By Sukhi Jutla, co-founder and COO of MarketOrders.
Of all the industries in the world, the jewellery business is one of the most traditional and old-fashioned. It is also the most reliant on direct interaction between master craftsmen and merchants. The most precious metals and stones in the world pass from hand to hand in a supply chain that has barely changed in hundreds of years.
The jewellery market is an industry rooted in ancient times. From the dawn of civilisation, humans have been adorning themselves with gold jewellery. It has morphed into an industry where purchases are driven by emotion and status, worn for prestige and used as investments.
Gold jewellery consumption has proved to weather economic uncertainty well, so there is little surprise that cryptocurrencies such as Bitcoin have been dubbed ‘digital gold’. Its continued growth proves that buying and wearing gold jewellery is never out of fashion. Whether bought as a piece to wear or as an investment, gold jewellery continues to account for a large proportion of the global gold supply.
According to the latest gold demand trends, jewellery accounts for 47.7% of total gold demand (over 90,000 tonnes). 88% of this gold jewellery is distributed to consumers via SME retailers and boutiques. It is these retailers who MarketOrders helps. We propose to develop a trusted supply chain system, powered by blockchain technology, that will resolve the friction points and inefficiencies faced by independent retailers.
Why now is the time for digital disruption
While the human-to-human global supply chain worked adequately before, it is ill-equipped to deal with consumers who want access to products immediately, rather than waiting weeks for them to arrive, and who want to see an array of options before making a final purchasing decision, with the reassurance they are getting the best possible value. And, of course, the product they are buying has to be ethically sourced with full traceability.
Perhaps it is unsurprising then that the industry has been traditionally slow to embrace change and innovation. There are growing signs, however, that the jewellery business, after years steeped in tradition, may be about to welcome an injection of digital disruption. It is the consumer who is driving this industry shake-up, and if industries don’t adapt to these changing consumer demands then they risk being left behind.
However, the industry we operate in – the gold and diamond jewellery (GDJ) trade industry – is well aware of the need to embrace new technologies. In recent years, the global authority for precious metals trading, The London Bullion Market Association (LBMA), a wholesale over-the-counter market for the trading of gold and silver, has urged the industry to embrace blockchain as it will strengthen supply chain provenance. They announced plans to help modernise and improve transparency in the industry, with an approval process for companies using blockchain technology to track the movement of gold. This came after the revelation that a US refinery had accepted billions of dollars’ worth of gold that had been smuggled from South America.
Ruth Crowell, CEO commented: “The LBMA is continually looking at ways in which investors can be assured their purchase of gold bars addresses supply chain risks, as well as protecting them against issues arising from fraud and breaches of security. The LBMA looks forward to seeing the innovative ways respondents devise technology which can further enhance the Responsible Sourcing Programme.”
As previously mentioned, the latest reports show that the GDJ industry currently makes up over 50% of the total gold demand globally at 2135.5 tonnes of gold. 88% of this industry is made of small and medium businesses and boutiques (SME) that are currently facing significant challenges. MarketOrders aims to resolve these friction points by giving retailers and suppliers a more efficient way to source the products they need. We support these business as they embrace the technical and digital innovations provided by our award-winning innovative marketplace platform.
MarketOrders is a business-to-business retail platform, offering small businesses a cheaper and better way to buy trusted verified products, direct from the manufacturer using blockchain technology to validate the credibility of the product. There are 3 main areas in which MarketOrders helps SME jewellery retailers:
- Lack of transparency. This is the primary problem encountered by the gold and diamond supply chain. Retailers cannot be 100% sure of the exact makeup of their product, where it came from, or if it has been tampered with along the supply chain. Above all, this lack of transparency makes it very difficult for retailers to serve ethical customers as they cannot be sure which mine the materials came from or where the product was manufactured, and as a result they’ll doubt its credibility. MarketOrders utilises blockchain technology to track the gold and diamonds used in their products at every stage, from manufacturer to supplier to retailer, providing validated confidence and assurance in the quality.
- High costs. Traditionally, only large jewellers would have a direct relationship with manufacturers, and SME merchants would buy from a sales rep with a limited and expensive catalogue. MarketOrders offers these merchants a direct business-to-business relationship with manufacturers enabling them to communicate customer feedback, demands and trends directly, whilst receiving the best pricing. Retailers place orders through a pioneering eCommerce marketplace where orders are aggregated and sent to the manufacturer to secure bulk discount savings as well as favourable credit terms.
