Shopping Under Surveillance: Why We Should Think Twice About Letting Retailers Track Us in Stores

Posted in: Consumer Law

Retailers keep looking for new ways to collect our data in order to market to us, and to more effectively predict what we will buy, for how much, and when.  As I have noted in prior columns, retailers are already using our shopping patterns to market new products and services to us, and this practice results in some potentially embarrassing situations—like a retailer’s effectively announcing your pregnancy via mail before you tell close friends or family.  Much of the data that has been collected, until now, has been compiled either by a store’s keeping track of what we actually purchase at the register or buy online.

Now, however, stores want to know even more about what we do once we enter: what we look at, where we browse and linger, what we might pick up but then not buy.  Are we going to the housewares department or the lingerie section?  And how long do we spend in the sections of the store that we visit?  Retailers already have access to this data for online shopping—as a retailer can track on our online search and browsing patterns.  But what about shopping in brick-and-mortar stores? There, stores now track our movements by using our cell phones, as recent news stories have described. In this column, I will briefly describe this new trend, and argue that consumers should be concerned about suffering yet another loss of privacy in this way. I also argue that when retailers track consumers this way, they need to alert the consumers that this is occurring, and give them an opportunity to opt out.

The New In-Store Tracking Experiment

The New York Times and others news outlets have reported the identities of some large retailers who are using shoppers’ Wi-Fi signals and video cameras to track customer behavior in their physical stores. It’s a new version of the method used by online retailers to figure out how their users behave, and it’s got some consumers worried

Nordstrom, like other brick-and mortar retailers, wanted to learn more about its customers activity while shopping—how many people came into the store, who were repeat visitors, and what they looked at while inside.  This is, of course, the kind of information that e-commerce sites like Amazon have instantly available, thanks to cookies and tracking technology. So last fall, Nordstrom started testing new technology that allowed it to track its customers’ movements by detecting and then tracking the Wi-Fi signals from their smartphones.

But when Nordstrom displayed a sign telling customers that it was tracking them, its patrons became concerned, and some voiced their discontent. Nordstrom’s experiment is, however, illustrative of a movement by retailers—from small coffee shops to large big box stores—to gather data about behavior and preferences, using video surveillance and cellphone tracking to detect patterns.

All sorts of retailers—including national chains, like Family Dollar, Home Depot, and Cabela’s as well as higher-end specialty stores like Benetton—are deploying these technologies to decide how to display merchandise, when to have more staff on the showroom floor, and what items are the latest craze. Of course while doing this, they may learn our gender, preferences, and even our secrets. Still, physical retailers argue that they are doing nothing more than what is commonplace online.

It’s no secret that carrying a smartphone reveals information about where you are located.  As your phone pings cell towers, its location is constantly noted and logged. Most smartphone users also leave Wi-Fi turned on, which lets them quickly connect to available networks when they enter a retail or public space. But that practice may also be giving some retailers detailed information about what you are doing on their premises.  So the free Wi-Fi may not be such a good deal if it means giving up personal data as a condition of access.

National retailers like Nordstrom and Home Depot have worked, or are working with, a company called Euclid Analytics, to track shoppers in their stores, by detecting smartphones by requests that the devices make for available Wi-Fi networks even if they aren’t actually connecting to a store’s network. (Nordstrom noted this spring that it had discontinued a pilot it ran with Euclid.)

When a consumer walks into a store, Euclid Analytics can also recognize returning shoppers, because mobile devices send unique identification codes when they search for networks. That means that stores can now tell how repeat customers behave and when they last visited the store.

According to Euclid, 40 to 70 percent of all shoppers are equipped with a smartphone that can be used to determine specific departments that a shopper visits and how long a shopper may spend in each. Shoppers wanting to shop without being tracked have to disable their Wi-Fi or turn off their phones.

On its privacy page, Euclid refers to “foot traffic analysis” and assures consumers that the data it provides to retailers “do[es] not include any representation of individual behavior, nor do we attempt to link any data to individual people.”  Instead, the anonymous data on individual shoppers that the company does collect is bundled with data from other individuals, resulting in an aggregate report.

