Privacy Fears Hit Retailers' Big Data Analytics Plans - InformationWeek

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Data Management // Big Data Analytics

Privacy Fears Hit Retailers' Big Data Analytics Plans

Brick-and-mortar retailers plan to link in-store analytics with shoppers' mobile devices. Shoppers say not so fast.

Top 10 Retail CIO Priorities For 2014
Top 10 Retail CIO Priorities For 2014
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Privacy will "almost certainly" be the leading big data issue this year as consumer advocates focus on controversial spying activities of the US National Security Agency (NSA), according to a new 2014 predictions report from global consulting firm Stratecast | Frost & Sullivan.

If this prediction holds true, it's unclear how it might impact big data efforts in the retail industry, particularly a new class of in-store analytics systems that use WiFi-enabled devices -- typically smartphones -- to gather information on customers' shopping and purchasing habits.

Why kinds of systems? Silicon Valley startup Euclid, for instance, sells analytics software that can uses a shopper's smartphone's WiFi signal to monitor his or her movements inside a store and in front of it.

It's not a stretch to suggest that consumers may react negatively to stealthy monitoring apps, despite the fact that their movements are closely tracked by online retailers as well. As public awareness of in-store analytics grows, a consumer backlash isn't out of the question.

"I talk with people who I didn't think thought about this much, and they say, 'Oh yeah, I turn my WiFi off when I go shopping,'" said Stratecast | Frost & Sullivan analyst Jeff Cotrupe in a phone interview with InformationWeek.

[Why are you worried? See The Truth About Why Stores Track You.]

This type of shopper reaction, if common, will create a challenge for retailers, who have a lot to gain from in-store analytics, said Cotrupe, who manages Frost & Sullivan's big data and analytics global program.

"It's a great thing for retailers," said Cotrupe of mobile analytics. "It's one of these really, really essential things they need to be doing in addition to using customer data, crunching numbers, comparing different in-store sales, and scanning QR codes to indicate which flavor of peanut butter you like best."

Privacy-wise, there are at least three levels of mobile analytics in the physical retail space. Some systems require a customer opt-in, others don't.

Location-based analytics firm Digby, for instance, has the least furtive approach.

"Their claim to fame is that they help retailers, the brick-and-mortar folks, compete and survive in the age of Amazon," said Cotrupe. "They do mobile apps and barcodes and integrated mobile marketing campaigns."

Smartphone-toting customers have to download and install the Digby app, which makes the mobile analytics process relatively transparent. Customers get discounts, deals, and other perks for their efforts.

"That's the biggest level of involvement a consumer has with one of these (services)," said Cotrupe. "In order to interact, they have to download the app" and agree to the terms of service.

Nearbuy Systems, which was acquired recently by RetailNext, another in-store analytics provider, requires a little less effort on the consumer's part.

"You have to log into the retailer's WiFi network in order for their system to monitor you," said Cotrupe. "That's a slightly less level of involvement. You didn't have to download an app, and you didn't have to log in."

The opt-in approach sends a clear message to shoppers: "Hey, if you don't want to do this, don't log in," said Cotrupe.

The third -- and most stealthy -- level of WiFi analytics is Euclid's approach.

"You don't have to log in or take any proactive step," said Cotrupe. "If your (mobile) device has the WiFi turned on, and if that device comes within range of their system, they're able to monitor you."

This is the sort of big data operation that raises the hackles of privacy advocates, and understandably so. To ease critics' fears, Euclid and retailers plan to make their intentions clear, Cotrupe said.

"What Euclid does is make people very aware," he added. Retailers put signs in the windows to inform customers, who can scan a barcode to avoid being monitored by the WiFi analytics software.

While Cotrupe believes in-store analytics can help brick-and-mortar retailers, particularly smaller vendors, compete with online giants like Amazon, he's sympathetic to consumers' privacy concerns.

"I do appreciate the need for privacy," he said. "People have the right to turn that WiFi and location stuff off, and that's great."

Jeff Bertolucci is a technology journalist in Los Angeles who writes mostly for Kiplinger's Personal Finance, the Saturday Evening Post, and InformationWeek.

