Comment: The Internet of Things, new horizons and new challenges for retail

The Internet of Things (IoT) is already here and many retailers are experimenting with the logistics of connected solutions, but IoT obviously also offers consumer-facing, in-store and especially experiential marketing opportunities for retailers. However, retailers will have to pay close attention to the regulatory landscape which may not be keeping pace with these swiftly evolving tools and products.

Brands and manufacturers are getting out there and experimenting with transforming products into connected services and experiences. Digital-Out-Of-Home advertising is also showing the way with interactive location-based personalisation. In the era of IoT, retailers can be learning a great deal from these other sectors.

As with any new opportunity there is a need to experiment and to iterate, and crucially, to be part of the process as innovation materialises. Retailers should engage actively with platforms and tech providers to enable the curation of solutions in a way that works for them and for the target customer. Without this, there is a risk that we repeat the mistakes of, for example, web and mobile advertising or consumer-facing beacons, where the tech providers had been left to develop (dis)functional solutions with little real value to users.

With cross sector insights, IoT could be the opportunity that allows retailers to change the shopping environment and to use technology to engage consumers with added-value experiences, in the right place, at the right time. 

From a legal point of view, some key challenges for retailers are likely to be around advertising and marketing regulations, such as the CAP Code having to be reviewed in a new light; while the new European General Data Protection Regulation will have a profound impact. There is also a more subtle but interesting issue (and indeed opportunity) of how traditional roles, rules and responsibilities surrounding the creation and ownership of content, rights and intellectual property (IP) will shift.

Using the example of a retailer providing IoT-enabled interactive promotions jointly with a third-party product or service, the key challenge will be transparency; in particular, differentiation between editorial and paid for marketing content –  in order to avoid any accusations of misleading consumers. The challenge for retailers, their marketers and the regulators will be staying ahead of developments to navigate the potential range of campaign executions which are already far more sophisticated than the current regulations had envisaged.

When it comes to data, there will be significant changes and increased scrutiny over the next two years and beyond as the new General Data Protection Regulation comes into force in the spring of 2018.  This revised law provides for greater transparency surrounding the types of data collected from, for example, customers in store – and its use for purposes unconnected with the use of the IoT device or service, as well as greater restrictions over profiling of users and greater control by the user of any data collected.

In relation to content creation, rights and IP there is the biggest opportunity for the landscape to shift and for all players to actively change their roles and the traditional rules of the game. There are many new platforms emerging – from the connected screen in the car or bathroom to voice-activated kitchen devices able to recommend integrated retail options. The instore experience too is changing, with voice or motion controlled devices able to provide product information or offers and additional content in new showroom-style environments. Such innovations bring with them new formats and functionality, including opportunities for real-time brand integrations. The challenge of how to access these platforms effectively and manage rights, though, will be significant, and it is likely case-by-case partnerships will need to be forged in the short-term.

These partnerships are crucial for the development of the sector, to ensure functionality and marketplaces develop effectively for platform owner, product owner or retailer alike, as well as to avoid technical solutions that have little commercial and audience value. Whilst these development and funding models shift, different players – whether that be the retailer, brand, agency, platform or talent – will be trying to change the rules in terms of IP ownership, and their place in the overall value chain.

The key to success in the IoT revolution will be to start thinking now about how best to embrace and capitalise on the significant structural, operational and commercial challenges and opportunities which will are only set to accelerate.

David Deakin is a partner in the retail sector group at the law firm Lewis Silkin LLP.