Euclid also has an opt-out option for shoppers who would rather not be tracked as they wander the aisles of participating retailers.  The company also states that it provides instructions on opting out at each retailer it services. The process requires a consumer to find her smartphone’s MAC address, a unique code that identifies the device to a network. A MAC address is buried amidst other details about a phone, so consumers have to do some hunting to find it and then submit it to Euclid. After a shopper opts out, her data is removed from Euclid’s database.

But Euclid would have the ability, if it so chose, to match your phone to your identity—and at least some marketing companies are doing just that. Euclid’s privacy practices may be laudable, but it is unclear whether all retailers and their tracking affiliates do provide notice and an opt-out process. Nomi, of New York, uses Wi-Fi to track customers’ behavior in a store, and also goes one step further by matching a phone with an individual.

When a shopper has volunteered some personal information, either by downloading a retailer’s mobile app or by providing an e-mail address when using in-store Wi-Fi, Nomi retrieves a profile of that shopper—which reveals the number of recent visits the shopper has made, what products that customer was looking at online in recent days, and that customer’s purchase history. The store then has access to that profile. Nomi then uses Wi-Fi signals to follow the customer throughout the store, adding to the information that it maintains. Such tracking—which matches and aligns a shopper’s identity and preferences to his or her movements—may lead to a customer’s getting special coupons or targeted advertisements.

Another company, Brick stream, uses an advanced camera that can distinguish adults from children. Some cameras can even read the expression on a shopper’s face, allowing a retailer to predict his or her mood. And yet another company, RetailNext, uses video footage to study how shoppers navigate the store’s premises.  RetailNext also differentiates men from women, and children from adults. Realeyes, based in London analyzes facial cues for responses to online ads and monitors shoppers’ so-called happiness levels in stores, as well as their reactions at the cash register.

Should We Be Sanguine About This New Trend?

Brick-and-mortar retailers who buy these tracking services feel that doing this is necessary to compete with online competitors, which can glean large amounts of behavioral data using online browser tracking. Stores then can use the data to make changes to floor displays, or to determine how many registers to keep open. The data can also be used to offer coupons to shoppers who linger in one part of a store for a long period of time, or to offer suggestions to a customer as she navigates different aisles.

But do we want more data stored about what we are buying, or even simply looking at? Do we want our Visa charge connected to an adult book section to be tracked, or our visits to a store that offers sexy lingerie?  Perhaps even more troublingly, shopping algorithms may learn of a serious illness because of a pattern of spending on healthcare products.

At some level, do we want all of this to be catalogued and stored—and if so, for how long?

This leads us right back to the important factor of context. We have grown accustomed to having our online browsing tracked and recorded, but until now, we have likely assumed that we have some degree of personal autonomy when we are wandering around a store.  We don’t assume that a company’s sales rep or marketing department is looking over our shoulder as we move through the store, but tracking may be able to do almost exactly that.  While we know, of course, that we are visible in public places, it’s one thing to be seen, and another to be tailed, as if a private eye were following you.

Of course, just as you can block cookies or opt out of online tracking, you can also take steps to prevent physical retailers from learning about your behavior. You can turn off the Wi-Fi feature of your smartphone before you enter a store, or put your phone on airplane mode.

But, in my view, just having that option that is not enough. Retailers need to let you know that they are watching you.  Sure, we know that there are surveillance cameras in stores that are meant to help prevent theft, and we have seen warning signs in dressing rooms alerting that they may be monitored, as well. But it’s one thing to know that you are on tape along with countless others, and quite another to think that the store may be tracking you and possibly compiling a profile of you as well—or even aggregating your other, prior customer data with your shopping movements.

At a minimum, retailers that have brick-and-mortar stores need to think less about competing with Amazon, and more about the privacy of their in-store consumers—and these stores need to let us know when they are watching us, in order to allow us to take measures to defeat the surveillance.  While we learn more about how we are being watched, regulators would also be wise to ask companies to explain their tracking practices.

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