Post Categories: Market Watch

In-Store Tracking: Personalization Innovation or Privacy Invasion?

By Retail News Insider

More than three-quarters of consumers don’t trust what you are doing with their information. At least that’s the case if you’re one of the many retailers today using in-store tracking to gather information about shoppers and to target sales and promotions.

According to consumer survey firm OpinionLab, 77 percent of consumers find in-store tracking unacceptable and 81 percent don’t trust retailers to keep their private data secure. The Federal Trade Commission (FTC) has even turned its eye toward the growing phenomenon, investigating whether new regulations may be required to keep consumers safe. Yet technology firms continue to roll out new options for in-store tracking and a growing number of retailers are adopting them. Why would retailers persist if the majority of their consumers object to these practices? As they say, there are two sides to every story. We set out to investigate both perspectives and find out whether there’s any middle ground to be had.

First, let’s do a quick review of the technology. While there are a variety of options available, most retailers are latching onto those based on mobile device-enabled tracking. They fall into two basic categories. The first tracks the signals a digital device sends out as it connects to a retailer’s WiFi system and matches it to a device’s MAC address (basically a unique ID number). The second uses in-store beacons to connect with (and track) devices that have the retailer’s app installed on them. Both types allow retailers to monitor where consumers go inside a store, how long they spend in front of a particular shelf, etc. Beyond this basic description, the uses and implications of these technologies differ depending on who you ask.

Abhi Beniwal
Senior Vice President of IT, Interactions

The Pros: In-Store Tracking Improves the Consumer Experience

On the retailer and technology side, both forms of in-store tracking are seen as safe and beneficial for consumers. With the WiFi-based MAC address tracking previously described, no personal data is transmitted from consumers’ devices to the retailer, allowing them to remain completely anonymous. “This kind of in-store tracking data is really just a set of geolocation coordinates tied to a mobile device ID,” says Abhi Beniwal, Interactions’ Senior Vice President of Global IT. “It’s not truly sensitive information like credit card data and personal information might be.”

Anonymous as it may be, retailers can still use the data collected about where shoppers spend their time inside the store to better the consumer experience through improvements in layout and efficiencies. For example, if a tracking system picks up on the fact that a large number of devices have been waiting at the checkout area for more than the usual amount of time, the retailer could respond by opening more registers to expedite the checkout process.

With in-store tracking done via retailer apps, the individual benefits for consumers can be even greater. “It can be used to provide the same personalized experience consumers get from—and love about—online shopping,” says Beniwal.

As consumers move through a store, the retailer’s tracking, loyalty and marketing systems can work together to offer a more personalized and efficient shopping experience. For example, an app could map out the best route to take through the store based on what’s on the shopper’s list that week and/or what he or she typically buys. Coupons or personalized deals for items he or she is likely to be interested might be offered along the way. In the end, the shopper leaves the store feeling catered to and truly “known” by the retailer.

“It’s all about creating a more relevant, enjoyable experience for the consumer,” says Beniwal.

Jeff Chester
Executive Director, Center for Digital Democracy

The Cons: In-Store Tracking Puts Consumer Privacy and Data At Risk
Potential improvements in the shopping experience aside, many consumers and privacy advocacy groups have major concerns about consumer privacy and data security as it relates to in-store tracking.

“In-store tracking is part of a larger set of data collection and digital consumer protection issues,” says Jeff Chester, Executive Director for the Center for Digital Democracy, the organization that spearheaded the only federal Internet privacy law currently in existence (the Children’s Online Privacy Protection Act). “The industry claims they’re using the information they collect for consumers’ convenience. But are they bringing in outside data, like information about your health, race or finances? Are they selling that data? We don’t know because the industry isn’t being forced to be transparent about these issues.”

Even if consumers are initially tracked anonymously, cross-referencing databases like this could allow retailers to create detailed profiles of consumers that effectively strips away any pretense of anonymity. Most consumers don’t trust retailers to keep the type of personally-identifiable information that may be gleaned secure, particularly in light of the recent security breaches at Target and Michaels.

And even when consumers opt-in through retailer apps, Chester doesn’t think retailers are truly keeping their best interests in mind. “The industry has done a great amount of research and they know we see mobile devices as an extension of ourselves,” he says. “They take advantage of the fact that this clouds our decisions. Combine that with today’s tough economic environment and the incentives that are often offered [to use these apps] and most consumers have no choice but to render to this sort of in-store tracking.”

Reaching Consensus: Best Practices for Retailers
So is there a middle ground to be had? Despite serious concerns about the current state of in-store tracking, critics aren’t necessarily calling for its ban. “I think there is a happy medium,” says Chester. “It’s all about consumer choice and control. We need retailers to be completely honest and transparent about what information they’re collecting and how they’re going to use it [so consumers can make an informed decision].”

For that to happen, Chester believes the government needs to step in and regulate how in-store tracking can be used, just as the FTC is currently investigating. And while Beniwal agrees transparency and choice are key, he thinks that retailers can, by and large, regulate themselves. “It’s an issue of self-preservation,” he says. “Retailers’ know that there’s a real risk of backlash if they’re not honest with consumers or if they don’t keep consumer data safe.”

Whether official regulations are eventually issued or not, Beniwal says there are two key best practices for retailers considering in-store tracking to follow in order to truly get their consumers on-board with the practice.

“First, retailers have to educate the consumer. They need to find an easy way to make it clear exactly what data they’re collecting, how they’re keeping it safe and how consumers can opt-out,” he says. “For example, typical WiFi tracking can feel intrusive to consumers because it’s often done without their consent. If retailers are going to continue that practice, they have to tell consumers about it upfront and give them a choice to participate.”

“Second, retailers should make sure they’re not just tracking for tracking’s sake,” continues Beniwal. “Retailers need to create a compelling experience for consumers—giving them a whole new perspective than what they would have if they didn’t use the retailer’s app [or consent to tracking in other ways] in-store.”

Though the nuances are varied, when it comes down to it, it seems that both sides really can agree that what’s best for consumer is best overall.