Retailers in China Understand the Potential of CCTV and Facial Recognition

Wired recently reported that China has over 176 million CCTV cameras scattered around the country, and the number is growing by 12 percent per year. Furthermore, CNBC quotes data from CB Insights that indicates that China is ahead of the U.S. in facial recognition patents, with over 900 — a number that is almost ten times higher than the number of patents filled in the U.S. Given the technology and market size, it’s not surprising that the luxury industry in China has found a new usage for monitoring technology. “For luxury brands, facial recognition has the potential to build a bridge between the online and offline worlds,” says Tony Wong from Wired. Indeed, facial recognition is likely to reshape the luxury retail sector, but that doesn’t eliminate serious ethical and security concerns.

First, until recently Chinese consumers considered “privacy an alien concept.” And according to the South China Morning Post, “Chinese are bent on dismissing privacy as a bad thing, and their zeal might have something to do with its negative connotation. In Chinese, si yen means seclusion and implies secrecy.” But various sources have reported that Chinese consumers are evolving and becoming “more anxious about data privacy.” The ZAO face-swap app scandal shows that Chinese netizens are fully aware of the vulnerabilities of the system, understanding the risks that come with the “misuse of personal information.”

Second, the system raises serious ethical issues. American backlash against facial recognition has made it even into the democratic primaries when liberal presidential hopeful Bernie Sanders has called for a total ban on police use of facial recognition technologies. The European Union also wants to regulate the facial recognition system and in China both the private and public sector are inviting citizens to educate themselves in the risks of A.I. and facial recognition technologies. According to a CNBC translation, the Beijing city newspaper wrote, “The future has come, artificial intelligence is not only a test for technological development, but a test for governance.”

Third, the technology still needs further improvement and innovation. A Dutch non-profit named Consumentenbond conducted a test on 110 smartphones and found out how easy it is to trick the facial recognition technology. For 42 of the tested smartphones, it was enough to hold up a photo of the phone’s owner to unlock the devise. Furthermore, gender and ethnicity also play an important role in the performance of the technology. Wired reported that even the best algorithms struggle to recognize individuals with darker skin, and “concerns about the intersection of facial recognition and race” have emerged.

But despite serious considerations regarding the technology and the misuse of biometric data, retailers continue to experiment with surveillance appliances because they understand their potential. RetailWire quotes Brent Biddulph, General Manager, Retail & Consumer Goods, who believes that there are “some misconceptions about facial recognition, or at least, the many benefits the broader AI concept of Computer Vision for Brick and Mortar Retail.” Indeed, the retail world will profit from facial recognition since it offers viable solutions to its most pressing issues such as reducing costs, increasing customer satisfaction and the conversion rate, creating a seamless retail experience, and improving brand loyalty.

Increasing customer satisfaction and the conversion rate

Walmart is using facial recognition to identify “frustrated” and “unhappy” shoppers. “The technology uses video cameras at store checkout lines that monitor customers’ facial expressions and movements to try and identify varying levels of dissatisfaction,” says Business Insider. When the technology identifies frustrated buyers, it signals staff to report to a checkout register where they will try to sooth the situation out. Walmart believes that this technology helps stores to respond in a timely and competent manner to customer service problems before shoppers register their complaint.

Burberry has also caught up on the trend. In fact, once an identified customer walks in a store, sales representatives can access his entire online purchasing history. According to Forbes, “If Burberry knows that a customer has recently bought a particular coat, for example, then assistants may be encouraged by the app to show them a handbag which is popular with other buyers of the coat.” Evidently, such services are increasing customer satisfaction. And research shows that a customer that has already made a purchase in a store has a 27% return rate and if the retailer gets “that customer to come back and make a second and third purchase they have a 54% chance of making another purchase.”

When you cut down service and transaction times, you are freeing up employees to handle more transactions and eliminating the need for unnecessary service staff.

Creating a seamless retail experience

The Burberry case shows how merging behavioral information from both online and offline can create a seamless retail experience. Every online shopping activity including preferences, habits, and styles becomes instantly available to the sales personnel, and this creates a situation when retailers know and understand their customer’s needs. Naturally, brand loyalty is built by optimizing the customer experience.

Alibaba is taking retail customer understanding to new levels and this can be seen even in the partnership with the snack food chain Bestore Co Ltd. Through the deal, Bestore gains access to Alibaba’s consumer data and shopping history, while facial recognition technology is used to link the data to registered customers.

Improving brand loyalty

Evidently, retailers can translate a great customer experience into brand loyalty. And as the bond between buyer and brand grows stronger and more meaningful, a long-lasting relationship can be established. This bond is especially important to brands now, when retailers strive to be customer centric and when buyers move further away from price and product considerations and demonstrate increased interest in a “brand’s ability to deliver the best possible customer experience.”         

Reducing costs

Facial recognition technologies are becoming a successful retail pricing strategy. “When you cut down service and transaction times, you are freeing up employees to handle more transactions and eliminating the need for unnecessary service staff,” says C2RO.

Despite challenges, the potential for facial recognition tools is impressive. Additionally, the Chinese market remains the best playground for testing out new innovations that could shape the global retail scene. As Quartz and Alibaba said, “the future of retail is happening right now in China.”

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