At a Glance: Retail Tech

By 

12-2017

Our international Retail & Consumer Group takes a look at the latest developments around the world regarding retail tech:


Europe

Belgium

When will digital wallets replace our traditional plastic cards?

One of the most revolutionary upcoming technologies is the digital wallets payment system. It is an app containing all of a person's bank card credentials, meaning that physical cards would no longer be required. Currently, the system is offered, among others, by Apple ("Apple Pay") and Android ("Android Pay"). There are some obvious advantages to this new technology: there will no longer be a need to carry physical bank cards around, and there will be no need to remember one password per card, etc. Belgian banks are currently negotiating with digital wallet providers so that their customers' credit and debit cards can be stored in these wallets.

Will this new payment instrument be as secure as the traditional one? How will authentication be ensured during the payment transaction? According to Chapter II of the final draft of the Regulatory Technical Standards on Strong Customer Authentication published by the EBA, authentication must be ensured through at least two of the following elements: knowledge (what the person knows, e.g. a password), possession (what the person possesses, e.g. his/her phone) and inherence (what the consumer "is", e.g. a finger print or a retina scan). Apple's new iPhone X, presented on 12 September 2017, will no longer possess any physical buttons, meaning that everything will probably happen through facial recognition. Apple Pay will most likely use the retina scan as the authentication system on its new phone.

By Sylvia de Graaf, Constance Eckhardt-Descout, Guillaume de Villegas, Associates, Brussels


Denmark

Retailers minimise food waste and cut losses by cooperating with app developers

According to a study published by the Ministry of Environment and Food of Denmark every year 715,000 tonnes of food goes to waste. About 163,000 tonnes of food waste a year is estimated to come from the retail sector, which results in a yearly loss of about 8 million Danish Kroner.

A Danish start-up company launched the "Too Good To Go"-app which is a platform dedicated to reducing food waste. By using the platform consumers can purchase food from restaurants, cafes and other food businesses that would otherwise go to waste, at significantly reduced prices. The consumers pick up their "TGTG" meal shortly before the restaurant's closing time. The "TGTG"-app, since its launch in 2015, has saved over one million meals across Europe, and reduced greenhouse gas emission by 2,476 tonnes.

The "TGTG" platform adds value to both retailers and consumers in the food sector. The retailers are not only provided with a way to cut losses on food waste, but also to show Corporate Social Responsibility. On the consumer side, customers are not only given the opportunity to save money, but also to help protect the environment, as ethics plays an increasing role in consumption patterns. The "TGTG" concept adds value to both retailers and customers using the app. Who wouldn't like to be part of an initiative to help prevent food waste?

The app was launched at a time when several other examples of "software eats all" had already been released. A software company can certainly change the agenda of a business area, as seen recently with Uber and Airbnb. This app has found a niche market as it does not cannibalise on any existing business.

By Lars Karnoe, Counsel, and Sarah Rasmussen, Associate, Aarhus


Finland 

Dynamic Pricing – Happy Hour in Retail?

In 2017 a Finnish company called MariElla Labels Oy was awarded the "RBTE Innovation Award" in the Retail Business Expo in London. The award was given for electronic price labels designed particularly for fashion. In addition to fashion, electronic price labels of the company can be used in other segments of retail as well. The solution of the company consists of a combination of price displays, two-way radio equipment and controller software.

Dynamic digital pricing can serve several purposes in a variety of different industries:

  • In the retail space, it allows seasonal sales and happy hour both in the physical stores and online.
  • In electronics, it means the pricing can be changed easily - for example both in-store and online channels can display the exact same prices simultaneously.
  • In the food industry, the prices can be flexible to prevent food waste.

Electronic price tags can also enable real time inventory. 

One of the use cases for the electronic price labels of MariElla Labels Oy is "verkkokauppa.com", the stock-listed Finnish retailer which operates both a major online store and physical stores. It has successfully used the electronic price labels in its physical stores.

By Ella Mikkola, Partner, and Maija Puustinen, Associate, Helsinki


France

Will the new General Data Protection Regulation be compatible with the use of blockchain technology in retail?   

E-commerce is currently experiencing important legal and technological changes especially with the upcoming General Data Protection Regulation (GDPR) coming into force in Europe and increasing use of blockchain technology.

E-commerce companies will have to comply with all of the GDPR provisions which are set to transform the privacy and data protection legal frameworks.

