No time for news? We’ve got you covered. Welcome to the Retail Rundown, your go-to weekly podcast where RETHINK Retail teams up with industry experts to deliver the top trending news stories in retail.

August 3, 2020: The new Back to School season, Rite Aid and facial recognition, SPARC group eyes several struggling brands.

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Hosted by Julia Raymond

Written and produced by Gabriella Bock

Edited by Trenton Waller

 

TRANSCRIPTION

Julia Raymond:
Hi everyone. Today we’re joined by guests, Paula Rosenblum and Carl Boutet. Paula is the Managing Partner and co-founder at Retail Systems Research. Paula also serves on the RETHINK Retail Advisory Council. Carl is the Chief Retail Strategist for Canada’s Studio Rx. Paula, Carl, thank you for joining the show today.

Paula Rosenblum:
My pleasure.

Carl Boutet:
Thanks for having us.

Julia Raymond:
You guys have both been on before, so I’m really excited to have you back. And the first topic is about back to school. So it’s the first week of August and officially back to school season. Traditionally, as we all know, this time of year brings a siege of apparel and school supplies shoppers. But as educators begin preparing their lesson plans, questions still remain as to whether or not students will be heading back to school or back to their bedrooms to study. Major US cities, Atlanta and Los Angeles are moving forward with plans to remain digital this school year. While New York, the country’s largest district is opting for a hybrid model with both in-person and digital learning.

Julia Raymond:
When we look to Canada, provincial authorities are still working to determine if students will return to classrooms in the fall. Most countries in Europe have reopened schools. And according to NRF’s annual back to school shopping survey, 88% of US consumers say the pandemic will affect their back to class shopping in some form. The NRF also projected parents with children in grades K-12 will spend the record 33.9 billion on back to school goods up from 26.2 billion in 2019.

Julia Raymond:
The study mentioned that 63% of K-12 families expect to buy computers and other electronics this year, which is up from 54% last year. Paula, I’d like to pass this to you first. There’s a lot of uncertainty in the air about if people will be going back to school, and this definitely will affect retail. How should retailers be rethinking marketing strategies when it comes to this year’s back to school season?

Paula Rosenblum:
The back to school season is really interesting for me, because it’s not what it used to be when we were kids. By the way, add Miami Dade to that list of places that is opening digitally and opening two weeks later than it normally would. And that brings me to one of the reasons why back to school has changed. I know the NRF is saying, “Well, it’s a great time for apparel, and it’s going to be different this year.” But the truth is school opening schedules are so skewed all around the country. I mean, up in New York where I grew up, they still start after Labor Day. Typically, here down in Miami, they start on the 15th of give or take the 15th of August.

Paula Rosenblum:
And I frankly don’t see people buying with the exception of uniforms if it’s that kind of school. I don’t see parents buying new clothes for their kids when it’s 100 degrees outside. So I think the apparel side of the business has been shrinking for years, personally. And I don’t even know where you draw the line that says it starts here and it ends here. Given, again, there’s a month-long span of back to school. Certainly, electronics will only grow because so many are going to at least the home part of the time. And the parents who may or may not have realized, been able to share a computer or realize that their old computer they gave to their kid was good enough, and realize, “No, I really have to spend some money on a good one.” So I think that side will be very positive. I think the apparel side is a strategy of hope on a good day, and in this situation, it’s not going to happen unless it’s casual wear.

Julia Raymond:
Good points, Paula. You said apparel is a strategy of hope on a good day and electronics looks more positive. Carl, are you seeing the same things where you’re based in Canada?

Carl Boutet:
Yeah, and not just Canada, I mean, we track around Europe and even globally some of these consumption patterns.

Carl Boutet:
So basically, I mean, I think the story here is not so much a seasonality, and what the buying opportunities are. It’s really the economic repercussions of what this crisis is doing to disposable income. And that’s going to be the true tale is, we’re going to see where or just how hard economically we’re hit, and what that does to disposable income. So I think that’s going to be the real story around the world. And as Paula was saying, it’s also very much a story of what are the priorities and electronics are clearly going to be ahead of apparel.

