How Blockchain Technology Can Transform E-Commerce Part 4

The illusion of low prices and absence of incentives

Prices on many e-commerce platforms may appear low, but it doesn’t mean that they actually are low. This happens for a number of reasons.

First, it is cheaper for an e-commerce platform to maintain a warehouse than it is for a brick-and-mortar retailer to maintain and run a physical store, pay salaries to employees and pay rent for the store.

Second, when you buy a product from a retail store, you can be sure that the product is authentic. Some e-commerce platforms are one of the main sources of income for sellers of counterfeit goods. The pictures online may look the same. The description of the product may be the same and the price may be lower than what you would pay when ordering the product elsewhere because you are not paying for the same product.

Third, some e-commerce platforms change pricing on the regular basis and may show different prices to different customers. This is the same strategy that many retail businesses use: they would have a few products called loss leaders that they sell at a cost or at a loss, so that customers come to the store and while in the store also buy other products, the products that have high margins, so that the store would make money on the transaction even though it may be losing money on some of the products.

While today it seems like you can buy almost anything online, in reality this perception exists only when you are comparing the options on an e-commerce platform such as eBay or Amazon to a retail store that will have a much smaller range of options simply because of the square footage limitations. No matter how big a physical store, it simply can’t compete with a website that ships goods from a number of warehouses. However, what if you want something custom-made? What if you want a laptop that has more memory, a t-shirt with a custom logo, and so on? Most likely, you will not be able to purchase a product like this on a large e-commerce platform. You will find such products on websites of individual manufacturers, but the prices are likely to be very high.

With a blockchain platform, prices could be clear and transparent. Groups of users could pool funds together, auction and exchange unwanted items, and buy products and services from merchants at significant discounts.

 

No incentives for interactions with platforms

As mentioned above, smart sellers are interested in building a relationship with their customers and providing them with incentives to leave comments, reviews, and to share products. Many of the platforms, however, have a lot of restrictions when it comes to customer reviews. The restrictions are there because of the system abuses and fake reviews that occur exactly for the reason of incentives not being there.

On a decentralized platform, sellers could create smart contract that clearly outline the rules of referral programs, loyalty programs, and incentives for interactions with the sellers. This way, every customer would know what the rules are and the enforcement of the rules would be done by smart contracts, not only reducing the fees for execution of such a program, but also making it easy for all the involved parties to see what is happening with the program.

Incentives for the users could include token, commissions and discounts. Smart contracts on decentralized platforms could apply to transactions from beginning to end. For example, a buyer could send the funds equal to the price of a product to a smart contract. The seller would then ship the product and update the contract with the shipping information. Once the product arrives to the customer, the smart contract could release a part of the funds. If the customer is happy with the product and doesn’t request a refund, the contract could release another part of the funds. A small part of the funds could be allocated to go back to the customer if the customer leaves feedback within a certain timeframe. Smart contracts could also make access to warranty information and services easier.

Today, in many cases users are not able to obtain warranty service because they either did not register with the manufacturer or have lost the paper receipt that was the proof of purchase of the product. With blockchain, manufacturers could simply put the information about the products on the blockchain. Sellers could update the information with sales dates, which would serve as proof of warranty start. All interested parties, including manufacturers, sellers, and end users, could have access to the data, which would make validation of the data easy, efficient, fast and transparent.

All of this could be done automatically and once developers create the right smart contracts, the platform could run almost on auto-pilot.