Member Article

Shoosmiths’ digital media expert and Partner, Sherif Malak, examined the multitude of predicted developments in retail, and the legal challenges that accompany them, in an article published in the Lawyer.  Here we reiterate Sherif’s published thoughts on likely trends.

Introduction

The COVID-19 crisis has brought a renewed focus to the role of retail technology and models, as the industry seeks to reimagine the retail landscape over the next year and beyond. Inevitable changes to customer and workforce behaviours will see many strategies ripped up whilst the rule book is re-written to allow retailers to pivot to the ‘new normal’.

The challenges inherent in adopting new technologies and models are seldom without legal risks. But the pace at which the post-pandemic era will demand change, and the speed by which such a heavily impacted industry will need to embrace it, means that the law (and lawyers) will be playing catch-up as things evolve. Nothing illustrates this more than the emergence of e-commerce as the channel of choice during lockdown, and the forecast by IBM’s US Retail Index that the crisis has accelerated the shift from physical to digital retail by five years.

Keeping it real

Last month Gartner announced that augmented reality or ‘AR’ would officially be removed from its Hype Cycle, which charts the maturity of emerging technologies. It signifies that AR’s time has finally come and, just like its interactive cousins, virtual and mixed reality, it is a potential game changer for the retail sector. For the uninitiated, technologies harnessing AR overlay digital content onto the real world, with 100m shoppers predicted to use it this year. Well established in the gaming world, it has numerous use cases, notably for retailers, a much enhanced shopping experience for consumers. Shoppers can try on products digitally at home, receive visual and personalised browsing assistance,enjoy adaptable store displays, share AR content and immerse themselves in gamified experiences (in-store monster egg hunting anyone?). All this, whilst minimising physical contact and the need for in-store inventory; from a COVID perspective, the benefits are self-evident.

Among AR’s most exciting uses, is the promise of creating unlimited inventory for out-of-home advertising, turning the world into a customisable, real-time marketing canvas.However, unlike physical displays and website inventory, the law offers no effective monopoly for AR space. Except for untested (and some argue, fanciful) passing off arguments, there appears to be no protection for a property owner from a software developer displaying digital content on their property, or say, a retailer advertising on a competitor’s shop front. Put simply, there is no established land registry for AR. Efforts to curb the impending chaos are afoot, but unless legislators step in, early attempts can only seek to bring about order on the basis of voluntary respect for AR rights. If these do receive recognition, it’s not difficult to see property lawyers accounting for the right to monetise AR rights in commercial leases in the future.

With news that Apple is rumoured to have hundreds of employees working on smart glasses and related projects due for launch in 2021, new hardware will only add fuel to the AR fire.

Leap-frogging the supply chain

Many correctly heralded 2019 (aka ‘year of the mattress’) as the year Direct-to-consumer (DTC) would make its mark. Despite the lure of DTC via online sales, established businesses higher in the supply chain have until recently sought to preserve their existing distribution models, but there are signs of change. The pandemic has brought with it logistical issues, in some cases caused by increased demand. High profile examples are evident in automotive and food and drink, including Heinz who launched a direct to consumer subscription service (edging closer to the utopia that is ‘ketchup-as-a-service’).

Another short-circuiting of the supply chain has attracting renewed interest too, namely ‘dropshipping’ – direct order fulfilment by suppliers. Long used by sellers on e-auction sites to facilitate just-in-time sales without holding inventory, the benefits are now being revisited by major retailers.

The challenge brought by these changes centre on the lack of in-house experience of parties unaccustomed to dealing directly with consumers, including outsourcing arrangements. For example, many DTC e-stores have been spun up using low cost e-commerce platforms, which provide few commitments in relation to availability, data protection or software escrow, creating potential commercial and regulatory exposure. For retailers engaging dropshippers, the level of customer involvement and how to maintain consistent customer experience will need careful consideration, as will their scope of use over customers’ personal data. Lawyers reaching for their precedent bank to craft these contract terms will be sorely disappointed.

(Another) social dilemma

The GDPR’s introduction of enhanced consent (and the ensuing contraction to marketing databases from re-permissioning) has contributed to the ever-growing share of retailers’ marketing mix enjoyed by social media and online behavioural advertising (OBA).

The double whammy of draft codes and guidance from the ICO and European regulators, together with ongoing issues relating to the ad industry’s consent frameworks for OBA are set to severely restrict the use of a channel that ostensibly avoided the need for obtaining proper consent. The requirement for social media cookies that allowed for customer retargeting and the dreaded extra tick box for ads based on uploaded customer lists may be the beginning of the end for certain types of ‘traditional’ social media marketing.

Expect to see a further shift towards content and influencer marketing, with Instagram and TikTok leading the charge. The legal challenges are abound with increased platform scrutiny and moves towards unionisation by influencers.

This article was previously published as an Industry Spotlight piece in the Lawyer magazine:

https://www.thelawyer.com/industry-spotlight-retail-technology-and-models/