Carl Boutet:
So once we have to focus where the disposable income is going, next is how much disposable income there is to put into the purchasing that goes around things like back to school, the next will be where the priorities are going to be in technology is clearly going to get the majority of that.

Julia Raymond:
When we talk about categories of apparel retailers, are you thinking maybe department stores will be hit the hardest? Or what have you seen from your work with retailers?

Paula Rosenblum:
I think specialty stores is more of department stores seem at the moment for whatever reason they seem to be in line with the notion of if I’ve got to go out, I just want to stop one place and so a department store tends to be an opportunity to buy stuff for the whole family. So it seems to me. I don’t go to store. I’m not going to lie. I haven’t been to a store in … Well, I’ve been to two stores in four months. So I’m not the best example of it, but it’s based on the results we’ve seen so far. That’s the way it’s looking, like big box retailers and convenience shopping is going to overtake specialty shopping. The only exception may be being like athleisure and other casual wear that people wear in the house for their Zoom conferences.

Carl Boutet:
And maybe I’ll take it back into the disposable income conversation and make it more around value, where the retailers are going to be able to discount the most and show the consumer that they’re going to get the “best deal”. I think what’s going to probably dictate where the shopper is going to go with their money. I don’t think it’s a department necessarily as much of a department store or not question. I think is who’s going to really go out of their way to show that they’re going to make that buck stretch as far as possible.

Julia Raymond:
Absolutely.

Paula Rosenblum:
And I think people are caring about how retailers are treating their employees, to be honest with you, the majority of people. I know there are some who want to kill somebody because they’ve asked them to wear a mask. But in general, we saw it from the backlash against amazon for a while during the early days of the pandemic, that people really do care how their employees are treated. And Walmart has certainly gotten some great PR for treating its employees well as at Target. The whole bonus is recognizing that they’ve become frontline and no longer disposable but actually rather important. So I think that consumers will remember those things for the long term, I do.

Carl Boutet:
I hope so as well. I mean, I have this whole jam around sustainable retail making it more than just about the environment but about the people and how we treat the businesses. But I’m concerned, again, in this, as we bifurcate towards these extremes of where the money is, and I think there’s a portion that will be able to vote with their dollars. But I think there’s another portion, unfortunately. They’re just going to be left with the economic realities where they have to go where their money is going to get the biggest, have the biggest purchasing power.

Carl Boutet:
I really hope you’re right though, Paula. That said, I think that would be great. And maybe as an industry, we need to put a little more effort into that and making sure that that comes across to a broader consumer base.

Paula Rosenblum:
I mean, there’s no doubt that it’s going to be Walmart’s time. But that’s not just because this stuff is the cheapest. It’s because you don’t have to feel, for want of a better word, dirty for buying from them, because they’ve done some good things. And they’ve proven to have the leadership that I think the industry has really needed by them setting the tone saying, for example, that they weren’t going to open on Thanksgiving. They kicked off a trend that is just moving further now. So, Target, Best Buy all the big guys have now done that. So I think that their leadership has helped a lot.

Carl Boutet:
How ironic is this to be saying these words, think 10 years ago where-

Paula Rosenblum:
I see that. You couldn’t have paid me enough for me to say I would ever say those words.

Carl Boutet:
And maybe, an additional argument in the environment that we’re in right now where shoppers are going to be very focused on where they invest their time, not just their money, and not wanting to be, maybe going to too many touch points, and in physical contact, having that one stop shop will obviously play to Walmart’s favor as well too.

Paula Rosenblum:
Right. Exactly, exactly. There’s a lot of reasons why it’s Walmart and Target time. But it did seem at least for the first month or so to bleed over into the department stores. Don’t forget they’ve got a lot of goods they got to get rid of, so their prices will be sharp.

Julia Raymond:
I will say there was an interesting article posted July 30th and it was from Bloomberg reporting that Walmart is laying off hundreds of corporate jobs, which I found interesting. But if you dig a little deeper, they’re saying it’s because they’re not opening as many new stores. And then the merchandising division, and then some of the jet.com since they’re getting rid of that whole segment, there are layoffs because of that. So I think it actually makes sense. But do you guys think that they’ll have some negative PR around that because of the economic situation right now?

