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Friday, July 19, 2013

The Rules of In-Store Surveillance

You can tell when a powerful new technology, like tracking people as they shop, is coming of age. It starts trying to persuade people it is a force for good, and it broadens its reach and capabilities. Take the the observation and data collection techniques used by online retailers that are now moving into the physical world.

Cellphone signals, special apps and our movements tracked by software-enhanced cameras in stores are the equivalent of the tracking cookies in Internet browsers. Most people don't seem to mind being tracked online, if the low percentage of people who disable cookies is any indication. (Studies suggest the number is below 10 percent.) Offline tracking, though, still seems to be a concern. Nordstrom discontinued using one mobile phone tracking system, produced by Euclid Analytics, after shoppers complained. That may be because the systems are new, and some people see more harm than benefit from the surveillance.

On Tuesday, several companies involved in offline tracking announced that they would be working with a Washington-based research group, the Future of Privacy Forum, to develop a series of “best practices” for privacy controls for what it called “retail location analytics,” or tracking.

Euclid was among the sponsors, along with WirelessWerx, Mexia Interactive and ShopperTrak.

The Future of Privacy Forum is primarily supported by corporations, with extensive financing from the technology sector. According to Jules Polonetsky, its director and co-chairman, the organization also has an advisory board that includes “chief privacy officers, privacy academics and privacy advocates.”

On Thursday, Euclid also announced it was producing a series of analytics tools for specialty retailers, which it said would help stores make better decisions about things like operating hours and inventory. The product, which is primarily a comparison tool, also shows how rich the data from tracking people online can be.

“We're offering benchmarking, so we can say ‘Your customer capture rate is 8 percent, and this week the average for your sector is 10 percent,'” said Will Smith, the chief executive of Euclid. “The question is not whether something is good or bad, but what something means.”

Mr. Smith would not provide specifics, but said his company's product was now in hundreds of malls across the United States, and had captured information on thousands of shoppers at dozens of retailers. “We can tell if someone has visited multiple outlets of a store on the same day, which indicates they couldn't find the product they wanted at the first one,” he said. “You can assume a lot of others went to a competitor.”

Mr. Smith emphasized that the data Euclid supplied to retailers was made anonymous and delivered in aggregated forms, which he said made it unsuited to personally identifying customers. But the data gathered by the company, which Mr. Smith founded with the former head of Google Analytics, can be used to determine things like whether a Starbucks' customer with a loyalty card stays longer at the coffee shop, or how often a store is acquiring repeat shoppers.

Over time, it is likely that at least some customers will accept tracking, particularly if offered incentives like free mall parking in exchange for visiting a specific store. “People became used to Web analytics,” Mr. Smith said, “Amazon's customer experience is 10 times better because of the data it gathers on people. Shorter lines and good in-store service can also come from data.”