The Retailer Summer Edition_2020

summer 2020

//  Retailers showing resolve during Coronavirus crisis

//  Understanding the post-COVID consumer

//  Retailing in the digital era

ANNUAL RETAIL INDUSTRYLECTURE 4 NOVEMBER 2020 | 18.30 – 20.00

This year's Lecture is an important opportunity for our industry to regroup, reflect and focus on how we collectively move forward. Our presenters and keynote speakers will assess how COVID has changed UK retail, with reflections from the front line and exploration of what our long-term future, recovery and re- growth can look like.

Speakers

Helen Dickinson OBE, CEO, BRC

Lisa Hooker, UK Comsumer Markets Leader, PwC

Mike Coupe, former CEO, Sainsbury’s

BOOK YOUR PLACE

Thank you to our Event Partners

UK retail leads with adaptability, resilience and compassion Helen Dickinson OBE Chief Executive British Retail Consortium

In recent years, we have been talking about the ‘unprecedented’ change taking place across our industry - driven by changing customer needs and expectations and the rapid rise in digitisation and automation. The pace and nature of change was unprecedented. Until COVID-19. COVID-19 has exacerbated the challenges already facing retail and accelerated longer-term changes in consumer trends and behaviours. Many retailers have been quick to invest, find new ways of reaching out to and serving customers during the crisis. Many others are taking the learning – accelerating their online and omni-channel presence and innovating to ensure the in-store experience continues to appeal to and meet customer needs. UK retail has also built up a strong reputation during the crisis with retailers demonstrating adaptability, resilience and compassion - something we should recognise now more than ever. Hardworking staff have kept our shelves stocked and the nation fed. They have spent nights filling vans and lorries. They have driven to our homes and our local stores to get us the goods we need. They have kept websites going and been a lifeline to those isolated or alone in these last few difficult months. The reopening of stores has been an important first step towards a ‘new normal’. We are pushing Government for ways in which consumer demand can be boosted – ensuring jobs are supported and that our industry can play its part in the rebuilding of our economy. We are an industry worth fighting for. Three million people work in retail – making it Britain’s largest sector employer – with shops contributing £17 billion a year in business taxes. But more than that, every purchase from a shop supports manufacturing jobs, drivers, distribution hub staff, marketing teams and more. Every high street supports coffee shops, hairdressers, restaurants, pubs and a multitude of other services that make it the social epicentre of our lives. The retail industry has always been able to innovate and overcome and a compelling case can be made for it to continue to do so. With Mike Coupe, former CE of Sainsbury’s, and Lisa Hooker, UK Consumer Markets Leader at PwC, we’ll be honing in on what recovery and regrowth can look like for our industry at our Annual Retail Industry Lecture on 4 November. Join us - physically or virtually - this year. I look forward to ‘seeing’ you there.

this issue

06

Assessing face mask and sanitiser safety for retailers // Richard Smart, UL CRS EY Future Consumer Index: Serving the anxious consumer in a post COVID-19 world // Silvia Rindone, EY How Leading Retailers are Reinventing their Stores // Fergal O'Mullane, validify

08

10

12

Retail in the digital era // Graham Wynn, bRC

16

Now is the Time to Build for the Post-Pandemic Future // Ed Whitehead, signifyd

18

The future of Ecommerce requires understanding the new consumer // Alpesh Patel, Axerve Spa

20

THE RETAILER Digital Hub // bRC

22

Chargeback losses increase during COVID: Key steps to protect yourself // Monica Eaton-Cardone, Chargebacks911

24

Interchange Reclaims: A Ground- Breaking Movement for Retailers // Callum Godwin, CMSPI

26

Spotlight on: Lucy Crowther // bRC

27

BRC LEARNING WEBINARS: EXPLORING THE IMPACT OF COVID-19 // bRC

28

Creating a future for retail learning & development // bRC

30

Leadership Considerations in the New Normal // Elliott Goldstein, The MBS Group Ensuring talent pipelines in retail // Aimee Higgins, The Careers & Enterprise Company

32

34

Clean Air, Clean Vehicles and the role of retail // Leah Riley Brown, BRC

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Assessing face mask and sanitiser safety for retailers

