Hey, retailers: Give your shoppers a reason to share their location

The New York Times created a stir this week with this piece documenting how retailers are using Wi-Fi signals from smartphones and other technologies to track their customers and gather information about their behavior as they stroll through the aisles. Nationwide chains such as Cabela’s and Family Dollar are testing such systems to help determine store layouts and to offer customized coupons.

Using consumers’ own cellphones to monitor their whereabouts and behavior is risky business, of course. Nordstrom made unwanted headlines earlier this year when The New York Times reported that it was one of 100 retailers using a Wi-Fi-based tracking system from Euclid Analytics, and it decided to kill the program in May after customers complained.  Nordstrom should have been paying closer attention during the holiday season of 2011, when two shopping malls aborted an effort to track shoppers via their cellphone signals after a U.S. senator voiced privacy concerns.

Doing it wrong

Brick-and-mobile retailers aren’t the only ones who’ve been accused of following mobile users, of course. Researchers reported more than two years ago that both iOS and Android track users’ movements, storing that data and transmitting it to Apple and Google respectively. And it seems that every week or two there’s a new story about how some popular game or other that tracks the location of unsuspecting users.

All of those stories underscore how difficult it is to keep location-tracking systems secret. And many of these efforts fail to address even the most basic privacy concerns: They often don’t explicitly tell users that their movements are being recorded, they don’t explain how that information is shared, and they often don’t make it easy for users to opt out. Which is one reason legislators at both the state and federal level are busy creating laws to address those concerns, as I documented in this Research Briefing for GigaOM Pro last year.

But one of the biggest reasons those efforts consistently draw the ire of consumers and watchdog groups is that the businesses involved fail to respect consumers. The businesses hoping to leverage location information don’t demonstrate that they understand its value by giving consumers something in exchange.

Consumers understand the trade-off

Consumer privacy is always a sensitive issue, of course, and – as you’ve heard countless times – no device is more personal than the mobile phone. But the massive popularity of loyalty programs at grocery stores is evidence that most shoppers are willing to surrender at least a little privacy in exchange for something of value. They’re OK with nationwide chains tracking their grocery buying habits as long as it means they can save a few dollars every trip.

Indeed, a recent survey from Accenture Interactive found that a majority of consumers understand that allowing advertisers to track their activity can result in personalized, targeted offers that deliver real value. And the grocery-store model isn’t difficult to replicate in mobile. Shoppers would be far more comfortable sharing their location if in turn they received substantial discounts on their favorite items, for instance, or maybe even just for a mobile navigation tool that helps them find what they’re looking for inside the store. Retailers should always be careful not to bombard their customers with in-store come-ons, which could easily be seen as intrusive and annoying, but they should offer something valuable in exchange for monitoring their customers’ location. And that trade-off could even give mobile payments a much-needed boost.

Relevant Analyst
Colin Gibbs

Colin Gibbs

Founder and Principal Peak Mobile Insights

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