However, it's not just the GDPR. There are other data protection regulations which will also be challenged by technological innovations such as blockchain. The technology on which the famous Bitcoin cryptocurrency relies, blockchain, can be defined as technology which allows the storage and transfer of data, transparently, securely and without having to trust a central entity.

Such transparency and accountability will impact the retail industry and offer new possibilities for consumers.  

In fact, blockchain can reliably store all the details of a product’s journey. Consumers would then be able to know how the purchased product was made, and the names of the companies that were involved in its manufacturing, transport and/or sale process. The absence of a central entity means that the product information can never be altered by the retailer.

As for data protection law, blockchain may be a very interesting development, allowing data subjects to increase control on their data through transparency and accessibility. However, unlimited conservation and traceability, and lack of confidentiality, may appear incompatible with privacy and data protection.

Different projects such as ENIGMA (MIT Media Lab) are currently being developed to improve blockchain technology and complement it with tools such as an encryption system, which ensures compliant security and confidentiality of data.

Blockchain technology could be seen as a new proficient source of technical solutions which will allow more efficient privacy and data protection.

By Sharone Franco, Associate, Paris


Italy

How can retailers make use of autonomous technologies and manage the related challenges of privacy and consumer protection?

The new trend of "autonomous stores" started out in the US last year and is now being closely considered with increasing interest by Italian retailers.

In order to develop these stores, three technologies have to be considered: computer vision, deep learning and use of sensors, which are all technologies that are also used in autonomous driving cars. The idea is to have an algorithm to explore and interpret information that is collected by sensors located in the physical retail space and cross checking this with any other digital information obtained from social media, apps or other digital tools. Then the next step is to react accordingly and, in this case, provide appropriate retail solutions (discounts, sale proposals, product bundles etc.)

While a key selling point for these autonomous stores is efficiency, there are major legal concerns to be addressed, particularly in relation to privacy and consumer protection.

Under Italian and EU privacy law, consumers have strong rights, which will be further enhanced under the new GDPR, which will introduce the right to "port" personal data to new service providers or access data or even have them erased (known as the "right to be forgotten"). Personal images are also considered personal data (in some cases sensitive data) and must be processed with the utmost care and comply with all mandatory data protection rules.

But these rights will introduce major technical complications to these systems, so they need to be respected and appropriate legal solutions embedded into the autonomous stores systems and supported operationally.

Also, similar to the EU legislation, the Italian consumer code provides strong protection for the consumer which will have to be taken into account, especially for online transactions. The Italian consumer code differentiates between physical and online sales and contracts concluded in automated commercial premises, which is important to consider in order to create the right legal framework to regulate these new type of stores.

Retailers who want to make the best use of this new technology must reconsider their legal model and adjust their contract terms in order to avoid any possible legal issues and obtain the maximum economic benefit from the data obtained and filtered through their autonomous stores.

By Roberto Camilli, Partner, and Gabriele Ferrante, Associate, Milan


Spain

Spanish Ministry of Energy, Tourism and Digital Agenda launches Public Consultation for the new Digital strategy for an intelligent Spain

In July this year, the Ministry of Energy ran a Public Consultation for interested administrations, bodies, entities and citizens to update the existing Digital Agenda for Spain.

The Public Consultation was focused on the identification of targets where public power may intervene to encourage a more equal, open and safe digital environment.

Participants could freely respond to 41 voluntary questions on the most important digital subjects to be regulated; the best strategy to implement; and the identification of additional potential points to be regulated or encouraged.

The Consultation was structured under 5 pillars:

  1. Data Economy: how Big Data, cloud computing, IoT, communication networks or Advanced Analytics should be regulated.
  2. 4.0 Ecosystems: Innovation in SMEs and cyber-attacks were two of the main issues to discuss.
  3. Intelligent Regulation: Digital platforms which enable the transactions of goods and services requiring Consumer, Competition or IP regulations to be amended.
  4. Technological Infrastructures: Future 5G National Plan and network availability actions were suggested in this section.
  5. Citizenship and Digital Employment: Access to digital services requires a continuous digital education for citizens, whose rights shall be guaranteed before digital intrusions.

The retail sector is undergoing a digital revolution due to the fact that consumers have more product and services options than ever before, so a specific consumer protective regulation is needed. Major Spanish retailers such as Zara and El Corte Inglés have recently made huge investments in technology to respond to market needs in order to continue being powerful E-Retail businesses.