RICHARD SMART UK SITE LEAD UL CRS

AS THE WORLD REACTED TO COVID-19, A SERIES OF NEW AND URGENT NEEDS EMERGED. RETAIL CUSTOMERS BEGAN LOOKING FOR TWO POPULAR ITEMS, NONSURGICAL FACE MASKS AND HAND SANITISER, BUT WERE OFTEN FRUSTRATED BY THE LACK OF SUPPLY. PANICKED BUYING AND DISRUPTED SUPPLY CHAINS DROVE MANY COMPANIES TO APPROACH THE PROBLEM IN A NEWWAY. From fashion houses sewing masks to alcohol distilleries creating sanitiser, it seems like everyone is producing pandemic-related products. Customers have responded eagerly, leading many retailers to stock and sell these items. With so many new players in the market, how can retailers know that the products they offer are safe for customers to use? Face masks Generally, there are three types of face masks or coverings: • Respirators – respiratory protective device designed to filter airborne particles. These are personal protective equipment (PPE). • Surgical masks – medical masks with liquid barrier protection. These are considered medical devices. • Community masks or face coverings – masks for general public use. These include various forms of commercial masks or coverings made of textiles or other materials. Although some retailers may sell respirators or medical masks, many are selling fabric community masks, also referred to as face coverings. A quick perusal of any online clothing brand will show fabric masks for sale. These are also subject to legislation but less likely to be evaluated and monitored for quality, potentially risking safety and, in the case of branded masks, the brand owner’s reputation. Manufacturers should verify the specific safety requirements for their products but global guidelines for face mask testing may leave retailers, brands and manufacturers confused or unaware of the latest requirements. One way to mitigate the risk may be for retailers to sell only masks that have been through a third-party evaluation. These independent assessments can evaluate products and packaging for characteristics such as flammability. Further, quality assurance programs can evaluate the manufacturer’s process and provide product and facility inspections and training. Third-party face mask testing services take the complexity out of the supply chain, leaving retailers confident that the face coverings they offer for sale meet legislative requirements for consumers’ continued safety. It should be noted that some countries have initiated additional specific requirements for face coverings, so understanding the end market is essential.

Hand sanitiser Health authorities around the globe have recommended the use of alcohol-based (ethanol or isopropyl) hand sanitisers to kill germs when soap-based washing is unavailable. The World Health Organization (WHO) provided suggested formulation guidelines as sanitiser production ramped up during the early days of the pandemic. They recommended that final formulations are at least 60% alcohol for best efficacy. Global regulatory requirements for producing and selling hand sanitisers are complex, and with good reason. Alcohols are highly flammable and airborne fumes can be irritating to the lungs and mucous membranes. Considered hazardous substances, they require Safety Data Sheets (SDS) that provide specific information relating to occupational safety and health during product use. Companies such as distilleries and cosmetic manufacturers stepped up to fill the shortage gap but may be less aware of the regulatory requirements. These companies should verify the claims made by the products, which may include the alcohol content in their products, and provide SDS to retailers. Where products are making biocidal or medical claims, registration may be required. Science-backed testing and verification services can help expedite production of hand sanitisers and avoid supply chain delays. Contamination may also be a concern if sanitisers have an alcohol content less than 60%. Below 60%, microbes such as bacteria and moulds can grow, potentially causing illness or an allergic reaction in sensitive individuals. Expanded testing should include microbiological evaluation for E. coli, salmonella, yeast and mould. Even as countries begin to reopen their economies, it is likely that our “new normal” will include increased mask wearing and the use of hand sanitiser for the foreseeable future. Major manufacturers have been able to close their supply gap, but retailers should be prepared to continue offering masks and hand sanitisers made by nonconventional suppliers. Retailers should do what they can to protect customer health and safety. Requiring verification from independent accredited third parties can help make sure that the masks and hand sanitisers sold to customers meet all appropriate legislation and compliance requirements.

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Hand Sanitizers THE DO’S AND DON’TS

Benefits of product safety testing and verification

While the evolving COVID-19 situation presents new challenges, UL offers critical solutions that meet emerging demands and evolving conditions in today’s retail environment. Our science-backed testing and verification services can help expedite your production of hand sanitizers and avoid supply chain delays. Our face mask testing services can help take the complexity out of your supply chain. Our program is designed with consumers and healthcare workers’ safety and well-being at the forefront. We remain committed to our mission of working for a safer world. To explore all of UL’s solutions and support tools to help you respond, reopen or resume your business, visit our website https://www.UL.com/ul-covid-19-support-services or call +44.1256.312.100.

Do check if an alcohol based hand sanitizer – with active ingredients such as ethanol or isopropyl – is formulated with the minimum alcohol concentration of 60% for highest effectiveness

Do supervise toddlers or older children while they use the product and never let your child lick their hands immediately afterwards

Do apply a hand sanitizer on dried hands starting from the back to the wrist and then continuing on the palm, fingers, interdigital spaces, nails and under jewelry until when your skin will be dry again

RICHARD SMART // Richard.Smart@ul.com // ul.com

Do not apply hand sanitizer on visibly dirty or greasy hands—the cleaner your hands are, the better!

Do not produce your homemade hand sanitizers mixing chemicals that can cause hazardous inhalation or skin irritations

Do not replace hand washing with the use of hand sanitizers

Contact us at CRS.UL.com/en/contact-us/

ULand theUL logoare trademarksofUL LLC©2020.

