Can AI Drive More Ethical Retail Or Is Common Sense Enough?
A few years ago Samantha Zirkin and her husband took their two young children and travelled around the world, volunteering at orphanages, schools and homes for abandoned or abused children.
“I saw many children with the same sad story: dad gone, mother dead or dying after working under appalling conditions in a garment factory, no sanitation, no medical care,” she recounts. “Some children had been so malnourished they could not stand on their own two legs. I decided to delve into the retail world to learn about the supply chain and workers’ rights. And I wanted to know if people would pay $70 instead of $50 for an item they knew had been produced under fair conditions.”
Tackling the big issues in retail
Today Samantha is the CEO and Founder of Point 93, a company that addresses several big problems in retail. Point 93’s software replaces discounting with dynamic pricing and addresses the need to reeducate customers. “Customers have been conditioned to expect deep discounts which hurt the retailers brand and bottom line,” she explains. “Our solution encourages positive buying behavior and allows customers to provide feedback about product, price and in store experience.”
Most importantly, the software enables retailers to share their corporate social responsibility (CSR) campaigns with customers and analyze their impact on sales and loyalty.
“Retailers invest a lot in CSR activities, but they do a poor job communicating about them. They often don’t know whether their customers care about the campaigns or if they are willing to pay more for items produced under ethical conditions,” says Samantha.
Retail with a purpose
Research like the SAP/EY market study shows that as digital transformation takes hold across all industries and lines of business, profit alone will not make companies successful. Successful companies must offer their employees a sense of purpose. Take the case of CVS, the American pharmacy chain that stopped selling tobacco products in 2014 because it conflicted with their purpose of helping people on a path to better health.
“CVS has a history of being purpose led,” said Helena Foulkes, President of CVS Pharmacy and Executive Vice President of CVS Health, recently at NRF’s Big Show 2018. “We walked away from $2 billion in sales to be a leader in healthcare.”
One year later, the company was able to show a measurable, positive effect on public health nationwide. Not only did people purchase fewer cigarettes in states where CVS had stores, they also bought more nicotine patches. This purpose driven decision did not harm the drugstore giant’s overall sales which have been up, thanks to new business from in store medical services and health plans.
For all its advances and amazement, modern commerce is a double-edged sword. Some consumerist habits can be wasteful or harmful. Is it possible to improve conditions in a garment industry that depends on cut-throat pricing to drive consumption and is notorious for cutting costs at the expense of its employees?
AI to the rescue
Experts believe artificial intelligence (AI) could help make retail more purpose driven. According to Francesca Rossi, AI Ethics Global Leader at IBM Research, ethical retail should start with the design of algorithms that determine how retailers use data to understand consumers and meet their demands.
“To help human society flourish, we must ask the right questions from the beginning in order to design the human experience differently,” she said at a panel discussion at NRF 2018. Ms Rossi went on to explain the importance of making AI a multi disciplinary effort. “We shouldn’t leave AI in the hands of developers and designers. AI must become a multi stakeholder effort involving psychologists, economists, philosophers, the users, and so on.”
Tenzin Priyardashi, Director of the Ethics Initiative at the MIT Media Lab, agreed with Ms Rossi during the discussion. “Normally, you wouldn’t expect to find a monk like me at a retail event,” he quipped. “I believe in moderate consumption. We should ask oursleves: what is a healthy rate of consumption? Retailers now have the right data at their disposal, the right insight into consumer behavior and very powerful tools that can challenge society to be more responsible when it comes to healthy consumption.”
Massive supply chain ineffeciencies, environmental damage and low wages that perpetuate the cycle of human suffering and poverty are all part of the hidden cost and long term damage that can be caused by modern commerce. But it doesn’t have to be like that. Machine learning and AI can help retailers and product managers create dialogues along the customer journey and reward responsible buying behavior. Technology can give the shopper the opportunity to ask about the source of a product or understand what goes on behind the scenes to determine its price. Transparency enables informed decisions.
But we don’t have to wait for machines to guide the way. As consumers, we can all use technology to learn more about the source of our garments, our food, our medications, and then use common sense to do the right thing!
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Common sense is not common. AI will help, but not elevate the supply / demand marketplace. If there is one apple for $1 and another for $2 that was organically grown. I would still pick the $1 apple. So if there is a product for $70 and one for $50 how do I know which one has been created ethically? Will there be an advertisement like the organic apple. That in itself would be bad marketing for the store.
Now take a store. I know that store A closes on Thanksgiving and Christmas. I know store B does not. I will almost always go to store A first. For me that's common sense. However - in my family - there are people that shop on Thanksgiving so that go to store B. Which one is ethical? This again is not a real good example. But it is one that is known.
So now add AI. It quickly tells me product A was produced for 50 and not done ethically, product B was produced for 70 and is done ethically. It still comes down to choice. And honestly for me it comes down to where I stand with my money. Just out of college, I may not be able to afford 70 but I can 50.
The feedback on price, customer experience, and store would motivate me. If I took the time to look it up. Which I would do in the case of a big purchase. I love carfax.
So will AI help? My take on things: The information comes faster, but it only works if you look it up. Which as you can see, I rarely do.
I love these thinking blogs. Keep them coming!
Michelle
I believe most consumers would be skeptical about "ethical retail" and it would take A LOT of convincing. How would we know if the difference of $20 will be actually used towards well-being of the workers instead of just getting added to the CEO's bonus?
We've already been duped with "natural", "organic", "cage free", "environmentally friendly", "fat free", etc. labels that turned out mostly a marketing gimmick. A local store is selling "organic" fish when there are no regulations in the US on use of that label for fish. And even for produce the accuracy of "organic" labels and the actual differences in nutritional value have been questioned many times before.
Honestly, I don't know why retailers need AI to figure any of this out. Trader Joe's chain has no sales or coupons and no inspirational posters about responsible corporate practices. Their only two policies are: nothing artificial and if you don't like it - bring it back. Their stores are always full (ours is like a battlefield on the weekend). How do they do it for 20 years already? They provide VALUE to the customers.
If someone wants to sell $70 item to general population it needs to provide more value than $50 item. To me this means that in addition of being "ethically" sourced it'd have to be of better quality (just like Michelle, I won't chose much more expensive item simply for the label). Of course, there are always a bunch of self-righteous people with money to burn who would flock to the "ethical" product regardless of quality. If that's the target demographics then retailers just need to figure out where most of those people are. (Hint: they're are at Whole Paycheck buying organic fish.)
Thank you.
Will the artificial intelligence be able to help introduce better ethical standards in retail? Well, we can only say: maybe. But I guess it highly depends on what we actually mean by the term artificial intelligence.
If this is a set of advanced algorithms that use comprehensive coplex databases to quickly and effectively extract required data and carry out specific calculations, optimize, make data transfers, synthesize facts and present to the client, then honestly, speaking about higher ethical standards is pure fantasy. Such algorithms are the owners' property. And it is the owners' ethics that will decide wether the retail will be more ethical or less.
I believe, on our way to more ethical retail, we should rather pay our attention to people. The people should be educated in business ethics, they should be taught about all issues related to the ethical conduct of sale, or rather the whole retail chain, from the moment of purchasing raw materials, through transport and product-making, as far as to the final act of sale to the customer.
Comprehensive algorithms can help optimize orders and processes, make supply chains more cost-effective, better plan store spaces, distribution, and even customer personalization, but they will not be more ethical than their creators. Instead of looking for ethics in algorithms, we should look for it in ourselves.
If, on the other hand, the real artificial intelligence would be a self-aware sentient being, capable of making its own decisions, then I guess it is a completely different story.