Spain expects this consultation to prepare Spanish society to live in a hyper-connected world and is designed to be a big step towards a digital transformation and regulation road map.

By Covadonga Maestro, Associate, Madrid


Sweden

The Confluence of Cognitive Computing and Fibre Science - Set to Revolutionise Retail

The adage "Data is the new oil", formulated by Kevin Plank, the founder of Under Armour, reverberated during this year's Stockholm Fashion Tech Talks. Given that the market of wearables is evolving from consumer electronics (wearables as devices) towards fibre science (wearables as fabrics), and seeing as we live in our clothes, this provides indeed for a whole new world of data accumulation. The long-sighted observers of the industry believe that by assigning specific functional or aesthetic features to articles of clothing, we are only about to explore the many ways high-tech fabrics will enable the development of new methods of navigation and communication – "ubiquitous computing" in its purest form. 

Will clothing become a new service channel? Fueled by cognitive systems, this might not be such a far-fetched notion after all. A jacket acting as a loyalty tool or a pass key to a club? It is already on the trail. Pursuant to Niall Murphy, the CEO of EVRYTHNG, when more products become digitised they will create active digital points of interaction with the retailers, who in turn will develop into the biggest media providers in the world. 

By feeding personal data, harvested from such smart articles of clothing, into intelligent algorithms retailers will be able to produce actionable consumer insights based on individual sentiments and values. This will provide a carefully curated, super personalized, VIP-feel shopping experience, set to fundamentally reinvent retail.

So who owns the data? A recurrent question. For driven, tech-savvy retailers it must be a bit of an anti-climax to learn that under Swedish law there is no property right in data itself. Neither is there any EU legislation specifically regulating the question of data ownership. Rather, what might be "ownable" is data aggregation (datasets), which under certain circumstances might be protected by intellectual property rights (e.g. database rights, copyright or trade secrets). Interestingly, with the upcoming enactment of the General Data Protection Regulation, we are about to experience revived tension between the interests of database owners and the rights of individuals in their personal data.  In this big data gold rush – would a model based on the concept of data value exchange between the stakeholders defuse this tension?

By Anna Rzewuska, Associate, Stockholm


United Kingdom

How are disruptive technologies helping retailers reinvent the in-store experience?

Retailers now generally accept that disruptive technologies do not need to spell doom for "bricks and mortar" stores. Consumers still enjoy going to the shops and, in particular, want to see, touch, smell, taste and try products before they buy.

So what disruptive technologies are helping retailers reinvent the in-store experience? Here is a snapshot:

  • Augmented reality (AR): AR technologies allow retailers to create highly immersive customer experiences and also help bridge the gap between online and in-store shopping experiences.
  • iBeacon: Apple’s iBeacon technology uses Bluetooth low energy to connect consumers’ smartphones with hardware transmitters installed in-store and carries out functions that include offering consumers special deals and enabling mobile payments.
  • Radio-frequency identification (RFID): RFID technologies use electromagnetic fields to identify and track objects. Smart shelves, equipped with an RFID reader, can now continuously scan RFID-tagged items and notify back-end systems about the location of items, identifying any that are misplaced and update inventory systems accordingly.
  • Just walk out: This Amazon initiative proposes to use computer vision, sensor fusion and deep learning algorithms in order to automatically detect when products are taken from or returned to the shelves, meaning that Amazon can run convenience stores where consumers bypass the check-out process entirely and are charged automatically via an app.

Although these and other similar technologies enhance customers’ in-store experiences, they also raise data privacy concerns because they rely on the processing of consumers’ personal data. Retailers who collect personal data in the EU must comply with the extensive obligations that EU data protection law imposes, as well as respecting consumers’ broad rights.

Retailers and those involved in deploying innovations of this kind also need to be aware that, in the EU, there is a general absence of legislation that regulates the ownership of data. There are laws that can provide protection in relation to some types of data and datasets – such as copyright, database rights and rights in confidential information – but "monetising" the use of data under such innovations is not legally straightforward.

By Ben Hughes, Associate, London


Asia-Pacific

China

Beyond mere fitness – development of wearable technology in Hong Kong and mainland China

In the 2017 Policy Address, the Hong Kong Government re-affirmed its plan to develop the city into a smart city.  Following the policy address, the Government announced the formulation of a smart city blueprint.  In the announcement, wearable technology is highlighted as one of the key "smart city" technologies that will track health and help develop smart hospitals. 