the retailer | summer 2020 | 7

EY Future Consumer Index: Serving the anxious consumer in a post COVID-19 world

SILVIA RINDONE RETAIL PARTNER Ernst & Young LLP

UNDERSTANDING HOW THE UK CONSUMER FEELS AND REACTING ACCORDINGLY SHOULD BE A TOP PRIORITY FOR RETAILERS GOING FORWARD. Over the years, UK retail has seen many consumer faces and adapted to them all. But one of the greatest challenges the industry faces today is dealing with the latest evolution - the ‘anxious consumer’. This is a UK consumer nervous about everything, from the financial impact of the COVID-19 pandemic to the health risk posed by a potential second wave. Their uncertainty around the future means concern is high. When polled for the June EY Future Consumer Index, over the period non-essential stores reopened in the UK, more than half of UK consumers (52%) said they believed it will take a year or more for the country to recover. Just under half (48%) said it will take months or longer for the way they shop to return to normal, despite the ending of lockdown, and 49% said the way they shop over the next one to two years will change. Confidence may well improve over time as UK consumers settle into the ‘new normal’, but it is likely some degree of anxiety will remain regardless. For retailers, understanding and acting on these concerns and their long-term implications is key. Retailers need to understand the new needs of the anxious consumer – that of feeling protected, both physically and financially. They must also allay the nervousness of their staff. Consumers want to feel safe when shopping - 63% of UK consumers say they will be more mindful of hygiene and sanitation when shopping instore over the next one to two years. They also want value for money and to consume in a more purposeful way, so that when they do go instore it is with good reason. Affordability is now a top priority and the age of rampant consumerism, at least for the time being, has gone. Companies will need to face an increasingly anxious consumer and reinvent their customer experience if they are to prosper beyond covid-19 silvia rindone Action 1: Meeting consumers’ more basic requirements

Where sustainability, luxury and personalisation were key pre-COVID-19 trends, today’s UK consumer needs are more basic, focused instead on product availability (53%), price (44%) and health and wellness (44%). Affordability and health also appear in the top three criteria for what UK consumers will value in five years’ time and should be key focuses moving forward. Action 2: Focus on range and simplicity Editing of ranges, services and experiences are crucial for retailers to deal with the anxious consumer now, as well as their changing future requirements. Social distancing and protection measures now in place in all stores have changed the instore experience entirely. But while browsing may not be what it was and footfall comparatively low, it seems consumers are more determined than previously, with retailers reporting higher than normal conversion rates instore. Where UK consumers are considering changing how they shop, more than half (59%) plan on consolidating shopping trips into less frequent but larger purchases over the next one to two years. Action 3: Continued focus on digital Digital came to the fore during lockdown as online shopping increased. Over two fifths (43%) of UK consumers expect to shop more online over the next one to two years for items they would have previously bought instore. Consumer anxiety may mean that online shopping continues to grow more strongly than it may otherwise have. For others, longer-term changes in shopping behaviours may simply be the voluntary adoption of habits, preferences and attitudes imposed and normalised during lockdown. Engaging shoppers via digital will be key both online and instore. Instore apps and digital payments help to overcome some of the challenges retailers face at critical moments for consumer experience, such as at the checkout, and will continue to be important for the anxious consumer. Perhaps the best way for retailers to serve the anxious consumer is to understand how they are likely to feel, behave and spend in the future. Our inaugural EY Future Consumer Index, surveyed at the height of lockdown in April, suggested that post-COVID-19 UK consumer segments would transition into five key categories. We have been tracking their evolution ever since. When surveyed in June, the most dominant consumer segment is those focused on ‘getting to normal’. These were consumers who kept calm and carried on during lockdown with spending and mood largely unaffected. They account for just under half (47%) of UK consumers surveyed. The next largest group, the ‘cautiously extravagant’, accounts for a quarter (22%) of UK consumers. They focused on saving and stockpiling during lockdown but are now expecting to spend more and could even be tempted by premium products as they look to treat themselves. Action 4: Understanding future consumer behaviour

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Five emerging UK consumers • GET TO NORMAl (47%) • Cautiously extravagant (22%)

• Stay frugal (19%) • Keep cutting (4%) • Back with a bang (8%)

Source: EY Future Consumer Index (UK insights), June 2020. Percentages are rounded to nearest whole number.

One in four UK consumers (19%) will ‘stay frugal’, are price- focused and unlikely to increase discretionary spending in the near term. They are likely to have also saved and stockpiled during lockdown. However, some 4% of UK consumers will ‘keep cutting’, despite already making deep cuts during lockdown. These are those consumers most impacted by the economic implications of COVID-19. The smallest, but perhaps most exciting segment, is the ‘back with a bang’ group. Only accounting for 8% of UK consumers, they are largely younger, but the most willing to spend, both during and after lockdown restrictions have lifted. It is their pent-up demand and how they behave which could perhaps help to reassure other consumers that it is safe to spend again. Whatever the coming weeks and months bring, one thing is for certain. Building trusted relationships between retailers and consumers, as well as retailers and their staff, is going to be critical to reducing anxiety levels. For the latest global

EY Future Consumer Index methodology

The EY Future Consumer Index is based on regular global surveys conducted exclusively for EY. The surveys (currently covering 18 countries) are designed to provide a 360-degree perspective on the changing consumer and cover behaviours, sentiment and intent. This article references 1,012 UK survey respondents during the week of 8 June 2020.