Paula Rosenblum:
Me, no. I think that giving all the bonuses that they’ve given and things like that have really helped them. I wrote a piece earlier in the week, and I talked about COVID Accounting. I made up a name, and I based it on purchase accounting. When you work for a company that’s doing a bunch of M&A or doing any M&A. What you tend to do is throw all your sins into a one time charge called purchase accounting. And I think that there are very clearly organizations and entities that are like a lot of the bankruptcies we’ve seen so far, probably should have happened, anyway. And so, I have been calling them COVID accounting. The fact that Walmart is wanting to switch to digital and laid off some personnel because they’re not opening that many stores, I don’t think they’ll get negative press on that, because not that many people are shopping these days.

Paula Rosenblum:
Walmart Stores aren’t the most welcome in the neighborhood, because they’re so big and they tend to drive out local businesses. And they’ve done enough with digital that I think they have a good story to tell. So I don’t see them taking heat over that. I could be wrong, but I don’t think so. I think they’ve done enough, right? That they’ll get a pass on this.

Julia Raymond:
Right. Well, I know Paula mentioned bankruptcies briefly there. And that is part of the topic. In this next segment, we’re going to cover some malls. And we’re eight months into 2020. So far, there’s been 21 private and public retailers that have filed for bankruptcy. Lucky Brand, Brooks Brothers, and Ann Taylor’s parent company have seen a group are among the legacy retailers that filed for Chapter 11 last month. Meanwhile, there’s major mall groups making bids to keep the stores open. So a company known as SPARC Group, which is comprised of Simon Property Group and Authentic Brands Group made a $305 million bid for Brooks Brothers.

Julia Raymond:
SPARC has also put up a stalking horse bid of 191 million for Lucky Brand. SPARC group is also the owner of Nautica and Aeropostale. And last year the company teamed up with Brookfield Property Partners to acquire Forever 21. Carl, I’ll pass this to you first. What do you think of SPARC Group’s plan to acquire several more struggling brands during this pandemic?

Carl Boutet:
Well, how is it different than any other private equity play? I mean, I think they’re just using this as a financial tool to really try to find new ways to stretch the same dollar. And it’s a really interesting play to see if they’re actually going to be able to extract more value than any other private equity player just because of their knowledge of the sector, but they really work well together. And I think it’s just extending the inevitable, making, I don’t know. I mean, there is some brand equity.

Julia Raymond:
Okay, so Carl, you said it might be just a typical private equity play. Paula, what’s your take?

Paula Rosenblum:
I think it’s a little bit of two things. One is, yes, it’s a typical private equity play and those have not been working out quite so well. I think actually, I think Ascena was an equity play as well. And most of them, as I can recall have not worked out all that well for the retailer. But there’s another piece which is that there needs to be things in the mall. Right? I mean, if you want to drive consumers to the mall, and you want to charge the kind of rent that you want to charge, you need a variety of stores. And malls have been complaining already that everything was the same. I had a friend who was running a small chain of large-sized women’s clothes, and she would go to the ICSC, the international council of shopping centers every year, and they begged her to open in their mall because it was different.

Paula Rosenblum:
Because you go to a mall, it could be Dallas, it could be Miami, it could be anywhere, and that’s exactly the same stores. And so, that’s not a lot of fun. So, again, this is another pre-existing condition. The malls were trying to figure out a way to reinvigorate themselves before this came along, and were adding entertainment, and were adding all kinds of ways to become more sticky and more of a destination like they used to be. And now everything has been accelerated. So what they don’t want to do is get below what I can call a critical mass so that there just isn’t any reason for people to go there.

Paula Rosenblum:
I mean, I still think they’re going to have a really tough time because having them out and about here a little bit and seeing the lack of compliance with the requirements to wear masks and things like that, I don’t see a lot of interest in people going to malls, to be honest with you, but they’ve got to do something. And there’s a whole game of cat and mouse going on like Gap saying they weren’t going to pay. Simon opening their malls a little too early so that they could start charging rent, and Nordstrom them for their part saying, this is what we’re going to pay you. We don’t care what the lease says. And by the way, if you can draw more traffic, we’ll pay you up to 90% of what we were originally going to pay you.

