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Latest Retailer Tech Trends Go Beyond Cookies to Include The Fast-Growing Metaverse

Throughout the pandemic, retailers had to act swiftly to adapt to stay-at-home orders and social distancing guidelines. This meant making the most of the technologies available and experimenting with new technologies — both online and in-store — to engage with customers and maintain customer satisfaction (and safety!). As we continue to figure out how to navigate the new normal, it would be wise for retailers to keep on top of technological trends.

Still Reaching For The 'Cookie' Jar?

The economic toll of stay-at-home orders left businesses relying on e-Commerce sales and promoting their digital presence. Cookies and similar tracking technologies1 have been instrumental to advertising and marketing initiatives. Concerns about privacy intrusive tactics led data protection authorities (DPAs) to increasingly focus their attention on cookie compliance. Not only have DPAs issued new or updated guidelines regarding the use of cookies, but certain DPAs have prioritized enforcement efforts on cookie compliance. For example, in 2021 the Commission Nationale de l'Informatique et des Libertés (CNIL or the French DPA) issued orders to nearly 90 players, including companies in the clothing and retail sectors, on the subject.

We have also seen an increase in class-action lawsuits for cookie violations, such as those against Oracle and Salesforce.2

In light of recent regulatory attention, big tech companies have started making changes that suggest we are moving towards a cookie-less future. In 2019 and 2020, Mozilla's Firefox and Apple's Safari browsers, respectively, blocked third-party cookies by default. Apple's App Tracking Transparency (ATT) framework brought about changes to tracking within apps, now requiring brands and marketers to obtain user permission before tracking. Google also announced plans to disable third-party cookies by 2023.

There does appear to be some hope for cookies. Post-Brexit, the United Kingdom is considering re-working rules governing the use of cookies, including making compliance with cookie consent requirements less burdensome.3 In the European Union, the EU Council's draft of the ePrivacy Regulation — the law that will replace the ePrivacy Directive, which currently governs cookies — would allow users to whitelist cookie providers to minimize the number of consent requests.4 However, retailers should keep in mind that restrictions on certain targeted advertising may be incorporated into the EU's upcoming Digital Services Act (DSA)5 — which would regulate illegal content, transparent advertising, and disinformation online — and Digital Markets Act (DMA)6, an anti-competition law intended to address distortions in digital marketplaces.

With heightened regulatory attention and changes by big tech companies, and not to mention increased digital ad costs, retailers are now looking to third-party cookie alternatives. One promising alternative seems to be retail media, which allows brands to advertise their products on a retail website or app and access retailers' first-party data for ad targeting.

Escaping 'Reality' With AI

As stay-at-home orders lifted, consumers were eager to leave their homes, and in-store shopping became an entertaining, social experience and a way to escape the routine of staying at home. At the same time, social distancing guidelines left businesses rethinking their in-store practices.

In previous editions, we discussed how retailers have shifted their attention to augmented reality (AR), through virtual try-ons and smart mirrors and fitting rooms, in an attempt to offset losses due to forced store closures, and as a way to maintain customer safety.7 However, extended reality (XR), including AR and virtual reality (VR), will be core components of the "metaverse." Brands should start considering marketing and advertising strategies to rollout in the post-COVID-19 virtual world. Some brands have already started preparing for the metaverse by establishing a new genre of marketing: direct-to-avatar (D2A). For instance, Gucci sold a virtual bag in Roblox for more than its retail value, and Nike dropped virtual Jordans in Fortnite.8

In the digital space, retailers are turning to artificial intelligence (AI) to facilitate customer interactions through chatbots and conversational marketing, drive personalization through product recommendations based on previous customer activity, and understand brand sentiment and customer preferences. For example, AI allows brands to "identify social media photos in which people wear or use their products, even when the brand or product isn't tagged," offering insights into customer demographics in return.9

Retailers should keep in mind that regulators, private companies, non-profits, self-regulatory bodies, and the like, are racing to publish the latest guidance, frameworks, and guidelines on the use of AI. In June 2021, the Biden Administration launched the new National Artificial Intelligence Research Resource Task Force, which will "help develop a roadmap to democratize access to research tools that will promote AI innovation and fuel economic prosperity." In October 2021, the White House Office of Science and Technology Policy announced that it will be developing a bill of rights to guard against the harms of AI technologies. The Federal Trade Commission (FTC) also issued AI guidelines in 2020 and 2021, and more recently, filed an Advanced Notice of Proposed Rulemaking to issue rules on privacy and AI.

In April 2021, the European Commission released its proposal for an AI legal framework, the Artificial Intelligence Act, to address "risks generated by specific uses of AI through a set of complementary, proportionate and flexible rules."10 The UK Information Commissioner's Office (ICO) has also published guidance on AI and data protection and developed an AI Auditing Framework.

Common themes across various documented AI principles include, unsurprisingly, privacy, accountability, safety and security, and transparency and explainability.11

Integrating technology into the retail shopping experience isn't slowing down anytime soon. As with any technology, retailers should ensure they are responsibly deploying AI-based technology, addressing existing privacy and data protection requirements, and staying on top of legal developments.

1 For purposes of this article, we refer to cookies, though the same holds for similar tracking technologies.

See CNIL, Refusing cookies should be as easy as accepting them: the CNIL continues its action and issues new orders (December 14, 2021).

See Department for Digital, Culture Media & Sport, Data: A New Direction (September 10, 2021)

See Proposal for a Regulation of the European Parliament and of the Council concerning the respect for private life and the protection of personal data in electronic communications and repealing Directive 2002/58/EC (Regulation on Privacy and Electronic Communications).

See European Commission, The Digital Services Act: Ensuring a Safe and Accountable Online Environment.

See European Parliament, Digital Markets Act: Ending Unfair Practices of Big Online Platforms.

See Katherine Motsinger, I Want You to Want Me: Augmented Reality Edition, Kattison Avenue (Spring 2020); Katherine Motsinger, Augmented Reality Marketing Campaigns and the California Consumer Privacy Act, Kattison Avenue (Summer 2020); Dagatha Delgado and Kate Motsinger, Mirror, Mirror on the Wall, Who’s the Fairest of Them All? AR Retailing in the 21st Century, Kattison Avenue (Fall 2020).

See Nick Pringle, Why the ‘Metaverse’ Will Prove to be More than a Buzzword, Fast Company (September 6, 2021).

9 “Artificial Intelligence Report, 2021 Edition” ANA, 2021.

10 See European Commission, A European Approach to Artificial Intelligence.

11 See Jessica Fjeld, et. al., Principled Artificial Intelligence: Mapping Consensus in Ethical and Rights-based Approaches to Principles for AI, Berkman Klein Center for Internet & Society at Harvard University (January 15, 2020).

©2022 Katten Muchin Rosenman LLPNational Law Review, Volume XII, Number 26

About this Author

Dagatha L. Delgado Intellectual Property Attorney Katten Muchin Rosenman New York, NY
Staff Attorney

Dagatha Delgado helps clients get the most out of cutting-edge innovations and address the privacy, data protection and cybersecurity challenges that arise from an ever-changing digital world.

Dagatha helps provide advice on privacy and technology matters, including compliance with rapidly evolving privacy and cybersecurity laws, and engaging and managing IT and cloud service providers. As a member of Katten’s data breach response team, Dagatha also steps in to help clients respond to and recover from data breaches and security incidents.

Guidance on privacy compliance and...