EY Future Consumer Index insights, visit: ey.com/futureconsumerindex

SILVIA RINDONE // Contact // Linkedin // ey.com

Disclaimer: This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Member firms of the global EY organisation cannot accept responsibility for loss to any person relying on this article.

the retailer | summer 2020 | 9

How Leading Retailers are Reinventing their Stores

FERGAL O'MULLANE COFOUNDER AND CEO validify

2. Getting personal - Hyper Local Effective communications with customers has never been more important, not in terms of promotions, but building a personal connection with your customers. With fewer shoppers physically allowed in stores at any one time, combined with customers booking specific time slots, it raises an opportunity to create greater levels of engagement between store staff and customers. Utilising clienteling tools can help customers understand more about products, locate stock within the store network and develop a more personalised conversation between a retailer’s staff and their customers. The VP of Operations at Kennedy Luxury Group explains the impact solution clienteling solutions can have on a business; “Proximity Insight has revolutionised the way Kennedy engages with our clients. Sales Associates have real-time access to customer data, our team has been able to enhance our client’s in-store experience and it allows us to create a truly personalised service when interacting with our clients online. Empowering store staff to handle local customer queries and communications transforms a brands relationship with their customers as well as reducing your businesses overall operational cost. 3. Connecting online and stores Every retailer should recognise by now that online and brick and mortar stores are inextricably linked, and customers that engage your brand through both channels will deliver a significantly higher lifetime value. Connecting your online and in-store experience gives customers more ways to shop and ultimately increases the likelihood of converting. Solutions such as Comestri and Fluent Commerce enable customers to shop online and get orders fulfilled immediately through their nearest store. Local fulfilment gives customers more options, such as same day shipping and click & collect. Retailers such as Signet Jewellery and Sofology are taking it one step further, using solutions such as Go Instore to bring the store into their customers' homes. Signet Jewellery’s Digital Director Matthew Gratze wanted to make sure customers were able to connect with their sales colleagues for the inspiration and advice that would usually be received in a face-to-face conversation inside a shop. Using the latest video technology they launched a new selling channel that connects customers to their sales colleagues remotely, and as Matthew explains, the benefits were immediate. “We can now utilise video technology to have that face-to-face discussion, or even showcase our products. This has been a big hit with our customers, and also sales colleagues, as they can have those crucial conversations to help move the customer journey along.”

They say it takes 21 days to form a new habit, well 12 weeks of lockdown has seen people of all ages and types move online and this is unlikely to reverse back to pre-covid levels. For anyone who held previous reservations about shopping online, this has been almost eradicated in the space of 3 months – our shopping patterns have been forever changed. Inditex, the parent company of Zara and one of the most successful retailers in the world is responding fast, announcing it will close up to 1,200 stores worldwide (16% of its stores) and spending $1 billion accelerating their digital transformation. In a statement their CEO Pablo said; "The overriding goal between now and 2022 is to speed up full implementation of our integrated store concept, driven by the notion of being able to offer our customers uninterrupted service no matter where they find themselves, on any device and at any time of the day," Almost every brand will need to follow suit, but the smart ones will look to establish a holistic view of their business first. Simply closing stores based on store turnover or profitability does not factor in the impact an individual store can have on a businesses overall ability to deliver a superior experience for their customer. Operationally, retailers need to remove silo’s, establishing a single view of their customer, inventory, payments and content will set the foundations for achieving a unified customer experience and business. Setting out on this journey can seem daunting, especially in this environment, but there are some great retailers already setting the example and incredible innovative solutions helping them to achieve it. Here are four areas leading retailers in the Validify community are focused on; Consumer tolerance is high right now and everyone is being very accommodating, but this is already fading quickly. Shoppers will remember brands that made an effort to mitigate the restrictions imposed by the pandemic. Validify community retailers are using innovation to reduce unnecessary visits through better online information and communication, and reducing queuing through appointment setting. Furniture Village recognised this immediately and rolled out appointment solution Appointedd across their estate in a couple of weeks, and as the Commercial Director Charlie Harrison explains, the results were staggering; “Appointments are converting to sales at between 50 and 80%... I think the headline for us was Bank Holiday weekend. Across three days we took 1,046 appointments, from not having a booking system in place two weeks before. We were just blown away with it.” 1. Going the extra mile during the pandemic

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4. Setting the foundations for a unified business future The best retailers in the world like Inditex are setting the foundations for a unified business future. Step one is establishing a holistic view of your business and rightsizing operations to get the right mix of stores and online in order to maximise your reach and efficiency as a business. Easier said than done, with so many data points to consider, but solutions such as Storecast are specifically designed to help retailers to analyse the impact of the different variables before you put the plan into practice. Removing silo’s in your data is an absolute must, giving you maximum agility and ultimately helping to future proof your business. There is no shortage of incredibly powerful and quick to deploy solutions that can help aggregate your data from existing legacy systems and give you a single view of your customers, inventory, payment and content.

FIND THE RIGHT SOLUTIONS FOR YOUR BUSINESS

At Validify we provide the tools that enable leading retailers to find the right solutions for their business. In our latest report in partnership with the British Retail Consortium, we share many more insights from leading retailers and solution providers to help you reopen stores safely and successfully. Download the report.

FERGAL O'MULLANE // fergal@validify.co.uk // validify.tech

the retailer | summer 2020 | 11

12 | summer 2020 | the retailer

Retail in the digital era NEWS FROM THE bRC

Graham Wynn Assistant Director for Consumer, Competition and Regulatory Affairs british Retail Consortium

As retailers begin to re-open we’re re-focusing on our Retail in the Digital Era programme. In the previous edition of The Retailer, we highlighted the overall issues retailers needed to consider. We also included a blog on Online Advertising highlighting some of the key reflections from our member meeting with Guy Parker, CEO of the Advertising Standards Authority (ASA). In this edition, we’re following up with a summary of our member meeting with Ben Hooper of Fingleton Associates, introducing a discussion on the potential regulation of AI in Retail. If you’re interested in getting involved in our Retail in the Digital Era programme, get in touch with graham.wynn@brc.org.uk.

