Most of us have accepted the fact that when we log on to a website, web cookies are tracking our every click. That's how sites like this can tell what people are reading and what they're ignoring, which all helps inform what those sites publish next.
The same goes for e-commerce sites. If you click a pair of shoes at Saks.com several times, maybe even drop it into a virtual shopping cart, it's likely you'll see ads for that exact shoe hours, even days, later. Whether or not you bought the shoes only matters a little. Cookies allow e-commerce sites to track consumer behavior, which in turn better informs what each site looks like, what kinds of products it offers and where else on the web it buys ads.
Retailers want to be able to gather the same data that they gather online at their brick-and-mortar stores. Until recently, that hasn't been possible. The advent of smartphones, however, means that retailers are increasingly able to track your every move. And just like there are multiple analytics platforms on the web -- from Google Analytics to my particular favorite, Omniture -- there are dozens of in-store analytics programs, too, many of which have received millions of dollars in venture capital funding over the past couple of years.
The one you're most likely to encounter initially is iBeacon, which was developed by Apple. It works with your iPhone's Bluetooth to track your movements in-store. (Right now, it's being used at the Apple stores, but it'll likely be used by other retailers at some point.) If you "opt-in" to iBeacon -- which means simply having "Location Services" switched on within your iPhone settings -- every time you walk into an Apple store, the company can track how long you're there and where you spend the most time. At some point down the line, Apple might ping your phone and say, "Hey, we see that you're due for a new iPhone. Head to Floor 2 to buy one."
While Apple and Google are getting the most press right now for location technology, there are a handful -- if not dozens -- of startups cooking up their own special brew of in-store analytics.
One is the San Francisco-based Index, created by former Google employees Marc Freed-Finnegan and Jonathan Wall. The cofounders met while building the mobile payment system Google Wallet. Now they're tackling the in-store experience, and recently raised $7 million in a Series A round led by Google executive chairman Eric Schmidt. Unlike many of its competitors, Index will be a brand that is introduced to consumers. Users will be able to download an app, create an identification pin and load up their credit card information. When they walk into a participating store, Index will likely know if they've shopped there before, and what they've bought. The user might be notified of a new deal; maybe on a favorite item, maybe on an entirely different product that will get them moving into a different section of the store that they've never visited before. The hope is that the user will feel satisfied thanks to the discount, and the retailer -- on top of all the data it's collecting about this person -- will have made an additional sale. "Personalized incentives help our partners increase revenue and margins at the same time," Freed-Finnegan explains.
New York-based startup Nomi is taking a different approach. Less than a year into business, the company -- which raised an additional $10 million in a Series A round led by Accel Partners in April -- already has more than 40 employees, who are focusing on making offline marketing as effective as digital marketing. As an example: Remember the Vans Warped Tour? It's still going. For a long time, there was really no way for Vans to truly understand the impact of that major marketing effort on sales -- it was all about gut instinct. But it doesn't have to be anymore. Vans could hire Nomi, which could monitor attendees' smartphones and see which of them visit a Vans store after seeing a concert. Nomi combines newfangled efforts like this with more traditional video surveillance in stores. (A lot of companies already do this sort of thing, but Nomi says that it charges less and combines it with more advanced technology.) "We're not just selling one feature," cofounder Wesley Barrow says. "We’re providing a holistic picture of what they can do." Nomi supports that picture with a robust client services element: each retailer has someone on the team who will help them parse through the data. At least for now.
There are many, many more of these companies, and they all do things a bit differently. Palo Alto-based Euclid, which has raised more than $23 million in funding overall, is notable because its founder, William Smith, comes from a family of retailers. His grandfather was a shopping mall developer whose search for more hard data inspired Smith to launch Euclid. Then there's Atlanta-based Sparkfly, which has been around for more than a decade but only raised $2.5 million in 2011. Sparkfly creates coupons on the mobile web, which shoppers then redeem in-store. Another one, Quri, raised $10.2 million in a Series B round in October to build out its in-store analytics capabilities. Quri's point of differentiation is it uses "secret shoppers" -- the equivalent to a Nielsen household -- to help compile its data.
And the last one we'll be mentioning -- although there are many more -- is Viewsy, a London-based firm that has raised less than $20,000 but managed to win the Decoded Fashion Milan competition in 2013. Decoded Fashion founder Liz Bacelar says that Viewsy won out more than anything for its easy-to-use dashboard. (After all, these platforms aren't worth anything if the retailer can't decipher the data they're collecting.)
In-store analytics is obviously an incredibly exciting, potentially lucrative category. But if there's one thing these companies really don't want to talk about, it's the consumer backlash that could occur as these services become more prevalent. In July, Nordstrom pulled an in-store tracking program after customers complained. (The retailers had done them the courtesy of posting "we're watching you"-type signs in stores -- many folks were not happy.) The idea that a store is picking up cookies from your phone just like a computer picks up cookies from your search history isn't a difficult one to stomach. But given all the Big Brother stuff that's been happening this year, it's still scary to some people.
Bacelar thinks that the consumer-facing element of in-store tracking will work best at upscale retailers where many customers already have relationships with the sales people. Think about it like this: Say you walk into Barneys, a staffer is alerted that you are in the store and is also alerted about your most recent purchase in the store. The staffer could then greet and guide you to things he or she thinks you might like based on your past purchasing history -- kind of like a live recommendations tool. Adds Bacelar, "Personalization can be huge for conversion."