Shownotes
This Omni Talk Retail Fast Five segment explores New York's proposed legislation aimed at limiting AI-powered personalized pricing.
Chris Walton and Chap Achen discuss the fine line between personalization and surveillance pricing, why retailers should tread carefully, and how AI can still enhance the customer experience without eroding trust.
The conversation also highlights the growing regulatory questions surrounding AI in commerce and whether retailers can balance innovation with consumer confidence.
⏩ Tune in for the full episode here: https://youtu.be/BYxUBG-sSTQ
#AI #DynamicPricing #Personalization #RetailTechnology #RetailNews #ArtificialIntelligence #CustomerExperience #RetailStrategy #Commerce #OmniTalk
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Transcripts
New York legislators have passed the One Fair Price act, making New York the third state in the nation, after Maine and Connecticut to pass legislation limiting companies from using consumer data to set personalized prices, according to Chain Storage.
Speaker A:The bill passed on June 4th and now heads to New York's governor for consideration.
Speaker A:The legislation targets what advocates call surveillance pricing, which is the practice of using AI and algorithms to analyze a consumer's browsing history, real time location, inferred family size or income, to set individualized prices or discounts.
Speaker A:The bill does, however, carve out an exception for what it calls bonafide discounts.
Speaker A:That is, sales coupons and loyalty programs are preserved, which was a key concern raised by critics who argue the legislation could eliminate consumer friendly targeted offers.
Speaker A:Notably, Colorado recently vetoed a similar surveillance pricing bill, and California and New Jersey are both currently considering comparable legislation, making this a fast moving patchwork of state level action.
Speaker A:Chap.
Speaker A:This is.
Speaker A:You're the lucky, the lucky winner this week.
Speaker A:You get the, you get the A M consumer and retail groups put you on the spot question.
Speaker A:All right, here it is.
Speaker A:This one, this one's a.
Speaker A:They went, they went in a different angle this week too.
Speaker A:Chap.
Speaker A:So better you than me on this one.
Speaker A:So here it is.
Speaker A:They said, quote, you can't stop him.
Speaker A:You can only hope to contain him.
Speaker A: phrase on SportsCenter in the: Speaker A:God, I just read this.
Speaker A:I have no idea where this is going to go.
Speaker A:And that was to describe the dominant athletic forces who were simply too big or too strong to neutralize.
Speaker A:So their question is, in 10 years, who will we say was more difficult to contain comparatively?
Speaker A:Michael Jordan or AI?
Speaker B:Okay, that.
Speaker B:That's from left field.
Speaker B:Chris.
Speaker B:I.
Speaker B:So I lived in Chicago in the late 90s, so I had the privilege of seeing Jordan live.
Speaker A:Wow.
Speaker B:Incredible.
Speaker B:So the easy answer to this question is AI.
Speaker B:However, the key point in the question was in 10 years, which makes me more skeptical, actually.
Speaker A:Really?
Speaker B:So from my vantage point at Gartner, yes, AI is everywhere in our discussions, but the reality is, in my domain and supply chain, only 17% of AI pilots are scaling successfully in the supply chain Right now, only 23% of supply chains have a formal AI strategy.
Speaker B:Only 23%.
Speaker A:Right, right, right.
Speaker B:So, and the gap between what the vendors say you can do with AI and what folks are actually doing with AI has never been larger.
Speaker B:And if we're going to get AI in this dominant position where it really changes your operating model, you have to give AI some big, big Decision rights.
Speaker B:That's going to take time, a long time to get right.
Speaker B:So maybe I'm giving the edge to MJ here.
Speaker A:Okay.
Speaker A:Wow.
Speaker A:Okay, wait.
Speaker A:Okay, so first of all, I want to say, so the goat, Michael Jordan still beats AI.
Speaker A:Wow.
Speaker A:That tells you how.
Speaker A:That tells you how awesome.
Speaker A:That tells you how awesome Michael Jordan was as a basketball player.
Speaker A:What it, what it also tells me is that, you know, and the reason for the A and M consumer and retail group's question is like, you know, I think they're kind of, you know, you know, asking like, you know, what's the point if AI is going to always be, you know, out there and such an important thing in terms of how retailers do business, how consumers interact with things, is it even possible to keep up?
Speaker A:And your point, your point that I'm hearing you say is, yeah, there actually may be a point to trying to keep up with it because it may not happen as quickly as.
Speaker A:As we think it's going to.
Speaker A:And so then my question to you comes down to if you look back at the legislation like I just described in the headline, what do you think it gets right and what do you think it gets wrong when it comes to regulating pricing as it's trying to do across retail?
Speaker B:Yeah, you know, Chris, I think it's sad that we need legislation to deal with these kinds of issues, you know, while dynamic pricing is happening all around us.
Speaker B:Right.
Speaker B:Concert tickets, hotels, Uber rides.
Speaker B:Like, the consumer remains very sensitive to this issue on product pricing.
Speaker B:And smart retailers would tread very carefully here without the need for some law to prevent them from doing so.
Speaker B:You know, my advice to a retailer would be to lean into personalization in other ways that can still drive margin optimization.
