2020, and come to think of it, the whole of the next decade, is set to be an exciting and challenging time for consumers, retailers and those involved in the supply chain. Likely trends are set to include:
- focus on greater sustainability and the circular economy;
- richer community-building;
- deeper social media engagement;
- the increased use of AI tools (with the associated data privacy challenges);
- greater payment flexibility, such as the increased use of digital wallets (to help create customer stickiness);
- experiential shopping (at one end) and value and convenience shopping (at the other);
- a growth in wellness, fitness and health products;
- availability and next day delivery being pre-requisites, necessitating improvement in logistics and stock management solutions; and
- the use of loyalty rewards/virtual currency in a wide range of sectors ranging from entertainment and sport to gaming and day-to-day purchases.
As we all know, consumers expect more for less, which, in turn, can ultimately create a pressure for retailers to ensure they hit their sales targets and maintain margins. Nonetheless, the Government and the CMA are intensifying their efforts to strengthen consumer protection in the UK, with a strategic focus on enforcement and empowering consumers through accessibility to their data.
Consumer law is complex and achieving compliance is not easy or straightforward.So retailers will need to pay closer attention to ensure that both current and new offerings are promoted and sold in a manner that not only keeps regulators at bay but ensures that their customers are happy and loyal (and of course spend more).
Data
- Data will remain a focus point in 2020. In 2019, the Government conducted the ‘Smart Data Review’, which focused on the use of data driven technologies and services to improve consumer experiences. The review concluded that there is considerable potential for smart data to be used positively across consumer markets and identified three key areas which the government consulted on – these were how to:
- enable data driven innovation in consumer markets;
- use data and technology to help vulnerable consumers; and
- ensure consumers and their data are protected.
- The Government is analysing feedback from this consultation and we look forward to reporting on this shortly. Meanwhile, retailers should give thought to the collection, use, accessibility and portability of customer data, especially when designing or procuring new systems, including privacy by design. This work will (of course) go hand-in-hand with the steps that businesses should already be taking under GDPR, such as the undertaking of DPIAs (Data Processing Impact Assessments).
- The use of consumer data now forms a key focus in CMA investigations. For example, the CMA has launched a market study into online platforms and digital advertising, the report for which is due in July 2020. The study assesses three broad potential sources of harm to consumers, one of which is whether consumers are able and willing to control how data about them is used by online platforms. The concern is that, despite GDPR, consumers are generally still not aware of the data held about them or how it is used or shared.
- The CMA is looking into the business models of online platforms funded by digital advertising. These platforms are highly reliant on the supply of consumer data for segmenting audiences for targeted advertising. The CMA will take enforcement action if it becomes evident that there are breaches in consumer law being committed – and even if the CMA doesn’t do so, the ICO will likely pay close attention to this area (the ICO already has adtech and programmatic in its sights).
The Loyalty Penalty
- Whilst there may be no law per se that prevents businesses from using loyalty penalties, there is growing regulatory dislike of them in the UK. The CMA’s investigation into loyalty penalties as part of its Smart Data Review contributed to this. The investigation looked into how longstanding customers may pay more than new customers for the same service. Unacceptable practices include:
- making it more difficult to leave a contract than it is to sign up;
- rolling over customers onto new contracts without sufficient warning; and
- imposing ‘stealth’ increases in price on renewal year after year, which can lead to significant price increases without making consumers aware of this.
- The CMA has set out a framework giving guidance to businesses about the difference between healthy competition and unacceptable practices. On a related note, we feel that the use of auto-renewals should not be ruled out but specific hurdles need to be cleared first.
James Gill, Partner & Joint Head of Commercial & Technology, Lewis Silkin LLP
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