- Lack of technology and old-fashioned business practices. Most small jewellers are not online and so they miss out on millions of sales. Similarly, their processes are outdated, manual, offline, and slow. MarketOrders provides a seamless digital manufacturer to the customer supply chain and enables SME retailers to get online via their built in eCommerce platform.
Just as importantly as the above, MarketOrders addresses the main issues faced by manufacturers:
- High transaction costs. Manufacturers receive orders from around the world in various currencies. Hefty bank charges for dealing with these eat into their profits. The ability to sort logistically by bundling orders is cost and time efficient for the operational logistics of any company.
- Slow speed of transactions. Waiting for payments to clear can lengthen the project pipeline and result in delays before the machines are able to start manufacturing. Faster payments mean a quicker end-to-end process and more orders fulfilled in less time.
The high street is suffering a huge downturn. Almost 6,000 high street stores closed on the UK’s high street alone, in 2017. Even high-profile brands have collapsed because they have failed to keep up with the e-commerce habits and trends of consumers. SME retailers in the gold and diamond industry have also been affected and are currently struggling with these issues:
- Their products are more expensive than eCommerce retailers who don’t have the same overheads.
- They pay higher prices for their stock than larger retailers with more negotiating power.
- They miss out on sales from customers who prefer to shop online.
- They lack the transparency that most retailers seek in validating the provenance and credence of any product.
- They miss out on sales from customers who prefer to browse online before deciding which physical retailer to visit to make a purchase.
- They miss out on sales to competitors who can order in products quicker due to slow offline ordering processes.
However, there is still a role for the highstreet to play. Consumers still really value a positive in-store experience with old-fashioned customer service and many choose to collect their purchases in store. Data shows consumers are no longer interested in just buying products but are also looking for an experience. The provenance and validation of the certified product is also an experience in itself.
The future for retailers sits at the intersection of e-Commerce and brick and mortar shops. There is solid demand for them both and they can support each other.
MarketOrders’ primary goal is to integrate both experiences seamlessly to become the world’s largest blockchain-based convergence platform. This means both enhancing the offline, real world experience in physical shops by better use of technology, as well as providing retailers with an eCommerce platform offering transparency, credibility and efficiency. MarketOrders merges the offline and online worlds to create greater synergies across businesses in the industry with increased trust. Using blockchain technology, MarketOrders aims to help brick and mortar stores reduce their costs, operate more efficiently and sell a more targeted range of products, whilst also providing them with a convenient user interface (UI) and eCommerce platform.
What is blockchain technology?
In its simplest form, the blockchain is a permanent immutable ledger of transactions. When you purchase or sell gold jewellery, that transaction is verified and added to the ledger. Any transactions or activities related to buying, selling and sourcing are added to the ledger. Once a certain number of entries are made, a ‘block’ is filled and added to the chain forever: it may help to think of a block as a full page in the ledger. This goes on and on, each new block being added to the supply chain, the blockchain, assisting in trust between unknown parties, logistics and efficiency.
Unlike a traditional ledger, the blockchain cannot be amended once data is recorded. Therefore, it is a complete, secure, and accurate way to process transactions. This allows the ownership of gold and diamond jewellery in the supply chain to be tracked all the way back to their initial creation, making fraud and embezzlement a problem of the past.
The GDJ industry is well aware that it needs to embrace new technology or it risks being left behind. The London Bullion Market Association recently declared that it’s time for the gold industry to embrace blockchain as a way of strengthening supply chain provenance.
MarketOrders utilises blockchain technology to create an ecosystem of trusted transactions in the gold and diamond industry. Now is the time to bring the gold industry into the blockchain era: from verifying the source of the precious metals and stones, to ensuring it is not tampered with during the supply chain process, and establishing more efficient processes and systems for retailers to procure their products from suppliers, With MarketOrders’ system, every transaction and trade can be held securely, using end-to end-encryption, whilst being openly authenticated if needed, and documenting to ensure all transactional goods and information within the entire supply chain are reliable and validated.
Is this the start of a blockchain era?
While blockchain technology has inherently distinct values of bringing greater levels of trust and transparency to the supply chain, this technology can only really blossom if all players in the ecosystem are hooked into the blockchain and operating from the same data sets.
The second issue is that there is a huge educational gap in terms of how to actually use and implement this technology. Smaller businesses may be put off from using this tech by high startup costs (there are costs associated with changing systems and IT infrastructure). So even if we are a long way off from developing a fully end-to-end blockchain solution, it is vital that innovation in these technologies continues as that will help our industry to keep pace with digital transformation and contribute to new innovations, which will become more important as we move to an increasingly ‘digital first’ economy.