A recent spate of articles, including one in the New York Times about Nordstrom's in-store tracking methods, have drawn the public's attention (and ire) to the possibility that shoppers are being tracked without their permission. But retailers argue that they are only trying to provide a better service, and are doing so by taking advantage of new technologies.
"[Retailers] have been at a gross disadvantage for over a decade from their online counterparts, because online has the ability to truly understand, metrically and factually, every decision they ever make," explains Tim Callan, CMO for in-store analytics company RetailNext. "The brick and mortar world has had to muddle through without these tools."
Until now. There have been two main prongs of development in the technology space that amount to the IRL equivalent of cookies: One involves digital video, while the other utilizes WiFi signals from mobile devices.
Digital video technology has evolved so that cameras can now make sense of blobs of pixels--otherwise known as facial recognition technology. Manolo Almagro, senior vice president of digital for marketing agency TPN, acknowledges that it's "a bit creepy," but clarifies, "It's an anonymous facial recognition. It's gender tracking and age, that kind of behavior, and how long people look at things." The technology is relatively inexpensive--Almagro estimates it at $100 per camera--and it can track details, like which items customers are picking up, tied in with gender and age data.
Tracking WiFi signals is what landed Nordstrom in hot water with customers, but that mistrust may be unfounded--at least for the time being. The way that WiFi tracking works is like this: Your smart phone, if it is enabled to seek out WiFi signal (and most are), constantly sends out "pings" alerting other devices that it is present. The only piece of information contained in that ping (again, for the time being) is something called a MAC address, which is unique to your device.
"We use [the MAC address], which doesn't contain any personal information--so no names, phone numbers, any sort of communication, it's completely anonymous--we take that MAC address and aggregate it up to create our analytics," explains George Kwon, director of product for analytics company Euclid.
So as you walk around a retail space, your phone constantly sends out pings, devices in the store collect those pings with your unique MAC address, and from that they have a basic idea of where you went in the store, how long you spent in the store, and how frequently you return to that store.
Kwon was kind enough to show me a walk-through of Euclid's analytics to give me an idea of how stores are using this information. Euclid, and companies like it, aggregate the information collected to provide retailers with a sense of how they can improve each store. They are able to see how effective their marketing is based on traffic outside the store versus in-store; they can see the percentage of returning customers to better determine the frequency with which they should be introducing new product; and perhaps most importantly, they are able to determine in which areas of the store customers spend the most time to optimize both product and staff placement.
Or, as Callan puts it: "Let's say that I have a certain product sitting in my store and it's not selling very much. There could be several reasons why it's not selling very much: maybe it's not selling very much because nobody wants it, but maybe it's not selling very much because no one is finding it."
So essentially, by using the information collected, stores can optimize both their sales and your shopping experience.
But what if you're still uncomfortable being tracked? Is there any way to opt out?
"I think consumers are fundamentally afraid of things they don’t understand, and rightfully so," Kwon concedes. "This is a similar debate and conversation that you saw with the use of online cookies on e-commerce sites."
Still, all three experts I spoke with agreed that customer privacy was important. The most obvious solution, of course, is to simply turn your phone off or switch it to airplane mode when out shopping, though Kwon said that "isn't acceptable" as an answer. Euclid, and some other companies, offer a simple way of opting out by registering your MAC address through their websites. Still, this does mean hunting down each analytics company and registering individually with each one, which may not be the most practical solution.
The general sense, however, is that this technology is only growing and landing in more doors across the nation--so perhaps we just have to get used to the idea that we will be tracked in the public space. "I don’t know if there's a way to make people feel better about it, I think it's just a question of time," says Almagro. "As soon as people realize that really it's all anonymous, and the brands and retailers are using it to make your experience better, then it will make it more acceptable."
Each expert I spoke with told me this technology is beneficial both for the retailer and the customer, offering a more streamlined and efficient shopping experience. "I think consumers should expect better customer service, better product, better stores, and a more fluid experience between online and in-store," says Kwon.
In fact, Callan views the technology as a new way for customers to have a say in their shopping experience. "If [customers] don’t like what they see, they won’t tell you, they leave," he says, "Customers vote with their feet and their wallets, and the retailers have been handicapped in listening to the voice of their customers."
But Almagro is much more ambitious in his vision of future technologies, believing that they can be applied for a "bespoke" shopping experience. "If you think about how many times you've used Instagram and taken a picture of what you're having for dinner and you post it, you're actually recording what you’re eating," he offers as an example. "What if there was a database that recognized the food and if I’m in the store for groceries, it will provide me information based off of what I like to eat or what I ate last night and now I want something different."
It's definitely an overwhelming concept, but frankly, we expose more information about ourselves on social networks like Facebook and Twitter. Technology is evolving at lightening-fast speed, whether we're ready for it or not.