Please find retail in the digital era document overleaf

the retailer | summer 2020 | 13

RETAIL IN THE DIGITAL ERA Seminar on Artificial Intelligence, Retail and the Regulatory Framework

effective and proportionate authentication and appropriate customer consent mechanisms.

1 The need for regulators and consumers to understand the true nature of AI and associated machine learning; big data; blockchain etc – and how they are (and could be) used to benefit consumers. 2 Accurate assessment of the benifit of theses development of a new technology sometimes fails to match the reality. or associated terms can limit the ability of businesses to accurately assess the impact. disregard the value of their legacy systems, do not pay sufficient attention to the need for cultural evolution and/or adopt a ‘big bang’ approach to introducing change. 3 Legislative lag can sometimes be detrimental – but sometimes lead to better regulation and more innovation once the new technology is technology was not viewed by attendees to be desirable (indeed whether regulating a technology rather than its uses or those who use it was a sensible approach), there was general agreement that the development of legislation over long time scales can mean that the problem being targeted is either no longer relevant or has changed in definition. At the same time, there is a trade off between legislative clarity and certainty. The first step should be to assess whether existing regulations or approaches in fact cover – or can be adapted to cover - the uses of the new technology. transformations frequently fail

Summary Some retailers, associate members, regulators and other experts met as a follow up to the Oxford Forum on Retail in the Digital Era, this time having a particular focus on AI in Retail and the appropriate Regulatory Framework, if any. Ben Hooper and Ying Wu from Fingleton Associates gave a presentation. The main themes that were covered were the use of AI in retail; the main issues to be addressed in any consideration of a regulatory approach; and the most appropriate regulatory framework given the divergence between the EU and USA approaches – and the potential for the UK to adopt its own approach. justified or not, can have a material impact on the success of a new product or service and lead to pressure on regulators for new regulation. 7 A seamless digital identity is key: Ensuring that customers are recognised and responded to effectively, seamlessly and consistently at any of the touchpoints they may have with a company (online, in store, while browsing) is essential to serving them well. However, this requires

whether

means that consumers have constant access to data about price, quality and availability of a given product. The ability to monitor and compare price movements has particular relevance in a legal context as well as having a potential benefit for consumers. 5 Consumer behaviour and reaction to technology (eg provision of personal or biometric data or facial recognition to track a regular customer) be viewed as ‘creepy’ by some, in other cultures, geographies or groups the reaction may be quite different. Similarly attitudes can change over time, as customers become more confident their data is being treated in a trustworthy manner. 6 Consumer trust in new technology and its to achieve its goals it needs to be understood, trusted by and deliver successfully for consumers. Low levels of trust (for example in relation to retailers’ ability to handle sensitive data),

fully understood: While rushing to regulate a new

Retail uses of AI AI offers many opportunities for retail companies to grow operationally, improve supply chains, help make decisions, understand customer needs; and improve the customer experience particularly online and potentially with lower prices and better quality advice. Reduced costs, reduced risks and increased sales are the benefits for retailers. Many retailers use AI in both consumer facing and operations facing ways. In terms of consumer facing uses, success depends on customer trust, particularly in how their data is being used. Not all AI is developed and used in a way that has a direct impact on customers: it is used in the supply chain for product development; stock management; logistics. Examples of its use in consumer facing ways are personalisation, product recommendation, consumer relationship building, ordering, payment, chatbots may

AI- To regulate or not? Many AI applications used in retail do not have an impact on people in general – though increased efficiencies can have an impact on employees. However, there was general agreement that those applications that use personal data require more safeguards than those that use raw non-personal data such as scanning in a warehouse. There is a question then as to whether AI per se needs regulating or whether there is a distinction between AI used in a warehouse and AI used to interact with individuals. Existing laws on product safety and liability, on data protection, privacy, and competition may be adequate either as they are or with some amendment to deal with the new technology. However, even if they are, it may be better to bring them together in one set of regulation that specifically applies to AI and with one expert regulator. The jury is out on that. Use of obscure jargon Digital when companies

application is crucial: For a new technology

is not fixed: Where use of a given new technology

technologies: Economic hype accompanying the

digital technologies – including use of algorithms;

ubiquitous product data: Smartphone technology

4 Consumers have access to increasingly

The 10 key themes and challenges identified

Overview In the first BRC Legal Community event dedicated to the future of digital retailing, delivered in partnership with Said Business School, attendees heard from a range of academics, industry experts, legal specialists, technology providers and regulators. There was strong agreement about the key themes which need careful attention if retailers are to maximise the success of the rollout of new technology, not least AI, and harness its benefits successfully for consumers. There was also an understanding that any new regulation needs to take into account a proportionate approach for trustworthy businesses.

