Know-how-Primarily based Retail Operation Development and Dangers
Wednesday 26 January 2022
Throughout the pandemic, retailers have had to act quickly to adapt to stay-at-home orders and social distancing guidelines. This meant making the best of available technology and experimenting with new technologies – both online and in-store – to connect with customers and maintain customer satisfaction (and security!). As we continue to figure out how to navigate the new normal, it would be wise for retailers to keep up to date with technology trends.
Still reaching for the cookie jar?
We’ve also seen an increase in class action lawsuits for cookie violations, such as those against Oracle and Salesforce.2
In light of recent regulatory attention, major tech companies have started making changes that indicate we are moving towards a future without cookies. In 2019 and 2020, Mozilla’s Firefox and Apple’s Safari browsers respectively blocked third-party cookies by default. Apple’s App Tracking Transparency (ATT) framework introduced changes to tracking within apps, requiring brands and marketers to obtain user permission before tracking. Google also announced plans to disable third-party cookies by 2023.
With increased regulatory attention and changes by big tech companies, not to mention the increased costs of digital advertising, retailers are now looking to third-party cookie alternatives. A promising alternative appears to be retail media, which allows brands to advertise their products on a retail website or app and access retailers’ first-party data for ad targeting.
Escaping “reality” with AI
As stay-at-home orders eased, consumers were desperate to leave their homes, and in-store shopping became a fun, social experience and a way to break out of the stay-at-home routine. At the same time, social distancing guidelines have prompted companies to reconsider their in-store practices.
In previous issues, we’ve talked about how retailers have shifted their attention to augmented reality (AR) through virtual fitting rooms and smart mirrors and fitting rooms to help offset losses due to enforced store closures and keep customers safe.7 Extended Reality (XR), including AR and virtual reality (VR), however, will be core components of the “metaverse”. Brands should start considering marketing and promotional strategies for post-COVID-19 virtual adoption. Some brands have already started to prepare for the metaverse by establishing a new marketing genre: Direct-to-Avatar (D2A). For example, Gucci sold a virtual bag in Roblox for more than its retail value, and Nike dropped virtual Jordans in Fortnite.8
In the digital realm, retailers are turning to artificial intelligence (AI) to facilitate customer interactions through chatbots and conversational marketing, drive personalization through product recommendations based on past customer activity, and understand brand sentiment and customer preferences. For example, AI enables brands to “identify social media photos in which people are wearing or using their products, even if the brand or product is not tagged,” and in turn provides insights into customer demographics.9
Retailers should keep in mind that regulators, private companies, non-profit organizations, self-regulatory bodies and the like are all competing to publish the latest guidance, framework and guidelines for the use of AI. In June 2021, the Biden administration created the new National Artificial Intelligence Research Resource Task Force, which “will help develop a roadmap to democratize access to research tools that foster AI innovation and foster economic prosperity “. In October 2021, the White House Office of Science and Technology Policy announced it would develop a Bill of Rights to protect against the harms of AI technologies. The Federal Trade Commission (FTC) also issued AI guidelines in 2020 and 2021, and recently filed an Advanced Notice of Proposed Rulemaking to issue privacy and AI rules.
In April 2021, the European Commission published its proposal for an AI regulatory framework, the Artificial Intelligence Act, to address “risks arising from certain uses of AI through a set of supplementary, proportionate and flexible rules”.10 The UK Information Commissioner’s Office ( ICO) has also published guidance on AI and privacy and developed an AI Auditing Framework.
Common themes in various documented AI principles are, unsurprisingly, privacy, accountability, safety and security, and transparency and explainability.11
The integration of technology into the retail shopping experience is not going to slow down any time soon. As with any technology, retailers should ensure that they use AI-based technology responsibly, comply with existing data protection requirements and keep up to date with legal developments.
1 For the purposes of this article, we refer to cookies, although the same applies to similar tracking technologies.
2 See CNIL, Refusing cookies should be as easy as accepting them: the CNIL continues its action and issues new orders (December 14, 2021).
3 Cf. Division Digital, Kulturmedien & Sport, Data: A New Direction (09/10/2021)
4 See Proposal for a Regulation of the European Parliament and of the Council on respect for private life and the protection of personal data in electronic communications and repealing Directive 2002/58/EC (Privacy and Electronic Communications Regulation).
5 See European Commission, The Digital Services Act: Ensuring a safe and accountable online environment.
6 See European Parliament, Digital Markets Act: Ending Unfair Practices of Big Online Platforms.
7 See Katherine Motsinger, I Want You to Want Me: Augmented Reality Edition, Kattison Avenue (Spring 2020); Katherine Motsinger, Augmented Reality Marketing Campaigns and the California Consumer Privacy Act, Kattison Avenue (Summer 2020); Dagatha Delgado and Kate Motsinger, Mirror, Mirror on the Wall, Who’s the Fairest of All? AR Retail in the 21st Century, Kattison Avenue (Fall 2020).
8 See Nick Pringle, Why the ‘Metaverse’ Will Prove to be More than a Buzzword, Fast Company (September 6, 2021).
9 “Artificial Intelligence Report, 2021 Edition,” ANA, 2021.
10 See European Commission, A European Approach to Artificial Intelligence.
11 See Jessica Fjeld, et. al., Principled Artificial Intelligence: Mapping Consensus in Ethical and Rights-based Approaches to Principles for AI, Berkman Klein Center for Internet & Society at Harvard University (January 15, 2020).