In this week’s Retail Paradox Weekly, my partner Paula Rosenblum writes about the blasé attitude that our society seems to have developed about so-called computer glitches that result in widespread, and sometimes quite harmful outages. I won’t steal her thunder, but suffice it to say that for an economy that nowadays is almost entirely dependent on the reliability of technology, we sure seem to be okay with its unreliability. I’m waiting for someone to cheerfully relate on Facebook how the computer system of a commercial airliner had to be re-booted in mid-flight while the flight attendants passed out free drinks to all. Cheers!

People’s apparently undying belief that technology works reminds me of an inherent hole in the thinking of technology proponents (like myself, admittedly), that they tend to see the bright side but never the dark side of tech adoption. Case in point: the Internet itself. I was a novice data processor in the mid-1970’s working at the University of California at Berkeley, when the big boys in the Electrical Engineering Department were trying to implement IP (Internet protocol) between campus buildings to enable the exchange of binary files, documents, etc. The IP protocol had no built-in security, and I’m fairly sure that there wasn’t much or any discussion about how one might protect against unwanted eyes looking at the data as it flew by. Fast forward to today’s world: the IP protocol is basically the same, and we’ve connected the whole world together with it. But we have learned that there are lots of really evil data processors out there that are more than happy to not only peek at the data, but to steal it outright.

That is the subject of many a technology pundit and lots of studies (RSR itself plans to conduct one next year). But there’s another angle to this that came on the radar, and it raises a different sort of concern.

In May, the New York Times published a piece that highlighted the career of the U.S. Federal Trade Commission’s Chief Technologist, Ashkan Soltani. First of all, you get ten gold stars if you know that the FTC has a Chief Technologist (in fact, Mr. Soltani is the FTC’s third CTO). Beyond highlighting that fact, the NY Times mentioned a debate between Soltani and Hal R. Varian, Google’s chief economist, at a conference on big Data and Data Security in Philadelphia earlier this year. The two were disagreeing about price discrimination (as the NY Times piece defined it, “the practice of charging people different amounts for the same product, based on their age, location, creditworthiness or other details specific to them “).

The NY Times article went on:

“It is largely beneficial, ” Mr. Varian told the audience, citing examples like discount offers for seniors. He added, “You charge higher prices to people who can afford to pay higher prices. “… when it came time for his presentation, Mr. Soltani took the opposite stance, arguing that online data-mining is so opaque to consumers that it can lead to unfair financial treatment. “

Where’s the Hole In That Thinking?

This example gets to one of the dream applications for merchandising systems providers: dynamic pricing. The logic goes that as demand changes, prices can and should change – even intraday. RSR’s own recent study on retail pricing practices (Pricing 2015: Learning To Live In A Dynamic, Promotional World Benchmark Report, June 2015) revealed that:

“…retailers are responding to the perceived threat of online dynamic pricing. Overall, 62% of respondents report some level of belief in dynamic pricing’s lasting impact on retail, and of those, a third believe the impact will be felt most heavily in stores… (even though) Retail Winners are far more convinced that the impact of dynamic pricing will be limited to online. “

The report goes on to recommend that retailers experiment with dynamic pricing in the online space, because  “it gives (retailers) the opportunity to carve off small segments of consumers to provide them with a different price experience than the general population of shoppers. ”

That sounds great, and retailers should keep their eyes open to the possibilities of dynamic pricing. But that brings me back to Mr. Soltani’s point of view. Just as we as an industry get excited about the positive possibilities of that level of dynamic personalization, we also have to be aware of the negative possibilities. Mr. Soltani expressed concern about the idea that personal information can also be used to lock customers out — in essence, to be dynamically redlined.

Preposterous, you say? I remember being shocked to hear a retailer explain that his stores didn’t carry a certain line of merchandise because the target demographic didn’t represent our kind of people. He wasn’t looking at sales performance by demographics — he was making a judgment. What the next generation of retail technology can do in the way of personalization – based on information captured about individual consumers — could lead to another kind of breach — a breach of fairness and integrity.

Alarmist, maybe. But I’ll bet the early voices that expressed concern about commerce over the Internet were considered alarmists too.