The Future of Retail and the Need for Regulation

The future of retail will require regulation or else the future of retail might as well be called Amazon.

The future of retail will be based on surveillance, predictive analytics, profiling, and personalization. With the proper protections this could be empowering and entertaining. Without the appropriate protections it will likely become ugly, invasive, and authoritarian. Perhaps it already is.

To get a glimpse into the future of retail let’s briefly break down some retail trends and ponder what rules may ensure their proper use.

Gotta Get That Data Yo

The value of data continues to grow and the ways in which data can and will be used are expanding rapidly. As a result an increasing amount of retail experiences are data driven, and most retailers are doing whatever they can to collect as much data as possible.

This is why loyalty programs have been such an important focus for retailers, and for much of the consumer experience. Give people rewards, and in exchange, obtain the consent to collect and correlate data.

However has that consent been real? Has that loyalty been real? Or have these just been empty words that speak to potential but not existing relationships?

The consent to be part of a loyalty program should be informed and willing, not just with an eye towards privacy but also actual loyalty. On the one hand we have new rules as found in Europe’s General Data Protection Regulation (GDPR) that emphasize a need to obtain informed consent and not use people’s information without their full knowledge of how it is being used. On the other hand we need rules that govern loyalty programs so that people understand the nature of the relationship and retailers are encouraged to do more to earn people’s loyalty. Otherwise are these programs not misleading and deceptive?

After all what is loyalty? For many it is an emotion, often strong, that reflects who we are aligned with and stand behind. Yet it can also be an expression of faith or devotion. It is in this latter meaning that the future of loyalty may take a sinister or unconscious turn.

Ambient commerce has been articulated by some large retailers as the future of loyalty. They argue that if you have enough data about a consumer, you can predict and satisfy their desires before they even know they have them.

Household goods are an easy example of this. Toilet paper, toothpaste, soap, are the sorts of things we probably buy on a regular basis. What about vacations? Vehicles? Appliances? With enough data just about anything we purchase can be predicted ahead of time. Will your kitchen and pantry restock itself automatically?

There are probably some if not many consumers who would welcome such convenience of having their consumer desires met instantaneously and with minimal effort. However there are many citizens who do not want to give up the privacy, agency, and liberty that would be sacrificed as a result.

Loyalty programs therefore need to involve greater transparency and regulations around how people participate in them. This should include algorithmic transparency, so we can see what predictions are being made about us and why.

This transparency should be an opportunity for retailers to be open and earn our trust and loyalty by providing quality goods and services without the need to manipulate us.

Everything Is Social

The potential counterbalance to ambient commerce is social commerce. If the majority of existing loyalty programs are top down initiatives that seek to manipulate the consumer, the prevailing alternative are recommendation and rating engines that encourage consumers to express disloyalty and hold retailers accountable.

Isolated and alone, consumers are vulnerable. However united and organized, their passivity as consumers recedes and their voices as citizens return. There’s no need for an individual to be alone in any retail experience. They can always turn to friends and strangers to find more information about a product, service, or retailer, and leave a rating or share their thoughts about what went right or wrong.

Yet without rules and structure, the role and potential of such bottom up loyalty systems can be reduced or discredited. There is a similar need for transparency, and fairness, and ultimately there will be a desire for aggregation and consolidation of rating systems.

Should a regulator play a role in enabling trust in rating and recommendation systems, or should the regulator’s role be focused on standards for independent systems that provide a range of criteria upon which to measure trust and reputation?

Quite like loyalty, social media and related recommendation systems are also focused on creating personalized and customized experiences. The more you post, the more you rate, the more you recommend, the more likely the system will bend to your interests and encourage activity tailored to your past activity.

Are users aware of this self reinforcing logic? Should there not be rules that empower users to influence and ultimately control how this personalization occurs? Or on a more abstract level, how their reputation is impacted by their participation in reputational networks?

Social commerce is not just about retail in the traditional sense. Nor is it just about data. It is more broadly about being, shopping, and doing this with other people.

Retail spaces will continue to evolve beyond just retail. Co-working and multi-purpose utilization will allow these spaces to be used for broader experiences that contribute to retail revenue streams while also fostering culture and loyalty.

Similarly events and media networks are augmenting traditional retail experiences as people connect with other people, either in person, online, or via shared media. As they’re connecting they often exchange or buy things, whether spontaneously, or as organized into a marketplace. As services like Shopify make it easier for people to engage in online commerce the more commerce and in particular retail will find itself among the wide range of communities that exist (online and off).

Rules around product placement, paid endorsement, and sponsorship need to expand transparency and make it clear when spaces and messages are subsidized.

Mixing Reality and Retail

Deciphering reality is already difficult, with loyalty programs deceiving us in order to get our data, recommendation engines destroying reputations, and personalization campaigns preying upon our desires. Will the rise of mixed reality technologies help or hinder us when it comes to navigating the retail world?