Paula Rosenblum:
So I think that malls have a real challenge ahead of them. And buying these chains out is just to keep … It’s almost like a placeholder so that people will come if nothing else come and try and get a deal or whatever. And, of course, if they can extract some cash out of it as a [inaudible 00:21:41] all the better.

Carl Boutet:
Right. And I think what this doesn’t solve is really the fact that the business model is broken, especially for commercial real estate. I mean, the fact that they’re trying to value these assets on long term agreements that they can predict out what the revenues are going to be based on fixed leases is not sustainable. And I actually, at the beginning of the crisis had a couple of conversations with some of the leaders in the sector both on the real estate side and even on the development side. And they are all recognizing this and one more example of this acceleration where they knew that they had to work towards a new model.

Carl Boutet:
This is not acquiring brands. I don’t know if it’s really fixing anything because they’re still basically putting those brands under the same pressure. They’re just, they got closer to the books now. And what came out of the think tank, what I created around these conversations and over about a month and a half of discussions with the group, the only way forward, really, for these malls is not to buy out the brands. That’s actually, we’ve been tried in other parts of the world where the brands are on the malls, and malls are on the brands, and neither one of these truly, truly works.

Carl Boutet:
What seems to work more is, if they can get more of that more variability or verbalize their costs a bit more, so that the mall owners gain on the upside and share the downside in their lease agreements and make it more around the transparency of where the business is coming or where it’s going. The challenge with that model is around what I just said, is the trust factor, and there’s still no trust. So anyway, that’s a longer conversation, but it’s quite steep, so broken business model.

Paula Rosenblum:
Yeah. Also, there’s a component of a lease, typically at Molly’s has two parts to it. One is the base lease and then this percentage rent, which means that because the mall has done such a good job of drawing traffic to you, they get to have a percentage of your sales over a certain amount. And then getting that [inaudible 00:24:03] are very little. So I think what they’re trying to do is at least salvage their rent. I mean, this pressure, I don’t mean to try and paint them as the bad guys. There’s pressure across the whole ecosystem, let’s face it. You’ll be blocked down. We’ve basically locked down at least half the world. And it doesn’t come back in five minutes.

Paula Rosenblum:
And, again, where I live, we just had 10,000 new cases and 200 new deaths today. And so, anyone’s appetite to go to a mall either has to be desperate or dumb, I guess. I don’t know. I mean, it’s not something that I would see people doing aggressively.

Julia Raymond:
Absolutely.

Carl Boutet:
The fact that what made destination malls the most productive in the last couple of years was adding food and entertainment and hospitality venues and those are the first things that aren’t working in this environment. We have a major mall redevelopment that happened here in Montreal, where one of our largest pension funds owns this premier property, and they put $250 million into creating this massive food discovery in a project that was around a time out market and all these great, bringing the best chefs together.

Carl Boutet:
I mean, they were basically betting the farm on this, and now look what happens a couple of months later. Who wants to be in a mall eating fruit right now? So it’s just the whole thing. That doesn’t speak to the model. I don’t think anybody can blame the model for that. But it’s a category that unfortunately was the most vulnerable to this type of lockdown scenarios, to Paula’s point. But there are still some really good high-end malls apparently are doing better. But the key’s going to come down to building something beyond the trust that I was mentioning earlier.

Carl Boutet:
A business model or factors in the influence that these malls can have on consumption beyond the four walls of the mall, and see how they can leverage that and measure it so that the mall owners can have some sort of financial incentives as well too for the transactions that are instigated in the mall, but that occur outside of it. So that’s, again, a much longer conversation, but we’re seeing solutions out there that are edging their way towards that.