Speaker B:And we know that personalization overall as a strategy works.
Speaker B:Like Gartner research says, consumers are 1.3 times more likely to make a purchase when it is personalized.
Speaker A:Right.
Speaker B:And for me, like, so I'll just give you an example, as a supply chain guy, personalization could be about how do we use supply chain data to personalize and optimize the fulfillment offer itself.
Speaker B:Right.
Speaker B:We know the consumer wants personalized delivery experiences.
Speaker B:So I actually did some consumer research on this last year where we asked consumers about speed over reliability and accuracy.
Speaker B:Reliability was actually more appealing than raw speed.
Speaker B:And that accuracy, that's personalization.
Speaker B:Right.
Speaker B:That's the promise for you based on where you are.
Speaker B:And we know conversion rates go up 3 to 7% when we personalize the delivery estimate on the product detail page.
Speaker B:And when I talk to retailers who are always complaining about the speed expectations that Amazon sets.
Speaker B:You know, my, my, my comeback to them is, well, Amazon set another experience, another expectation for the consumer, and that's the personalization of the delivery offer.
Speaker B:Right.
Speaker B:We all get a different delivery experience based on where we're browsing from and our browsing history, our order history, et cetera.
Speaker B:So that expectation has been set for the consumer as well, which is an area I think retailers can lean into.
Speaker B:Right.
Speaker B:And when we shift our thinking this way to using supply chain data to help personalize the offer, that's a margin driver.
Speaker B:So when I search for men's khaki pants on your website today, that's a merchant's job to figure out which five pairs of pants appear above the fold.
Speaker B:But what about using supply chain data too?
Speaker B:Which of these pants are in stock near you that I can deliver at a more profitable cost?
Speaker B:So this is just like one example of personalization that I think retailers can be leaning into that stays away from this red line of dynamic product pricing that I think retailers, smart retailers will avoid.
Speaker B:And now, you know, unfortunately, it seems like some states are jumping ahead to ensure that the not smart retailers will not cross this line even if they try.
Speaker B:So, yeah, that's my take on it.
Speaker A:Right, right, yeah.
Speaker A:And yeah, no, you're bringing up good points too.
Speaker A:And then like, where does, where does like the shipping costs fall into this legislation too?
Speaker A:Like, is that a product price or is that something that's happening, ancillary from all this?
Speaker A:So, like, it gets really complicated really fast.
Speaker A:And so, like, you know, I think overall it's, it's grounded in the right direction as an idea.
Speaker A:And I think what they're trying to prevent is like the instacart example that we had on the show a couple months ago where there was just blatantly different prices for different people.
Speaker A:And so I'm all for protecting that.
Speaker A:But the couple things I would say, just for anyone listening, particularly if you're in government and you're thinking about doing this, the one thing that is driving me absolutely crazy now is all the negative blowback on ESLs, particularly around dynamic pricing.
Speaker A:Because if you think that that's going to happen, you're just totally, you're not getting it because that's not how retail works.
Speaker A:No retailer is going to put dynamic pricing down their aisles, you know, as different individuals are coming down them.
Speaker A:So it's just not going to happen.
Speaker A:So just stop, you know, stumping that.
Speaker A:But, you know, I think with this, I think there is some, there is some things here and I think you've got to keep.
Speaker A:So I'm all for using.
Speaker A:I'm.
Speaker A:I had this conversation with Scott Price of the.
Speaker A:He's.
Speaker A:He's a CEO over in Asia of a DFI group.
Speaker A:And he said like, yes, we have to be very smart about how we monitor our reg pricing and the personal data we're using to decide what those reg prices are.
Speaker A:But we have to have the ability to, you know, make the promotional decisions that we want to make because that's where the merchant really comes into play.
Speaker A:And it sounds like the legislation for the most part, you know, has got that, you know, and the legislation that we just described is thinking about that, you know, that they're still allowing that to happen.
Speaker A:So that.
Speaker A:So that's good.
Speaker A:The pro.
Speaker A:The part that sticks with me, though, is the whole geography thing.
Speaker A:I think, you know, the geography thing is just really tricky, you know, I mean, you know, because like, if you're a store, you know, if you're a store, and I'll just make states up, Seattle versus Arizona, those stores are going to have different prices.
Speaker A:And so, like online, you're going to have different prices based on that geography too.
Speaker A:And so I think that is a very complicating factor for retailers to get around and is going to be very hamstringing for them as well.
Speaker A:And so the legislation, you know, in that regard doesn't appear to answer that for me.
Speaker A:Me chat.
Speaker B:Yeah, no, I agree.
Speaker B:And yeah, where do we, like you mentioned shipping cost?
Speaker B:Like, we've been charging more for Alaska, Hawaii shipments for like two decades.
Speaker B:Right.
Speaker B:Because we're penalizing people that live there.
Speaker A:Right.
Speaker B:So.
Speaker A:Right.
Speaker A:Yeah.
Speaker A:It's already happening.
Speaker B:It's.
Speaker B:It's happening already.
Speaker A:So that's a really good point.
Speaker A:Yeah.
Speaker A:Wow.
Speaker A:Yeah.