In the last few years, the e-commerce industry has unveiled its potential for growth outperforming other sectors with the same prospects. The growth rate of the industry shot up during the pandemic, positively affecting the revenues of both big and small players. The world is now witnessing the rise of a multitrillion-dollar industry with firms like Amazon, Flipkart, Shopify being at the top of the pecking order.
Amazon reported a significant increase in their revenue within the first half of 2021. The leading e-commerce firm generated global revenue of $221.60 billion, 34.8% up from 2020’s revenue, $164.36 billion. While Amazon’s net product sales shot up by 25.4% from $92.09 billion to $115.50 billion this year, its net service sales topped out at $106.10 billion, which is an almost 50% increase from last year’s 72.28 billion.
Despite the great possibilities, e-commerce still faces the same challenge synonymous with the legacy system such that the middleman or a third party takes a large chunk of the benefits. Online sellers are often at a disadvantage given the fact that they have to pay processing fees when the payments of their customers are facilitated. This is not any different from the banking system where the financial institutions recoup most of the benefits to themselves leaving the other parties with crumbs.
The e-commerce or electronic commerce market is a competitive one since participants offer almost the same products and services. As such, there is a need to adopt certain mechanisms that appeal to thousands of online shoppers. It is this need that has pushed Amazon, Shopify and a host of others to the top, giving the room for their revenues to increase.
Additionally, online businesses or merchants are often inundated with the need to build the trust of their consumers since this determines the level of patronage they get. With the increasing trend of internet scams, with some customers falling victims themselves while trying to make purchases, this has highlighted the importance of safeguarding customers’ personal and financial details. In light of this, sellers or merchants often have to invest hugely in data encryption as well as other protective measures against hacking.
Essentially, the e-commerce market is complex and features a long list of operations- from logistics to supply chain, payments and many others. Handling all these activities is somewhat a herculean task. Besides, the impressive growth of the industry has taken its toll on these operations making them outgrow any human or technological solution. However, blockchain technology is poised to change the narrative. More importantly, it addresses the issue of centralization owing to its decentralized infrastructure.
Blockchain technology has found many use cases apart from being the linchpin behind cryptocurrencies. The technology has traversed sectors such as real estate, banking, transportation, identification, gaming. The potentials of the technology are such that its applications are unlimited.
Combining e-commerce and blockchain technology is an idea that has received endorsements from experts due to the benefits it holds for the former. Blockchain technology has been touted to be a game-changer for the industry. Some advantages include;
- Improved Operational Efficiency
Due to its decentralized nature, blockchain could erode the role of a third party or middlemen by introducing smart contracts. Smart contracts displace selfish intermediaries, payment processing and logistics partners, creating a direct relationship between merchants and online shoppers. This leads to improved operations and increased efficiency.
This is a major advantage as online shoppers before the advent of blockchain were stuck with limited payment options. Merchants can now integrate cryptocurrencies providing numerous and affordable payment options for their customers.
The e-commerce industry can benefit from the borderless property of blockchain technology. As such, merchants can take their services and products beyond their country of residence, receiving patronage from online shoppers in other regions.
Online shoppers can also benefit from merging both disciplines in terms of making payments. Blockchain technology has a higher processing capacity than the payments gateways available in the legacy system. Within a few minutes, they can get their payments completed, especially when they use a digital currency like Bitcoin. Payments are also stored in a secure manner which makes