You thought you were shopping for family and friends this holiday season, but in doing so you may have also given a nice present to retailers: your data.
Over the past several months, a growing number of retailers -- including major chains Bloomingdale's, American Apparel and Brookstone -- have hired technology companies to help them learn more about what shoppers are doing in their stores. Spend 30 minutes trying on high-heel shoes, only to make a beeline for the coat rack? Foot traffic patterns like that might be looked at later. Or maybe you just wandered aimlessly around. That also could be interesting to the retailer.
You may not always be in the dark on this. There are also some businesses, such as the Apple Store, which have installed sensors so they can alert you to special deals or products as you walk past them, if you have downloaded a certain app on your iPhone and agreed to let it recognize your location. You walk past the sensor, which could be a Wi-Fi or Bluetooth hotspot, and it wakes up the app, displaying content or a push notification related to some nearby product. Apple says it's not doing any "tracking," that the content is only sent from the store to the shopper, not vice versa.
It makes sense that Apple would want to clarify its intentions. Because for some people, the thought that stores might be analyzing their movements, looking back at where they were, even if only as a group, might creep them out. Nordstrom learned this last year, when it started following Wi-Fi signals from shoppers' smartphones and later ended the project following some negative reactions.
But for other retailers, the opportunity to learn more about shoppers' habits is still too good to pass up. There are usually several motivations driving them: the dream of beating digital data hoarders like Amazon and eBay at their own game; the desire to better compete against their brick-and-mortar peers; and just a general interest in making improvements to their own business based on new forms of data.
It's all part of a movement referred to by some as "location-based marketing," or "indoor mapping," or, by others, "in-store tracking." But it's difficult to say how widespread the practice is right now, given that the industry is still in its early days, and also because many retailers aren't ready to talk about what they're doing.
The Future of Privacy Forum, a Washington, D.C.-based think tank focused on advancing responsible data practices, estimates that roughly 1,000 businesses in the U.S. and Canada are using mobile location-analytics technologies in some way right now.
The movement is likely to grow next year, if the retailers and technology companies making it all possible are able to better navigate the privacy issues.
"In 2014, it could be more of the marquis brands like Macy's and Wal-Mart doing more with this," said Greg Sterling, an industry analyst with Opus Research. "Then rollouts might increase more broadly with second-tier businesses following the leader, if it all works out."
"Privacy is the wild card in this," he added.
Jeweler and retailer Alex and Ani is feeling optimistic about next year right now. The company has used a couple of different technologies in several locations to provide customers with deals on their smartphones and learn more about what they do while they're inside the store.
For promotions, the retailer turned to a startup called Swirl, which makes software and a mobile app that businesses can use for in-store marketing. So if Alex and Ani customers had installed the app, they received special offers about products in the store that had Swirl's Bluetooth beacons placed near them. The retailer is planning to roll out the technology in 40 new locations next year. Other big retailers such as Timberland and Kenneth Cole have also used Swirl's technology.
What Alex and Ani did on Black Friday -- the day after the U.S. Thanksgiving holiday in late November -- also gave them some juicy stuff. The retailer contracted with Prism Skylabs, a merchandising and video analytics startup that uses existing security cameras and integrates its own heat mapping software to show which areas of the store had the most activity. With the insights gathered, the store was able to move items around so they could put, say, a candle next to a bracelet, if the bracelet was in a heavily trafficked area but the candle wasn't getting much love.
The foot traffic data was stored on Prism Skylabs' servers, which could be accessed in real time throughout the day by Alex and Ani with its log-in credentials. With the company's software, brighter colors indicated more activity or interaction, and cooler colors represented less activity.
"We were looking at a combination of how long people spend in certain areas, and patterns," said Ryan Bonifacino, vice president of digital strategy.
Prism Skylab's technology is designed to give businesses information like footpaths, dwell time and overall customer counts. No personally identifiable information is meant to be generated from the data. Still, it raises the question: Does the technology cross a line?
"No matter what you do, some people are going to be uncomfortable," Bonifacino said. Perhaps a small subset of customers might feel weird if they knew about the technology, he said. Alex and Ani did not tell customers in the store about the project, which functioned as an experiment for them. But the retailer is thinking about using the technology in more stores.
RetailNext is another analytics company that gathers information from a range of sources inside stores such as existing video cameras, point-of-sale systems and Wi-Fi tracking devices. Its roster of customers includes Bloomingdale's, Proctor & Gamble, Ulta and Family Dollar, according to its website.
Those retailers, and many others, declined to comment for this story.
"A lot of retailers haven't quite figured out their strategy yet, or the best way to talk to consumers about privacy," said Jules Polonetsky, executive director at the Future of Privacy Forum.
To help retailers navigate the privacy waters, the FPF is working on a privacy-focused code of conduct meant to encourage retailers to provide notice to shoppers about their projects, such as through signs, and to employ opt-in policies when personal data might be collected.
As companies figure out the privacy questions, "we could see more stores using these sorts of technologies," Polonetsky said. So far nine technology companies have formally signed on to adhere to the code, including Euclid Analytics, Solomo Technology and Measurence.
Regulators might also provide some guidance, if not mandatory requirements. This spring, the U.S. Federal Trade Commission will hold a series of seminars to examine the privacy implications of several emerging technologies, including mobile device tracking in stores.
But even if a store wants to be more forthcoming, the messaging may still get lost. It's hard to convey the nuance of an analytics technology in, say, a sign in a storefront window.
Still, the thinking goes that some customers might be willing to trade a little privacy for in-store perks and other exclusive content on their mobile phones. That would seem to follow the trends -- more than half of people in the U.S. already use their cellphones to either look up product reviews or competing price information while they are in stores, according to a recent Pew report.
Compared to retailers, technology companies -- the ones doing the data crunching and building the apps -- are more than willing to talk about the bright future. "Businesses will be putting these technologies into their budgets for next year," said Michael Healander, general manager at GISi Indoors, a company that provides indoor mapping, positioning and analytics services based on Wi-Fi signals. The company would not name its customers, saying only that they work with major retailers across the country, as well as restaurant chains.
Positioning technologies like Bluetooth low-energy transmitters and Wi-Fi sensors, if used the right way, "will create a nirvana state of indoor location," said Nathan Pettyjohn, CEO of aisle411, a startup that maps the inside of stores and integrates those maps into retailers' own apps so shoppers can more easily find items. The company is working to integrate its services into more hardware like Bluetooth hotspots, so they can also push hyper-local content to shoppers, perhaps down to the shelf.
Those aspirations speak to another challenge: getting all the technology pieces to fit together. Pulling up a map of a store's inventory on your smartphone is all well and good, but it's not super useful if it doesn't also show you where you are. Vendors are hoping to improve this. "In 2014 we're going to see more technology integrations with hardware, software, search, offers, redemption, infrastructure," Pettyjohn said.
And then there's Google, which might be the elephant in the room. Technology vendors provide their services to brick-and-mortar retailers to help ensure that shoppers make their purchase there. But as Google becomes more active in indoor mapping, the Internet company could make greater use of its own data and targeted advertising to do the smaller companies' jobs better.
"The next two years will see stores battling over who has control of digital ads," said GISi Indoor's Healander. "If these startups don't take control, Google will get in there, and then maybe send me to Lowe's while I'm shopping in Home Depot, if it knows there is a better deal there."
While that may be bad for Home Depot, it could be good for shoppers.
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.