Paula Rosenblum:
There’s also a fair amount of talk about finding a way to do curbside pickup in malls so that you can minimize your amount of time in there and minimize what you’re carrying around with you. These all require changes. I mean, all the things going on now are just stopgap, something’s got to give here for sure. The other thing to mention is that, let’s say in places like where I live in Orlando, 85% of Bal Harbour shops, which has the highest sales per square foot of any mall in the country comes from tourists. And nobody’s coming. I mean, there’s some people coming here but they’re not the brightest bulbs on the tree. So there’s that ripple effect as well. I mean, the guys who built Mall of America were going to build a mall here with an indoor ski slope, which is, it’s just, that one is beyond me. But I don’t know where those plans are right now. But I probably wouldn’t build one today if I were them, that’s for sure.

Carl Boutet:
Well, they’re already struggling with the American Dream one. I think you’re referring to American Dream two, I think is what they were they were calling it, near the project in your area. And there’s a lot of question marks around what’s going to happen to the first one in New Jersey.

Paula Rosenblum:
Right, because there’s nobody in it, is there? If I remember correctly?

Carl Boutet:
Well, they had started opening, and it was, again, mostly around hospitality and food, and they had actually even announced that they were going to increase that to 70% of the footprint was going to be entertainment, hospitality and food and only 30% would be retail. So there’s a lot of question marks around how that’s going to unfold, so yeah. And the fact that is really is they put up their West Edmonton Mall in the Mall of America as collateral for that. So that’s where all this house of cards can come down. That’s the real concern because what’s happening in this crisis is we’re focusing on specific elements of it. But it’s all tied in from the mall operator all the way down to the first goods supplier out in the third world country that unfortunately, everybody’s feeling these pressures. So it’s all coming full circle and having us revisit where and how value is created.

Julia Raymond:
And I like what you both said Paula and Carl, you both mentioned in terms of SPARC Group acquiring these brands that are suffering a bit. It’s a private equity play, but they also, as Paul mentioned, need to have stores in the mall to attract people. And two points you made about malls and how they’re changing right now that I thought were interesting, is Paul, you mentioned they’re trying to figure out, “Okay, how can we do curbside at malls? And then Carl, you said there might be a bigger play with malls in the future helping to incentivize the sales outside of the four walls, and figuring out what that model looks like.

Julia Raymond:
So, both great points. We’re going to hop to the last segment of today, which I always find very interesting. It’s around facial recognition and retail. So I’d like to turn our attention to Rite Aid. They’ve been in the news last week. A recent investigation by Reuters revealed over the last eight years this pharmacy chain had installed facial recognition systems at over 200 of their stores in the United States. And the majority of these stores were reportedly situated in metro areas of Los Angeles and New York, with the technology largely housed in lower-income communities of color.

Julia Raymond:
Kathy Langley, Rite Aid’s VP of Asset Protection said earlier this year that facial recognition resulted in “less violence and organized crime” in the company’s stores. Last week, Rite Aid told Reuters it has quit using the facial recognition software and has since turned off its cameras. Meanwhile, if we look at the broad set of things, retail shrink from theft and fraud rose to 661.7 billion in 2019, and that was according to NRF. That was over a 20% year-over-year increase.

Julia Raymond:
So I’d like to pass this to Paula. Two years ago, the Loss Prevention Research Council called facial recognition, a promising new tool worthy of evaluation. What are your views in terms of where facial recognition software has a place in retail?

Paula Rosenblum:
Nowhere.

Julia Raymond:
Nowhere?

Paula Rosenblum:
Yep, nowhere. Yeah, I think that we’ve gone way over the privacy line, to be honest with you. People are suspicious that their cameras are watching them, that their microphones are listening to them, that Alexa is paying attention to every word they say. IBM was touting a technology for a couple of years where, I think it was IBM, and I think they partnered with SAP. I might have SAP wrong. And basically, they could tell the mood of the customer based on facial recognition software. And so, would give a cue to the sales associate how to approach them. I just think it’s a bridge too far. I really do.

Julia Raymond:
And you’re right, it was IBM, Paula, because they just announced in June of this year that they’re no longer funding their R&D rate for facial recognition.

Paula Rosenblum:
That’s because it’s intrusive. It’s a bridge too far. It’s really that simple. Period. Full Stop. And, of course, the other irony is at the moment, if people are doing what they’re supposed to do, they’re all wearing masks and who knows anything anyway.