KEY THEMES, CHALLENGES AND GETTING INVOLVED

RETAIL IN THE DIGITAL ERA FORUM

Existing regulation of AI in the EU/UK • GDPR • Anti-discrimination rules • Product safety and liability • Health and safety at work Overview In the first BRC Legal Community event dedicated to the future of digital retailing, deliver d in partnership with Said Business School, attendees heard from a range of academics, industry experts, legal specialists, technology providers and regulators. There was strong agreement about the key themes which need careful attention if retailers are to maximise the success of the rollout of new technology, not least AI, and harness its benefits successfully for consumers. There was also an understanding that any new regulation ne ds to take into account a proportionate approach for trustworthy businesses. The 10 key themes and challenges identifie 1 The need for regulators and consumers to 8 Regulators need to be careful when considering marketplaces and small businesses: Creating ew or pecialis d mechanisms for regulating marketplaces can add t the burd ns on the SMEs which use them. Regulation itself can become a barrier to en ry. New regulation tha is essentially target d at the activities of social media platforms should not automatically cover m rketplaces In the second half of the forum, regulators identified many of the key areas which are currently under consideratio includ ng: 1. Utilisation and regulation of AI and Machine Learning (EU proposal pending) 2. Personalised and drip pricing bas d on etailed individual profiling 3. Marketing and advertising fairly online 4. Digital identity, facial recognition and effective age verification 5. Internet of Things – liability; safety; security; • Platform to business regulation • Consumer protection • Competition rules RETAIL IN THE DIGITAL ERA FORUM KEY THEMES, CHALLENGES AND GETTING INVOLVED

Aims of Regulation • Create and maintain consumer trust – privacy; transparency; data protection • Provide incentive to innovate rather than barriers • Ensure market access and a competitive environment • Take consumers with you – consumer behaviour and reaction to technology is not fixed- it can be undermined And so to the UK The issue of the approach to be taken by the UK remained unresolved. Key questions and initial views include: • Would the UK setting up its regime in advance of others lead to an advantage given it is the leader in Europe? Open for debate. • Would businesses adopt the highest level approach anyway to avoid a dual regime internally? Quite possibly. • Was any regulation necessary beyond what is there? Quite possibly not. • Would a special AI regulator with real expertise be necessary to really enforce any rules? Has attractions because it would need people with expertise. • Would sectoral regulations be better suited to retail? Only if they recognised retail uses AI in two distinct ways.Would the UK have a better enforcement regime where securing compliance and ethical regulation are the keys rather than excessive fines? Open for debate as the trend seems to be moving in the other direction. Future Focus: We will examine these issues in a further meeting when we will also ask what a retail specific regime would look like. 4 Consumers have access to increasingly ubiquitous product data: Smartphone technology means that consumers have constant access to data about price, quality and availability of a given product. The ability to monitor and compare price movements has particular relevance in a legal context as well as having a potential benefit for consumers. 5 Consumer behaviour and reaction to technology is not fixed: Where use of a given new technology (eg provision of personal or biometric data or facial recognition to track a regular customer) may be viewed as ‘cr epy’ by some, in oth r cultures, geogr p ies or groups the reaction may be quite different. Similarly attitudes can change over time, as customers become more confident their data is being treated in a trustworthy manner. 6 Consumer trust in new technology and its application is crucial: For a new technology to achieve its goals it needs to be understood, trusted by and deliver successfully for consumers. Low levels of trust (for example in relation to retailers’ ability to handle ensitive data), whether justified or not, can have a mat ri l impact o the success of a new product or service and l ad to pressure o regulators for new regulation. 7 A seamless digital identity is key: Ensuring that customers are recognised and responded to effectively, seamlessly and consistently at any of the touchpoints they may have with a company (online, in store, while browsing) is essential to serving them well. However, this requir s e ective and prop rtionate authentication and appropriate customer consent mechanisms. hacking; IP; data collection and ownership; consent; transparency (UK pr posals pending) 6. Data ownership by consumers and privacy and transparency 7. Data ownershi by businesses a d implications for co petition and innovation – knowledg is power 8. Online advertising enforcem nt and scam busting The BRC is o planning a s ries of roundtables to explore these and other topics in more d pth. He ding the list will be Internet of Things; AI Regulation; and Competition issues – depending on availabili y of relevant participants from the regulators. To express an interest in being k pt informed and joining these roundtables contact graham.wynn@brc.org,uk

EU v USA models The EU model is based on upholding fundamental human rights; trust via a clear regulatory framework; a focus on high risk products and services with testing prior to market launch; and a voluntary labelling scheme for other AI enabled products to show whether the manufacturer of non high risk products observes the voluntary aspects of the regulatory framework. High risk products would require human oversight and information requirements. A high risk product would include ‘specific applications affecting consumer rights’. The regime would apply to any business trading with the EU. The USA model emphasises the promotion of innovation above all else and avoiding excessively high standards but where possible maintaining public trust and flexibility. understand the true nature of AI and associated digital technologies – including use of algorithms; machine learning; big data; blockchain etc – and how they are (and could be) used to benefit consumers. 2 Accurate assessment of the benifit of theses technologies: Economic hype ac ompanying the development of a new technology sometimes fails to match th reality. Use of obscure jargon or associated terms can limit t e ability of businesses to accurately assess the impact. Digital transformations frequently fail wh n companies disregar the value of their l gacy systems, do not pay sufficie t att ntion to the need for cultural evolution and/or adopt a ‘big bang’ approach to introducing change. 3 Legislativ lag can ometimes be detrimental – but sometimes lead to better regulation and more innovation nce the new technology is fully understood: While rushing to regulate a new technology was not viewed by attendees to be desirable (indeed whether regulating a technology rather than its uses or those who use it was a sensible approach), there was general agreement that the development of legislation over long time scales can mean that the problem being targeted is either no longer relevant or has changed in definition. At the same time, there is a trade off between legislative clarity and certainty. The first step should be to assess whether existing regulations or approaches in fact cover – or can be adapted to cover - the uses of the new technology. unless their activities are the same as those of the social media platforms. Only undesirable activities should be targeted not the fact that platforms and marketplaces are both online. 9 Understanding the shortfall in colleague knowledge and/or talent is essential: Skills shortages and skills gaps can mean that companies may find it difficult to secure the right people at th right time to develop and imple ent appropriate technological solutions. It can also be difficult to recruit the right people with t e right knowledge at director or board level to take co porate responsibility for how the new technology is used – which is ess ntial for a trustwor y business. 10 Deterrence is less effective than incentive: Compliance and rules-based approaches can have unintended outcomes. Positive incentives frequently work much better. Fines levied on companies sometimes just become part of the cost of doing business to the detriment of an inbuilt ethical approach to business that embodies a genuine desire to act appropriately, legally and ethically.

