Every week, The Interline rounds up the most vital talking points from across the fashion technology landscape. We provide our take on what matters, and why. This roundup is also delivered to Interline Insiders by email.

Blockchain is set to bounce back into the spotlight, more complicated than ever.

Blockchain technologies have never been easy to understand. While most people are familiar with Bitcoin, a lot of what makes that marquee blockchain application actually tick remains opaque. The principles behind decentralised currency, the different infrastructure models that can power and sustain it, and the myriad different factors that contribute to what’s become probably the world’s most volatile asset class – none of these things are simple. And even dedicated cryptocurrency analysts do not agree that any of them have yet been set in stone.

And while Bitcoin has become synonymous with blockchain as a broader concept, it’s just one – quite narrow – application of a gigantic class of applications that have budded from the same central idea. Most of which are still at the proof of concept or theoretical stage.

If you feel as though you don’t “get” blockchain, don’t worry. There’s a lot to get. The Interline will be dedicating a month of editorial coverage to the topic in October, including some essential primers and educational interviews. But in the meantime it’s becoming clearer than ever that blockchain is not something the retail industry can afford to ignore.

The main reason for this is the one that’s grabbed the most headlines. Last week, China’s government announced that it would be expanding its trial of a blockchain-based digital currency designed to – at least in part – replace cash in circulation. For a country with such strong adoption of digital payment methods and social commerce already, this might not seem too significant, but if the trial is successful and the currency – DC/EP – is rolled out across the mainland, it could have two big implications for retail.

First: as we’ve written about in recent weeks, the US government appears to be adopting strong-arm tactics to prevent leading Chinese technology companies from obtaining an unassailable foothold in the nascent social commerce sector. Initially this seemed to be a way of buying private enterprises in the United States more time to compete, but if China successfully launches a state-overseen digital currency that could, theoretically, be used as a tool to dismantle the dollar’s dominance over international trade, then the USA is almost certainly going to respond in kind – more than likely in partnership with its big technology players.

For retailers attempting to navigate the digital payments and social commerce spaces, this adds a lot of unpredictability at what is already an extremely uncertain point in time.

Second: a government-backed private blockchain does away with many, if not all, of the fundamental principles of how a digital currency is supposed to work, according to Bitcoin’s anti-institutional roots. Broadly speaking, cryptocurrencies are decentralised – the ledger that records transactions is duplicated many times and operates by consensus – which, by definition, eliminates the possibility of a single party controlling how its tokens are spent, or tracking the identity of the parties transacting. Removing that distributed, peer-to-peer element and centralising control of the currency is not likely to inspire confidence when the central party is a traditional financial institution – and even less so when it’s a government with a dubious record of surveillance and social control.

Fortunately, blockchain is not limited to digital currency. Far from it. The Interline will be going into much more detail here in October, but for the time being readers interested in the potential of blockchain for factory-to-retail distribution and data tracking might be interested in reading the results of the pre-pandemic proof of concept run by Auburn University with the participation of brands and retailers like Macy’s, Nike, Walmart, Kohl’s, and PVH. Using live supply chain data, this project is perhaps the clearest evidence we have to date of the sheer possibilities presented by replacing traditional supply chain and inventory databases with private blockchains.

As both traditional supply chains and global economies teeter on the brink of collapse, we’re certain to be hearing a lot more about blockchain in the very near future.

A limited rebound could lead to reconsideration of the role of brick and mortar retail.

Consumer spending is coming back here in the UK, with July showing retail sales returning to pre-pandemic levels. But fashion was not a contributor to this rebound: clothing sales are still down more than 20% from February this year, and with economic uncertainty and remote working looking to be with us for the long-term, that situation is unlikely to change. The sweatpants and shirt combo is here to stay.

Indeed, new research from McKinsey suggests that disposable income in the USA, EU, and Europe is unlikely to bounce back fully for several years, and what spending remains is likely to be focused on online channels and local stores.

In those circumstances, the role of brick and mortar retail is up for reconsideration. One possible approach is turning retail locations into new, more focused experience centres. But this week presented a rather different alternative: repurposing retail floor space for eCommerce distribution and customer collection. Amazon – which has this week announced that it’s turning Lord & Taylor’s former Manhattan flagship into a technology hub where Amazon Fashion will be in residence – is also potentially negotiating to turn old Sears & JCPenney stores into new nodes in its distribution network.

This would, in many ways, be the ultimate irony. For years Amazon – and its equivalents in Asia – have toyed with overcoming the burden of last-mile delivery using different technologies, from drones to street-level robotics, but a nearer-term solution could simply be to shift its warehouses closer to consumers by commandeering retail floorspace in towns and cities. Instead of using its technical edge, Amazon could get its next leg-up over other retailers by essentially resurrecting the “cashier desk in a warehouse” model popularised by catalogue retailers like Sears in the US and Argos in the UK decades ago.

One thing seems guaranteed: in an era of next-day home delivery and sameday kerbside pickup, physical retail premises will need to do a lot to justify their cost. This blend between fulfilment and experience will be The Interline’s focus this November, so look for more coverage of both this week’s headline topics before the end of this year.

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