and usage rights are clearly recorded, reducing legal disputes.

Businesses can use Shopify’s integration with blockchain-based solutions for tracking product authenticity and ownership. 

5. Loyalty Reward Programs

Ecommerce business is all about customers. Without engaging them, there is no revenue. One of the solutions to do is the loyalty rewards program. 

Blockchain can help create personalized loyalty programs for customers. By securely tracking purchase history and preferences, it can automatically offer discounts or reward points when customers reach certain spending levels. Since all purchase records are stored on the blockchain, smart contracts can easily manage these rewards without the need for manual processing.

Brands using blockchain-based loyalty programs.

• Visa to launch the world’s first Bitcoin Rewards Credit Card.
• Cordia launches a cryptocurrency reward program to earn MORE Coin for ordering from Cordia’s restaurant in Las Vegas.
• American Express uses Hyperledger to enable retailers to offer custom Membership Rewards offers. 

6. Decentralized Marketplaces 

Centralized marketplaces pose critical challenges for Ecommerce businesses

• High fees
• Lack of control
• Privacy issues, and 
• Censorship leads to monopolistic practices, unfair competition, and limited choices for consumers.  

With decentralized marketplaces, ecommerce businesses can reduce fees, have more control, and fast peer-to-peer transactions. Decentralized marketplaces use blockchain to ensure fair trade among parties by eliminating middlemen.

For example- ROVI. We created a platform allowing people to shop and earn rewards. 

7. Warranty Management

Earlier businesses relied on paper-based agreements, which can be lost and altered. Blockchain can make warranty management easier and more secure. It stores each warranty on the blockchain, which is accessible to all but no one can alter it. Ecommerce businesses can use blockchain-based warranty system that helps them track each agreement without losing key information. For example- FlipVerse is a blockchain-based ecommerce warranty system that uses NFTs.

8. Asset Tokenization

Online businesses need to securely store credit and debit card information for future payments. Since this data is sensitive and regulated, many companies use third-party services to store it, avoiding the need for expensive certifications. One popular solution is payment tokenization, which replaces card details with a secure token. This helps businesses process payments efficiently, reduce costs, and improve payment success rates.

These applications of blockchain in Ecommerce are transforming how businesses ensure efficiency and security. This is why, many top brands have integrated blockchain within their workflows.

Real-world examples of blockchain in e-commerce

Many brands have already implemented blockchain for various use cases.

• Nike- uses blockchain to verify the authenticity of its products and prevent counterfeiting. It uses the system “Cryptokicks“ to track sneakers from production to purchase, providing customers with proof of authenticity. 
• Walmart uses IBM’s Food Trust Blockchain which helps them streamline the supply chain. Their users can track products from farm to table. 
• De Beers’ Tracr platform records every diamond’s details on the blockchain. This enhances consumer confidence by proving the ethical sourcing of their diamonds.
• Shopify allows users to accept cryptocurrencies in payments using blockchain-based payment systems. It also has a crypto-based loyalty program for better engagement. 

Not only this other top brands like Overstock, amazon, Everlodger, and Vechain also leverage blockchain technology to improve their Ecommerce experience. However, implementing blockchain technology is not a simple task. It poses some challenges that every Ecommerce business must know before it starts.

Challenges of Implementing Blockchain in Ecommerce

As an Ecommerce business, you must consider challenges while implementing blockchain.

• Low Scalability: Blockchain can slow down while processing too many transactions. It can slow down your scalability while processing too many user requests.
• Implementation Costs: Setting up a blockchain can be expensive and complex.
• Private Key Risks: Private keys control access to sensitive data. If stolen, they could expose information and financial details.
• Integration Issues: It might not work well with old systems, which can lead to data loss or errors.
• Temporary Disruptions: Using blockchain can cause short-term problems for businesses as they adjust to the new technology.
• Changing Regulations: It is still new, and the rules about how it should be used keep changing. This creates uncertainty and potential legal issues for businesses.
• Cryptocurrency Restrictions: Cryptocurrencies and blockchain are restricted in many countries, making it a difficult choice for expanding ecommerce businesses. 
• Legal Disputes: Blockchain transactions are permanent. If you have any accidental transactions, it can lead to legal conflicts.

Businesses must consult a leading blockchain app development company to leverage its benefits and successful blockchain implementation. Make sure you follow the best practices for blockchain implementation.

Best Practices for Implementing Blockchain For E-commerce

• Identify the right use case- Not every part of an e-commerce business needs blockchain. To achieve success, companies should focus on specific areas where blockchain can make a difference, like supply chain management, payment processing, or preventing fraud.
• Invest in Education– To implement blockchain, businesses must understand how it works and what it can do. Educating key people in your company—like management and employees—about blockchain is essential. 
• Start Small and Scale Gradually– Implementing blockchain can bring big changes, so it’s smart to begin with a small, manageable project. This lets businesses test the technology, make improvements, and see how well it works before expanding it to a larger scale.
• Ensure Security and Compliance– it is generally secure, but it’s important to follow the necessary rules and regulations when using it. Businesses should make sure they comply with data privacy laws, financial regulations (if using cryptocurrencies), and any industry-specific standards to maintain security and avoid legal issues.
• Partner with Experienced Providers– Since blockchain can be complex, working with experienced service providers is helpful. They have the technical know-how to solve challenges and provide ongoing support during implementation, improving the chances of a successful blockchain project.
• Encourage User Adoption– For blockchain to work in e-commerce, both businesses and customers need to use it. Companies should explain the benefits of blockchain, like better transparency and security, and show customers how to use blockchain-based services. This helps customers understand and get involved with the technology.
• Plan for Integration– Implementing blockchain often means connecting it with existing systems. Careful planning is needed to make sure this integration goes smoothly and doesn’t disrupt business operations.

Choose the right blockchain app development company that can help you from ideation to deployment. 

The Future of Blockchain For E-commerce

As e-commerce keeps growing, adopting blockchain is a key move toward a future focused on trust, transparency, and efficiency. With blockchain at its heart, e-commerce is heading into an exciting new era.

If you’re considering starting an online store, we’re here to help you create and improve your e-commerce business. Contact us today to learn more!