Now is the Time to Build for the Post-Pandemic Future

ED WHITEHEAD SIGNIFYD MANAGING DIRECTOR, EMEA signifyd

IT’S SAFE TO SAY THAT THE EFFECTS OF THE CORONAVIRUS PANDEMIC OF 2020 WILL BE WITH US FOR SOME TIME TO COME. For retailers, that means building a strategy that addresses the short-term, mid-term and long-term realities that come with it. First, there’s the matter of inviting consumers back into physical stores while keeping customers and staff safe, while also managing what has been a dramatic spike in online orders. Next will be launching payments and order flow systems that acknowledge the requirements of PSD2 and the SCA regulations that will be enforced in most of Europe come Dec. 31. Then comes the job of looking farther ahead into a post-pandemic future that will likely shape the shopping habits of consumers for generations to come. As tricky as it might be to think far ahead when the crisis seems so immediate, those that find the way back to retail success will be those who have taken a long view. While much remains uncertain, there is a lot that we do know. That provides a solid foundation for building a three-pronged approach that will serve retailers well as they power through the health crisis and look forward to the future of retail. Short-term steps: Omnichannel is no longer a nice-to-have buzzword. With consumers cautiously returning to brick-and- mortar stores, retailers need to provide ways for shoppers to buy in whatever way they feel comfortable. There is no one answer. In fact, there is no one answer even for the same consumer, who might be ready to brave the store one day, but would prefer to shop online the next. As economies open up, the ability to click and collect will become far more important. Entering the fourth month of the pandemic, the number of click-and-collect orders on Signifyd’s Commerce Network is up 144% since pre-pandemic levels. The increase, which has registered above 300% some weeks, is potentially a sign that shoppers aren’t interested in returning to stores when there are practical alternatives. Retailers need to ensure inventory visibility and have dedicated systems and staff in place to make click-and-collect seamless. Other consumers will prefer delivery. Merchants who think of their physical stores as warehouses enabling forward deployment of inventory will be at an advantage. Mid-range work: SCA is upon us. It seems the delays are finished. Yes, in the UK we have another year, but now is the time to act for two reasons. First, unless you want to close yourself off to most of Europe beginning in December, you’ll want to be able to deliver strong customer authentication by the enforcement deadline. Beyond that, it’s an opportunity to fortify your fraud protection with state-of-the-art, machine-learning systems that will provide a better customer experience today and set you up to seamlessly perform SCA tomorrow. Navigating the pandemic and post-pandemic world

Long-range vision: Though it’s hard to see some days, one day the coronavirus will be contained and the pandemic will end. Retail, of course, will have been changed forever. We’ve already seen that the pandemic has propelled ecommerce adoption years into the future. Four months into the COVID-19 crisis, ecommerce spending was up 85% over pre-pandemic numbers. The figure represents a serious enthusiasm for online shopping even after non-essential stores were open again for business. The pandemic also attracted a tremendous number of shoppers who had never or rarely shopped online before. Four months into the pandemic, the number of new online shoppers on Signifyd’s Commerce Network was 32% higher than it was in early March. A significant number of those consumers became repeat online shoppers, indicating that they had established a habit that they were likely to continue. Given that more people are shopping online and those who have always shopped online are buying more there now, retailers want to capture as much of that upside as they can. And they want to capture it for the long-term — benefiting from bigger basket sizes and turning new customers into lifetime customers. With so much of the in-store experience out of your hands, you want to capture new customers by building a flawless online experience. Focus on providing intuitive navigation, engaging content, precision personalization, accurate inventory, seamless checkout and instant order confirmation. Automated systems can help with some of the heavy lifting. AI-powered content management systems, personalization engines and automated inventory management can help with discovery and fulfillment. Fraud and order management systems that instantly sift fraudulent from legitimate transactions and issue automated ship-or-don’t-ship orders eliminate friction at checkout and significantly reduce the chances that legitimate orders are declined. Moreover, the best in the industry incorporate SCA and the evolving versions of 3D Secure into their solutions, meaning retailers are protected today and prepared for the future. No question, the past few months have been a whirlwind of efforts that often felt defensive in nature as retailers gauged the threat the coronavirus presented. Now it is time to turn to offense, by making the moves to serve customers now, while doing the work to be in a position to succeed in the future. Control what you can: Build a flawless online experience

16 | summer 2020 | the retailer

Retailers can tackle the ongoing pandemic by tackling the short-term disruption, the mid-term SCA requirements and the long-term customer acquisition opportunity.