Julia Raymond:
That is true. That is ironic. I didn’t think about that until you just said that.

Paula Rosenblum:
That’s one reason … There are two reasons why Rite Aid immediately said, “Okay, no more cameras.” One is, it’s a short walk from poor neighborhoods to racial profiling. And that’s obviously not a good thing to be having going on right now. And the other is, with everybody wearing masks, everybody looks the same.

Carl Boutet:
I actually have quite a bit to say on this too, because I spent quite a bit, a good part of two years really going deep on this and working with the AI researchers or the data science researchers, working with the loss prevention people, the surveillance manufacturers and all that and trying to understand. I think Paula really brings up great points about a bridge too far. And a lot of these companies were already very tentative to explore this because it wasn’t very effective technology at that time. Now it seems like with products, we hear about Clearview AI and these guys that are becoming very, very good at facial recognition at the time. It wasn’t even that great.

Carl Boutet:
And even with that IBM sentiment analysis tool. I mean, we would say back it would be, on sentiment, it was probably 30% accurate. On demographics, it was probably 50% to 60% accurate, it was pretty good on gender, not so good on age. And then when it came to full facial recognition, it was very poor. You really didn’t have the catalogs to properly correlate it to the loss prevention where you’d have a face on file that the camera should be able to recognize somebody who regularly has stolen from you, for instance, which was really the reason why they wanted in the first place more than anything. And it wasn’t really working.

Carl Boutet:
I can even see, the face masks are an interesting point. There’s a face mask, sort of mute need for reality. Actually, I was part of a panel judging technologies for startups in Israel a couple of months ago. And there was a couple that were tackling. The Israelis are obviously very security sensitive, and they had technologies that were, believe it or not, Paula, actually able to do facial rec even with masks on which just by using the data points between the eyes and the eyebrows, and all of this.

Paula Rosenblum:
All the more reason not to use it then, it’s too [inaudible 00:35:03].

Carl Boutet:
Right. The big conversation, you brought it up. The big conversation in predictive analytics right now, which is what AI is in this case, is around bias, and we really don’t have a way to figure that out. And that, I think is where the Rite Aid story was going as well, is there’s a sort of an intrinsic bias, unfortunately, into all these algorithms that doesn’t lead us to a good place. And until we figure a way to better tackle that, I did some work back in those days with the CCTV commission in London, which is very … London is known for having probably one of the densest security cameras installs in the world.

Carl Boutet:
And so, they were trying to figure out ways to find where the public’s acceptance of this would be. And people are obviously very accepting of the technology if it’s going to limit bad behaviors, and it’s going to help them prevent horrible crimes. I mean, when I was there, they just had the bomb in the tunnel and these sort of things so they were very sensitive to that, but not at the cost of the privacy. So, this is going like three years back already, and we’re no further along. It’s really a bigger [inaudible 00:36:24] goes well beyond retail.

Carl Boutet:
I mean, this is a societal question where we’re law enforcement meets ethics and all these things. And the technology is going to keep being developed. That’s the scary part, and how responsible … I think the Clearview AI is still the right story is probably the most representative. Look at the police departments that have come out public and say they’re going to stop using it because it is really super powerful, versus the ones that aren’t saying anything, which I guess you can insinuate are still using it.

Carl Boutet:
So, that’s a much bigger problem, not just retail. But retail was very interested in it. They thought they were going to be able to use it to reduce that shrink number that you, especially on the organized loss that they there was, which is their biggest problem after internal theft. So, where is this all going to lie and who knows? The Rite Aid thing, I think is really a small piece of a much bigger story.