Certainly augmented reality has a lot of potential to either empower the individual or expand the manipulation that they are subject to. While there are currently a range of augmented reality tools that are designed to help people navigate a retail environment and find information about the products or services that they might purchase, most people are content to use their smartphones to accomplish this manually.

A key concern when it comes to the use of augmented reality is the control over the interface. Does the user have a choice? Do they get to configure the interface and underlying engine so that the reality they see is one of their choosing? Or would a retailer in a retail environment try to control and dictate the reality that user sees?

The video “Hyper Reality” by Keichi Matsuda offers a glimpse into why the interface in augmented reality is so powerful and important, and why the users must have a considerable amount of agency over how they interact with the world via mixed reality technology.

Traditional concepts around “truth in advertising” and emerging concepts of algorithmic transparency have to be extended into the worlds of mixed reality otherwise augmented and virtual reality can be used to deceive, manipulate, and control.

For example, what role will discovery shopping play? To what extent are people discovering something on their own or are being led in a specific direction towards that discovery? How much of our online world is random versus paid for? Conversely, by following data, are marketers missing out on human dynamics and desires that cannot be quantified?

The rise of influencers and the adjacent booming business of product placement and paid endorsements are a great example of where mixed reality is headed, and why there needs to be proper oversight, disclosure, and regulation. At present the lines are practically blurred beyond recognition, and if this is not addressed then the potential for mixed reality to further cloud the marketplace and undermine consumer confidence is considerable.

Combining Surveillance With Automation

This undermining of consumer confidence may already be happening. As people begin to learn the extent of the surveillance that they are subject to, they may make less purchases, especially if they do not have safer alternatives. While we hear about data breaches, hacks, and all around insecurity, it is the aftermath of these events, the identity theft, fraud, the targeted scams that leave consumers scared and jaded.

Combine this surveillance society with the rise of automation, and we sit squarely between a utopia of convenience and a dystopia of fear and control. The difference between these two contrasting futures are rules that protect people and provide opportunities to withdraw from the surveillance and automation.

The Walt Disney MagicBand is an example of how surveillance and automation combine to offer convenience but actually deliver control. This kind of wearable technology showcases how the overall experience is designed to distract from individual retail transactions so you think less of each moment and more of the adventure as a whole. Done right this offers an opportunity for both the user and the provider. However it offers equal opportunity for manipulation and control. Hence the need for clear rules and regulations.

For most shoppers who are not at a resort or theme park, this kind of tracking is already emerging. Many large malls and retail environments currently use wireless tracking to monitor people via the devices they carry. That free wifi that is advertised is not entirely free, since its real purpose is to ping your device and follow your movements. If you opt-in and connect it can then correlate where you go with who you are and what you buy.

Amazon has taken this concept even further, by opening a concept store that enables shoppers to walk in, take what they want, and walk out, without worrying about check out or payment. All of that is automated. The retail environment knows who they are, can monitor where they go, what products they take, and when they leave, charge it all to their Amazon account.

This type of convenience is seductive, especially given the scarcity of time many of us have. Yet it does not exist in isolation. Does it eliminate too much of the social interaction that is part of the retail experience? As robots play an increasing role in retail, will the shopping experience be improved or made even less human? Does the user understand the value of the data being generated and is that value reflected in the price?

What if this vision of a totally automated and monitored retail environment was combined with augmented reality and ambient commerce? When you walk into the store, it either connects to your existing augmented reality (mobile or glasses) or creates its own augmentation via projectors to tailor your experience and direct you to the products it already knows that you want. Although do you really want them? What is real? Are your desires your own?

Transparency Is Just The Start

Perhaps the desire for transparency is a desire for accountability. To verify, audit, and authenticate what is happening so we can understand and prevent when we are being manipulated and taken advantage of?

Emerging distributed technologies offer the potential to enable greater transparency and accounting of reality, retail, surveillance, or automation. However is transparency enough to ensure an automated society that is not authoritarian?

On the one hand transparency can be used to organize supply chains, sourcing, and help customers understand where their goods or services came from. Will knowing how the food was grown or how the clothes are made impact how a consumer spends their money? What do we mean by value? Do we only think of dollars, or does value mean more than money?

For some yes, but if we depend upon consumers we will no longer have the power of citizens.

Instead transparency should be seen as a first step. An important first step, yet only the beginning of a democratic revival that creates rules and regulations in response to the world that is emerging around us.

Consumers should not decide how food is grown, but rather society should be informed and set standards as to how we feed ourselves.

Transparency is not the goal, especially if unregulated monopoly is the future of retail and society. Rather transparency is the first part of a larger process of democratizing automation and using data responsibly. Transparency is about understanding the problems and threats, and public policy is about responding to them and creating rules that benefit everyone.