Mobile, cloud, and BYOD blur the lines between work and home, forcing IT to envision a new identity and access management strategy. Also in the The Future Of Identity issue of InformationWeek: Threats to smart grids are far worse than generally believed, but tools and resources are available to protect them. (Free registration required.)

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[email protected],
User Rank: Apprentice
2/5/2014 | 4:20:57 PM
Re: On the upside
Like that a lot, Whoopty. Another area of opportunity we analyzed in one of our recent reports on this topic, The Human Bounce Rate (Stratecast report BDA 1-05, November 2013), was that retailers should turn negatives into positives by building retail analytics into promotional strategies centered on exclusive, premium content. For example, shoppers who do not opt out of monitoring for retail analytics data collection purposes get access to deals and content that those who opt out of monitoring do not receive.
[email protected],
User Rank: Apprentice
2/5/2014 | 4:12:29 PM
Re: Conversation between companies and privacy is becoming absurd
Good points, Dan. As you can guess, not every word of our published analysis can make it into print in a media article, but we have addressed both the major points I think you're raising here.

First, we do see far more of a give-and-take dynamic here than others may recognize. In one of our recent reports on this topic, The Human Bounce Rate (Stratecast report BDA 1-05, November 2013), we wrote: "Stratecast notes that it has been proven over the last 100 years that consumers will put up with commercials in exchange for entertainment—principally, on radio and television, more recently, in video, and even at the cinema. Also, any consumer who has ever submitted personal information on a Web site, or filled out a card for a raffle, knows there are points where consumers are more than willing to give away private information in exchange for something of value." One of our key points of analysis in this area is that retailers have been losing what we term The Battleground in the Aisles, where shoppers check out items in the retailer's store and then buy them cheaper online--a phenomenon known in the industry as "showrooming"--or, through the same shop & scan app, can find the same item at another bricks-and-mortar retailer across town.

About possible legislation, and action by watchdog groups, we mentioned efforts led by Rep. Charles Schumer (D-NY), and the Future of Privacy Forum (FPF), a think tank led by Internet privacy experts Jules Polonetsky and Christopher Wolf, which seeks to advance responsible data practices. Another group keeping an eye on privacy is the Wireless Registry, which, roughly, seeks to do for retail analytics what the Do Not Call Registry does re: telemarketing.

Further in the same report we wrote, "Focusing privacy concerns solely on bricks-and-mortar retailers is naïve: if shoppers believe every move they make on an e-tailer's site is not tracked, analyzed, and leveraged for some commercial purpose, they are misinformed. And retailers may do a better job serving customers if they can collect and crunch Big Data to figure out what customers want."

Dan Doyle
Dan Doyle,
User Rank: Apprentice
1/26/2014 | 3:19:45 PM
Conversation between companies and privacy is becoming absurd
  • Who doesn't like the bartender that remembers you and your drink(and maybe tells you your drink will be cheaper in 10 minutes because happy hour starts)?
  • Who doesn't like the waiter that knows the dish you like and how you like to customize it?
  • Who doesn't like a retailer that knows what you like to purchase and suggests promotions that are comparable to what you normally buy?
  • Who doesn't enjoy the extra customer service you get from a technician that knows you and does a little extra to help you out?

These examples generally strengthen my relationship with companies - it doesn't even enter my mind that it is creepy. And just think, all these examples use raditation as a means for recognition like seeing and hearing and sometimes location(direct mail) - although they do not utilize a WiFi signal.

As a final thought, is there a non-digital equivalent for legislation that protects the consumer from employees of retailers to treat consumers always as anonymous? I have never heard of anything like this. Consumers can start and stop their relationship at any time with a retailer by not visiting. Why is it that the consumer has the right to influence a company through means other than the marketplace, like legislation, for reasons that are not about discrimination or protecting public health? Just shop at companies that treat you the way you expect - is it more difficult than that?
User Rank: Ninja
1/17/2014 | 11:59:55 AM
On the upside
On the upside, this is a great opportunity for a company to develop an app that blocks all this stuff like the adblock browser extension. 
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