Posted by Neil Wilson on Dec 4, 2013 3:00:20 AM

by Kami Haynes, Director of Corporate Marketing

“You can observe a lot by watching.” – Yogi Berra

It’s likely that the last time you shopped at Macy’s, Target, Cabela’s, Family Dollar, Benetton or Warby Parker, you were tracked. No, not online – retail brick-and-mortar stores are tracking customers as well. Retail location analytics technologies are being used by a variety of retail outlets to gather information on customer behavior via wireless signals, facial recognition, hidden cameras and even simple tactics like zip code gathering.

Wireless tracking technologies such as those offered by Euclid, Nomi, Wireless Werx, and Mexia Interactive provide brick-and-mortar stores with analytic data that’s quite similar to website traffic reports. These vendors offer technology that picks up the wireless signals from cell phones to provide retailers with data on how many customers pass by the store, how many enter, where they go inside the store, and how much time they spend at various locations within the store. Nomi can also match a phone to an individual who may have downloaded the retailer’s app or provided an email address - this data is used to develop a profile so the store has specific information for the customer’s online shopping, repeat visits, and purchase history. The value of these analytics to the retailer include use of the information to optimize store layout, revise stock decisions, or increase staffing at registers, all in order to give the customer more of what they want.

These tracking technologies provide overviews of customer behavior that look like heat maps, using anonymous, aggregated data, giving the store general details about shopping behaviors, not necessarily what you did when you were there. So is that creepy? Let’s consider that online shoppers give up tons of personal information, knowingly or unknowingly, and as long as they perceive a value in the exchange they seem willing. There’s a perception that providing personal data results in a more personalized shopping experience, but research shows that consumers do want to have a say in how their data is used. So why not just let customers know that they’re being monitored?

That’s what Nordstrom tried when they experimented with this type of tracking technology. Nordstrom actually posted signs in stores to let people know that the wireless technology was in use, but ultimately they decided to end the experiment because they received customer complaints.

And what about that simple question at the register: “Can I get your zip code?” Is it really a big deal? Consider that just a birthdate, gender and ZIP code is enough information to identify up to 87 percent of Americans, according to Harvard Professor Latanya Sweeney. With a zip code and name from a credit card, retailers can use services like Harte-Hanks’ GeoCapture to pull up an address – which can easily be used to gather additional data such as phone number, past purchase details, and so forth.

Unsurprisingly, retail analysis technology is getting more and more sophisticated. Video technology from RetailNext can differentiate men from women, or children from adults. Brickstream’s video information counts the number of people in different locations within the store and can help indicate how many registers should be open – it can also let customers know how long they’ll wait in the checkout line. London’s Realeyes technology analyzes facial cues in order to gauge the “happiness levels” of shoppers, including their reactions at checkout. Synquera, a Russian software company, uses facial recognition to determine gender, age and mood in order to deliver appropriate marketing messages and offers at checkout.

These kinds of technology are a booming business. An ABI Research report predicts that “alternative” location technologies will be an $8 billion business by 2017. So what’s the difference between online tracking and physical location tracking? While both suffer from a lack of transparency over which data is gathered and how it’ll be used, online retailers have faced a lot of scrutiny over the past few years and many have updated and clarified their privacy policies so that they’re more open about what they do with your data. Brick-and-mortar retailers don’t offer even this level of transparency – but the privacy pros are taking the technology challenge on head-first, including the Future of Privacy Forum (FPF) as they develop privacy controls for retail location-based analytics. The FPF states on the Smart Stores section of their site that their goal is to “…make sure that these technologies are subject to privacy controls and are used responsibly to improve the consumer shopping experience.” This, according to the site, includes the de-identification of data, allowing customers the option not to be tracked, and transparency around what data is being used. “By being transparent about what is going on, location companies and retailers can make sure shoppers understand the benefits of the bargain.”

Other retailers have taken a different tactic – Kenneth Cole and Timberland have installed Swirl, an opt-in technology that lets customers share their location when they visit the store and receive offers. A Timberland executive explained in an AdAge article that that from May to August of this 2013 they’ve used the app in two of their East Coast shops, and over the course of that period they pushed approximately 750 shoppers a 20 percent discount. Of the recipients, 72 percent checked out the offer and 35 percent redeemed it. Another example of this kind of opt-in marketing is the Placed app, which offers cash and gift cards to customers for providing location information within a store. Users of the app provide basic demographic information such as gender, age, and income, agree to GPS, Wi-Fi and cellular tracking, and they get rewarded.

It comes down to a tricky balancing act: by gathering data about customer activities, retailers can offer more pleasurable shopping experiences, bigger discounts, and quicker checkout. But customers need to know what’s going on and should have the ability to opt out – or at the very least, they should be aware if a retailer is using cameras or Wi-Fi location tracking. While many of the companies specializing in retail analytics claim to keep data secure or to be sensitive to privacy concerns, how many of these companies are household names? Consumers don’t know what retail outlets they serve, or what tactics are being used. A much greater level of transparency is needed so that customers can choose to participate, or avoid stores that are utilizing the technology if they prefer.

And just an “enhanced experience” isn’t enough in exchange for the data that’s being accumulated. Customers want real value for their data, including cash or discounts. The benefit to the customer needs to be more than just an “optimized flow of the retail floor” or shorter wait time at checkout. While 51 percent of respondents in a recent Compass Intelligence study agreed that they want companies to use identity data to improve their experience, 61 percent said that they would respond favorably to some sort of incentive, whether cash-based or discount-based.

As consumers become more aware of the level of tracking happening in all aspects of their lives, they can easily find it creepy or become resentful over the lack of transparency around how much tracking is being done, when it’s done, how the accumulated data is used, and the data’s value to the individual. Retailers need to be more honest about how they’re gathering the data, and more respectful of the customers they serve, or they run the risk of alienating their audience. And let’s face it – the idea that the mannequin has cameras for eyes is totally creepy.

Topics: General