May 13, 2020 | The Italian version of this article was first published on Wired.
As partial lockdowns across Europe are extended, the coronavirus outbreak is generating an acceleration in the “going to digital” processes of companies across different sectors. E-commerce, more than others, is experiencing such acceleration. Artificial intelligence, augmented reality, digital marketing and new business models based on innovative data’s exploitation, will be key tools for offering a more efficient and reliable service to the final consumer. It will be interesting to go along with the growth of the e-shop platforms (B2B and B2C) in the next year or so, during which important European Directives, covering the area of consumer protection, will be implemented.
As partial lockdowns across Europe are extended, the coronavirus outbreak continues to have impact on the way people live and consume. Consumer behavior has changed over the past month and will change in the future. The question is how it will change, and — as far as legal analysis is concerned — what the impact will be on legal needs.
As might have been expected, purchases within the categories of “Food and Groceries” and “Health” have increased dramatically since the COVID-19 outbreak began. Interestingly, the next most affected categories are “Media Entertainment,” “Hardware and Building Materials,” and “Home Decorations & Furniture.” Lastly, there has been a boom in takeout food, despite the seemingly inconsistent fact that ingredients for home cooking are flying off the shelves: large-scale distribution stores have been ransacked and emptied to the point that now buying a one-kilo bag of flour or a cube of yeast has become an impossible mission, at least in Italy.
These categories can be expected to continue to increase in the coming months. Certainly, this emergency caused consumers to become more familiar with on-line shopping, and it is reasonable to expect that new consumer habits will take root in the future.
E-commerce digital acceleration
One thing about this crisis is clear to retailers and brands across different industries: it will usher in what some call an era of “digital super-acceleration.” Any gaps in digital mastery will put brands at a strategic disadvantage. It is time to step up, to embrace a proactive digital approach, to connect more strongly with customers, and to prepare for the “new normal.”
In light of that preparation, retailers and brands probably will ask themselves the following: how well prepared am I for the era of digital super-acceleration? How well is my e-commerce performing? How secure are transactions on my e-shop? Are there gaps in the information I give to consumers? How do I reach my targets and how do I engage them? Having the right answers to those questions is likely to make a difference.
It is reasonable to expect that consumers will favor web-shops that are perceived as secure and transparent with information and that offer fast and reliable delivery service, flexible return options, and a wide range of products. Above all, consumers must be reached and engaged.
Brands should answer all the above questions, while also taking into consideration the new European and national legal framework that will be implemented next year in the area of consumer protection.
In particular, transparency in online marketplaces, protection for consumers of “free” digital services, the right of withdrawal, and penalties for infringement are some of the areas covered by what is being called the Omnibus Directive (the European Commission’s Enforcement and Modernization Directive (EU) 2019/2161 that came into force on January 7, 2020), which will introduce significant changes to existing consumer protection legislation. These changes include harmonization of the rules applying to the on-line sale of physical goods and services, as well as digital goods, services, or content, pricing, and unfair commercial practice. In addition, the Omnibus Directive will introduce new obligations for traders and online platforms designed to give further protection to consumers, along with a deterrent effect obtained via the introduction of GDPR-style penalties for breach of the rules.
Before the Omnibus Directive, two other Directives will be implemented next year. These are also aimed at better regulating e-commerce and properly protecting consumers. We are referring to Directive 2019/770, which, inter alia, regulates (a) cases of non-supply of digital content/service and lack of compliance with related remedies for the consumer, (b) contractual post-termination obligations, and (c) cases of modification of digital content/service. This Directive has special importance from a privacy law perspective, as it includes a dedicated provision that finally formalizes a principle that was outlined at length in precedents from the relevant Italian authority: according to that principle, providing personal data is equal to paying a consideration. Finally, Directive 2019/771 will be implemented — that modifies the provisions regarding warranties for goods sold on-line.
E-commerce solutions cannot be boosted without taking into account the updated European regulatory framework that will be implemented in 2021. T&C for e-commerce platforms and information published on e-shops’ pages will require in-depth analysis and amendments in order to be compliant with that new regulatory European framework.
E-commerce and AI in B2C and B2B
Surely, Artificial Intelligence (“AI”) represents and will increasingly represent a strategic aid to e-commerce.
Today, companies like Alibaba, eBay, and Amazon are massively using AI for fake review detection, chatbots, product recommendations, managing big data, and so on.
Think, for example, about AI assistants and chatbots: they help brands respond to both written and voice customer inquiries. Pre-sale and post-sale assistance, especially in a period of peak demand like the one that will soon end, might enjoy advantages from this tool. And what about smart logistics? AI automated warehouse operations and delivery processes might become crucial to providing the client with fast and reliable delivery. Lastly, recommendation engines: artificial intelligence can analyze customer behavior on websites. It uses algorithms to predict the products customers may like and provide recommendations (Amazon serves as a brilliant example).
Also, B2B companies will probably be pushed to reorganize processes and channels, mixing up strategies and dynamics traditionally belonging to B2C, in order to increase their client satisfaction rates. For example, the need for B2B clients to be supplied quickly and efficiently, might lead companies to implement solutions based on AI platforms that favor the optimization of restocking orders and increase purchases using the recommendation engines already mentioned above. That would free agents from order tracking activity and restocking products with which the customer is already familiar, allowing them to focus on high added value activities, such as attracting new customers or increasing sales of different products.
One of the main priorities currently is the creation of strategic partnerships among companies and clients in order to support and push further sales to final consumers. One option is the creation of an integrated supply chain through sharing manufacturer and supplier catalogues with distributors in a B2B2C model in order not to miss out on sales because of lack of stock, or by sharing stock among different stores in order to increase the inventory available.
There are multiple implications under a legal standpoint, and these implications may cause different sets of legal provisions to intersect. It will be crucial to regulate the data flow both in terms of compliance with the GDPR and in terms of database and software law. Once you properly regulate data treatment and protect the relevant intellectual property, you will be positioned to protect the competitive advantage achieved by using AI in your digitalization processes.
E-commerce and digital marketing
Finally, how important is to engage the right target? In a recent public speech, chair and chief merchant of Value Retail Management Desirée Bollier said, “Retail nowadays is entertainment. No one really needs stuff. It’s no longer about owning something. It is about belonging to something.” Luxury brands — and other brands as well — are familiar with these topics and have been thinking about them for a while, but still they will probably experience further acceleration in the coming months. Luxury brands have invested a lot of effort and money in content production aimed at creating strong brand identities — a feat achieved in part due to strong and innovative digital strategies. Digital marketing on social media platforms like Instagram or TikTok is the natural outgrowth of this entertainment approach. The same thing can be said about a branded app that latterly catapults the consumer into a world designed by the brand. Think, for example, of an augmented reality app that allows the consumer to wear Gucci shoes, walking in the Gucci world, just by pointing an iPhone camera at their feet. Then, there is the integration of a branded app or Instagram account with a branded e-shop — the last link in a chain that fosters an increase in the rate of conversion.
The successful performance of this digital chain is based on a solid contractual framework that is regulated by sets of legal provisions covering topics such as copyright, trademark, database and software law, privacy law, regulations on digital marketing, and so on. The list is very long and complex, and that is why an integrated legal approach is unquestionably advisable.
• Lydia Mendola, Partner
Compliments of Portolano Cavallo – a member of the EACCNY.