Julia Raymond:
Sure. And Carl, you mentioned, and you were in Israel, I believe you said, and you were judging some of the new systems that were coming out, and the big conversation that I saw when researching this topic was that 3D facial recognition systems as compared to the old 2D ones are so much more accurate even in dim light, and they can measure the depth of your eyeball, the shape of your nose and chin, and compare it in real-time, nearly, to their database of images. So I think things like that. I mean, that’s where it gets a little crazy. And when we look to China-

Carl Boutet:
Right, right. Yeah, I was in China in January as well, and that’s just a different society, and different societal norms altogether. But the point around the technology, the capacity of the sensors, so when I was deep in these iPhones, they were using facial rec to unlock your phone, where everybody thought that technology was basically ubiquitous, which it wasn’t. So using CCTVs or security cameras to do that, those were 2Ds. They didn’t have that integration or that level of precision.

Carl Boutet:
Tie that now to the database, because the other big pieces of the database, and that’s what you made Clearview so strong and powerful is the fact that they’re scraping images off of social media. So, they’re grabbing all of them. So they would came out and said, “Listen, we were able to track down this criminal, because we were able to find his face in the mirror of somebody doing a selfie in a gym,” for instance. That’s a whole other level. That’s not even nothing to do with 2D or 3D sensors. That’s just how deep the catalogs can go now, and where is the start and stop. So combine those two things with computing power, that is everyday growing exponentially, databases that are growing exponentially.

Carl Boutet:
The question is really more around law enforcement, and where the legalities of all this are going to come in, and they’re just not able to keep up right now, quite honestly.

Julia Raymond:
Good points. And Paula, you said there’s no place for this in retail in your opinion, because it’s crossing the line. It’s a bit too invasive. But it’s interesting how many retailers are using it and people probably are not aware. I saw Burberry, last year, it was reported by Forbes that they have technology so that when you walk in the store, it can actually identify you if you’re a regular customer and alert the sales associate with your profile and your past purchase history, and then suggest things that they could offer you.

Paula Rosenblum:
I mean, it’s a risk. I mean, you can do it, and people like me can say, “You shouldn’t do it.” And then those vendors won’t ever spend any money with me or whatever. It’s a risk. It’s not a risk I would take, personally. I don’t think there are enough incremental dollars in it, or shrink reduction in it. I just think it’s a risk.

Carl Boutet:
And the Burberry case is a bit different because that’s an opt-in, right?

Paula Rosenblum:
Right. That’s a whole lot of things.

Carl Boutet:
That is probably part of a loyalty program that, and it has to be made very clear, involved with some researcher at McGill University in our retail lab where we have to really go out of our way even more so in an academic setting to really make it clear what it is we’re measuring and why. And that’s the first thing anybody who walks into this space will come across as a big sign saying, we are recording you for academic research to measure certain things for academic research purposes. But we’re even worried about that to a certain extent, if it’s enough. But all to say that opting in is very different if it’s a clienteling thing versus a loss prevention thing. It’s a less slippery slope, but there are still concerns that need to be addressed.

Paula Rosenblum:
Sure, sure. And like you said, it’s different by society. We see the EU definitely looking into highly regulating facial recognition after they passed GDPR not too long ago, and so, unlikely going to spread fast there, but then we have China, one camera for every eight people.

Carl Boutet:
Well yeah. And it’s probably under-reported. It’s even interesting to see we know even within the US because right now the leader on this privacy side in terms of using biometrics is Illinois. Illinois has a very comprehensive privacy package that’s, I think it’s pretty much adopted now by the state legislation that really, well, qualifies biometrics. Because the big piece whenever you’re in the privacy debate, is this thing called personally identifiable information, PII. And there’s a lot of debate around that. So in some places, biometrics isn’t considered personally identifiable information, and others it’s absolutely, which I think it should.

Carl Boutet:
But it even goes to things like what’s your phone’s WiFi address. The MAC address which is in Europe now recognizes person with GDPR became personally identifiable information. It’s, again, what I said earlier, the legalities are trying to keep up. It’s moving so quickly, that the systems have to the legal systems, the constructs have to catch up.

Julia Raymond:
Certainly, I’d like to take a moment to thank you, guys. Paula Rosenblum, Managing Partner and Co-founder at Retail Systems Research and Carl Boutet, Chief Retail Strategist for Canada’s Studio Rx. Thank you both for joining today.

Paula Rosenblum:
My pleasure.

Carl Boutet:
Thanks, Julia.