Whilst this is welcoming news for many wearable technology companies based in Hong Kong, wearable technology has already transcended the application to the healthcare sector.  Many innovations developed in Hong Kong are being used in the manufacturing and logistics sectors.  

This potential is well recognised by the mainland Chinese Government.  In the "13th Five Year Plan: National Technological Innovations Plan" published by the State Council in July 2016 and the "13th Five Year Plan: New Special Plan for Technological Innovations in the Modern Service Sector" published by the Ministry of Science & Technology in May 2017, wearable technology is featured prominently.  The government expects to see wearable technology to be widely applied in the internet space, and also as a key to serving its aging population.   The "technology" which China expects to see developing is not restricted simply to energy efficient wearable devices, but the entire life-cycle, from the technology's core systems, to technology permitting human-machine exchange, sensors, apps and other related infrastructure.  Wearable technology should also be developed and adopted in the entertainment and information/internet, sports and fitness and healthcare sectors.  In developing any wearable technology, we also expect to see an interplay between wearable technology, AI and Big Data.

As in all jurisdictions, many legal issues will arise as wearable technology becomes more widely adopted.  Product recall, intellectual property rights and data protection are only three of such legal issues. Whilst we are already seeing IP disputes in China concerning wearable technology, we expect to see more data protection related issues as the data protection law in both Hong Kong and mainland China matures.

By Michelle Chan, Partner, Hong Kong


Middle East

United Arab Emirates

The UAE's online and e-commerce sectors are growing, along with the use of electronic payment services

The UAE is a region where malls and physical shops are still very much prevalent. Many retailers in the region are franchisees of international brands, which often do not hold the rights to online sales, which has resulted in a slower development of e-commerce in the area. The region has also traditionally been a cash society - even today it is difficult to pay for a taxi using a bank card.

Despite this and in line with global trends, we are seeing an increase in e-commerce facilitated by electronic transaction companies and national players such as souq.com (local version of eBay). Amazon acquired souq.com in March 2017, a move indicating global confidence in the growth of the UAE's online and e-commerce sectors. As Amazon turns their focus to the GCC market, it's likely that their competitors and other global players will follow suit.

We are also seeing increased popularity and growth of delivery apps. It is possible in the UAE to order virtually any sort of food or service you desire directly through an app, e.g.: 

  • Instashop for groceries: allows you to shop directly through the app, and offers free one hour delivery;
  • Washmen for dry-cleaning: taking inspiration from Uber, the app allows you to schedule and track the pickup and delivery of your clothing for washing/dry-cleaning, and pay through the app; and
  •  mrUsta for household chores, cleaning and repairs.

Corresponding with the growth of e-commerce and use of apps for ordering food and services is an increase in electronic payment services. The UAE Central Bank issued a Regulatory Framework For Stored Values and Electronic Payment Systems on 1 January 2017, hoping to encourage more digital payment providers (existing examples being Beam and Etisalat Wallet) to enter the market. It comes into effect on 1 January 2018 and will arguably support the growth of e-commerce in the region as more trusted e-payment providers set up operations here. 

As a result of these new regulations, uncertainty has arisen in respect of the validity of bitcoin and other cryptocurrencies in the UAE, due to a statement in the regulations stating that bitcoin and other cryptocurrencies have been prohibited. The Governor of the UAE Central Bank then issued a statement to Gulf News saying that “these regulations do not cover ‘virtual currency’” and “these regulations do not apply to bitcoin or other cryptocurrencies, currency exchanges, or underlying technology such as Blockchain.”  It appears then that whilst from a legal perspective, virtual and cryptocurrencies are prohibited, from a regulatory perspective, the use of bitcoin and cryptocurrencies is a "tolerated practice". We look forward to receiving further guidance from the authorities on the validity of Bitcoin (and the underlying Blockchain technology) and other cryptocurrencies in the UAE.

Given the growing prevalence of e-commerce, local franchisees are also in the process of renegotiating deals to cover online aspects including revenue sharing and logistics/delivering to customers.

We expect to see e-commerce in the GCC region continue to grow with the aid of disruptive technology over the coming years.

By Shannon Rogers, Associate, Dubai