Are you ready for dark retailing?
Retail commentators spend a lot of time jabbering about customer experience, customisation, big data and other big buzzwords. To be sure, they are interesting and – in some cases – important topics to think about, but they are so obvious, they are hardly worth talking about.
The problem is that this detracts from (what I believe is) a massive paradigm shift happening in commerce, which sooner or later will also happen in retail. You know, frog, boiling water and all that.
Now I’ll throw another buzzword at you. Blockchain technology. It’s capable not only of transforming business models but also entire industries. This is not a primer on the the actual technology (Google will help you figure that one out), but to summarise, here are the key features of the technology:
- It allows direct (peer-to-peer) transactions without any third party involvement
- It is practically unhackable, which means it’s 100 per cent trustworthy
- It is decentralised, so it cannot be centrally controlled or influenced
- It is 100 per cent private; that is, it is 100 per cent transparent (and public). Some people seem to think that this means that it prohibits any abuse, but really, it means the best place to hide a grain of sand is a beach.
Park those insights for a moment and consider the current competitive landscape and actual retail practice. Let’s take your local pizza shop as an example.
- They probably underpay the staff and/or pay cash in hand
- They underreport sales figures to reduce BAS
- They juggle cash-flow to pay suppliers
- They act as a tax collection agent
- They are forced to allow third parties like banks, payment providers, tech suppliers and food delivery operators to ‘clip the ticket’ mercilessly
- They are probably not hugely profitable, and if they had to play by the book, they definitely would be unprofitable
Yet they live in fear of being caught out.
Then, along comes a technology that allows them to record transactions and collect payment without anyone clipping the ticket, and without anyone being able to trace the transaction value. What do you think is going to happen?
Think about it. Let’s say banks take 2 per cent of the transaction value to process payment by card. Is that reasonable? If a retailer has a gross margin of 40 per cent, that’s a 5 per cent cut of their gross margin for a tap of the card. If a retailer has 10 per cent net profit, then 20 per cent of their net profits is sacrificed to process the payment.
Given that the technological infrastructure is in place (and paid for independently of that transaction fee) the act of clipping this particular ticket is exorbitant and disproportionate to the value added. Whereas, there is no third party in a blockchain transaction, so it can be commission free.
Not to mention the way the Government has outsourced tax collection to retailers, not only without compensation, but with an additional financial burden. It boggles the mind that Joe Blow in the corner shop must effectively pay the government (and other third parties like accountants) to collect tax on behalf of the government and wear the risk of further financial penalty in case they get it wrong.
The only thing that is missing is an entrepreneur who is fed up enough to create an application that makes it impossible to identify purchases and sales transactions. Retailers will buy from suppliers in untraceable transactions, so the ATO won’t be able to benchmark operations to identify dodgy operators. And retailers will sell to consumers in untraceable transactions, so the ATO won’t be able to collect BAS. No commissions, and no bank fees.
That is dark retailing. That is the future, and it is a rather dystopian one.
The RBA is looking at ways to reduce the cost of electronic payments for merchants and consumers as cash usage drop… https://t.co/Eu1yOJGtkB2 hours ago