Traceability strategy choice in competing supply chains based on blockchain technology

Abstract

AbstractBlockchain can help reduce fraud and improve visibility and traceability in supply chains. It has attracted significant investments in commercial practices, especially in the luxury industry. With the recent upgradation of consumption worldwide, consumers care more about the source of information and the value of products. Will tracing products using blockchain technology help competing luxury brands gain consumer trust and cultivate new competitive advantages? This paper proposes a supply chain model comprising two competing manufacturers selling online through retail or direct channels. It also explores whether and how manufacturers implement traceability strategies, including building traceability systems or joining third‐party blockchain platforms, considering blockchain's traceability. The results show that, when only one party adopts the traceability strategy, being the first mover to join a third‐party blockchain platform with high traceability is always beneficial for improving the profits of all parties. In this scenario, the blockchain platform should adopt as high traceability as possible. When both parties choose to trace the product source, a win–win strategy for them is to join third‐party blockchain platforms with low traceability. In this scenario, the untraced party is motivated to implement a traceability strategy. Furthermore, if consumer perceptions of traceability are high, an untraced manufacturer can obtain higher profits using the traceability strategy. Otherwise, low consumer perception of traceability leads to low‐price competition, which is harmful to luxury brands.