Chart representing the change in ecommerce sales from the end of February to the end of May

Cumulative % Change

Vertical

109% 37% 60% 39% 40% 71% 60% -28% 137%

Electronics

Fashion, Apparel & Luggage

Home Goods &Decor

Luxury Goods

Grocery & Household Goods

Auto, Parts & Tires

Alcohol, Tobacco & Cannabis

Business Supplies

Leisure & Outdoor

Consumer Medical Supplies & Supplements

32%

49% 10% 19% 51%

General Mercchandise

Beauty & Cosmetics

Commodities &Collectibles

total

ED WHITEHEAD // ed.whitehead@signifyd.com // signifyd.com

the retailer | summer 2020 | 17

The future of Ecommerce requires understanding the new consumer

ALPESH PATEL HEAD OF STRATEGY Axerve Spa

AN INCREASE IN ONLINE SALES AND A DECREASE IN SALES IN-STORE AS A CONSEQUENCE OF THE LOCKDOWN: THIS IS HOWWE COULD SUMMARISE THE IMPACT OF THE PANDEMIC ON PURCHASES IN EUROPE, BUT WE KNOW THERE IS MUCH MORE TO IT AND THAT A MORE CAREFUL ANALYSIS OF THE DATA CAN PROVIDE EVERYONE WITH A BROADER PERSPECTIVE OF WHAT HAS OCCURRED. To understand what has changed in recent months, let’s take a look at some useful data as food for thought for online retail which must transform in order to keep up. The analysis of public data attributable to DESI (Digital Economy and Society Index), an index that monitors the overall digital performance of Europe and the progress of digital competitiveness in European Union countries, offers a snapshot of a situation of overall growth in digital accessibility alongside a growth in digital consumption. In terms of digital accessibility, in 2019, NGA (Next Generation Access) coverage increased to 86%, +3% compared to the previous year, and 17 EU countries are already at an advanced stage of developing 5G connections1. The tools for easier and faster network access are not lacking, nor is the consumption of digital services - increasingly satisfying needs which were purely analogue in the past. Even before the pandemic, 85% of European citizens regularly accessed the internet - with peaks of 95% for Denmark - and of these, 66% use internet banking services and 71% buy online. A general framework highlights a growing approach towards digital, in some contexts meeting typically analogue needs. A good example of this is the increase in those using digital services in the field of fitness. Estimates indicate users will have increased to 158 million in Europe2 by the end of 2020; Virgin Active Europe has declared a 150% increase in the use of its content since the beginning of the year. How to detect digital consumer needs The DESI snapshot of data before the pandemic and lockdown period that marked much of Europe in the first two quarters of 2020, shows the conditions exist to successfully approach more and more consumers online.. What aspects should we focus on in order to capture the potential online market globally? A first solution is to integrate collection platforms that combine the advantages of digital with the opportunities offered by in-store customer management. Accompanying the classic strengths of offline – for example payment cards and more traditional instruments – typical online payment instruments, for example digital wallets, can contribute to the loyalty and acquisition of new customers. New-generation platforms exist that let merchants request a payment by sending an email or showing a QR-code, offering customers the chance to pay from their devices, at any time and in any place.

Offering alternative payments In the European context, as well as internationally, the use of alternative payments beyond the more traditional options such as credit cards is increasingly common.. According to a report published by Bernstein Research, Apple Pay generates 5% of global card transactions, which will increase to 10% by 2025. The other digital wallets are also hard at work: just think that by the end of 2020 Google Pay and Samsung Pay are expected to have about 100 million users each, compared to the 227 million users of Apple Pay3. The possible alternative payments include more than just digital wallets. There are different types depending on the location of users, the type of payment needs (B2C or BTB), age or a combination of these elements. For example, MyBank and iDEAL are perfect for B2B payments, since the underlying tool is bank transfers. WeChat Pay, Alipay and Unionpay – two digital wallets and a credit card circuit – are the most widely used tools in China. With its platforms, KLARNA Payments responds to different needs, from B2B payment to payment in instalments, and is essential for those working with Northern European markets, especially in the fashion industry. Multi-acquiring Platform Even more so today, focusing only on the European market in certain contexts and for certain product sectors – think of fashion, for example – can be a limitation. A successful strategic aspect involves identifying a payment gateway that can offer a multi- acquiring platform, as it brings multiple advantages and could be a differentiating element for revenue generation and cost reduction. The opportunity to connect to multiple buyers can contribute to an increase in authorisations and conversion rates, improving the shopping experience. Local acquirers have better knowledge of buyers with cards issued by issuers from the same country, resulting in higher authorisation rates and conversion rates in general.

“Developing markets are driving growth in non- cash payments, expecting a compound annual growth rate of 23.5% between 2017 and 2022.” World Payments Report 2019 | Capgemini

18 | summer 2020 | the retailer