Brick-and-mortar merchants are catching up with their online counterparts, using position tracking to monitor customer activity inside stores. As with web tracking, the technology has great potential for improving sales, but also raises privacy concerns.
Technology Review's Verne Kopytoff describes how indoor positioning systems can transform retail.
You've just tossed a jar of peanut butter in your grocery cart when your smartphone buzzes. You glance down at the screen to see a message that seems downright clairvoyant: Buy some jelly. Get $1 off.
Convenient? Certainly. Creepy? Maybe.
This is one vision for indoor positioning, a fast-evolving technology that is allowing retailers to track shoppers' physical movements along their aisles in unprecedented detail. In many big-box stores, equipment is already in place to sniff out customers' smartphones and log data such as how many minutes a person spends in the shoe department.
Nordstrom, Family Dollar, American Apparel, and other retailers have experimented with indoor positioning.
Forest City Enterprises uses Wi-Fi to monitor foot traffic in most of the nearly 20 shopping centers it owns or manages. It says the data helped it decide where to move an escalator that was interfering with an entrance. The company also measures how long visitors stay after a fashion show or concert. Stephanie Shriver-Engdahl, Forest City's president of digital strategy, says the company wants to know, "Do they get one soda, hop in the car, and leave? Or are they staying longer?" In the future, foot-traffic data could be used to set lease prices, she says.
Most commonly, indoor positioning technology intercepts WiFi signals emitted by shopper smartphones, and is able to estimate the phone's position to within a few meters. Stores collect unique MAC address for each phone, allowing them to build up behavioral information on return visitors.
Some systems use video cameras, sound waves, and magnetic fields. Apple debuted a feature called iBeacon in its smartphones in September. iBeacon emits a low-power Bluetooth radio signal for indoor use.
Google executive Don Dodge, who has invested in several indoor location companies, believes the technology will be "bigger than GPS" or online maps, simply because people spend most of their time indoors. Google has already expanded its maps to include diagrams of the inside of museums, airports, and large stores in 17 countries. And Google Glass will likely make maps even more important to people on foot.
But tracking people in stores raises privacy concerns. Nordstrom tracked customers in 17 stores this year using a WiFi system from Euclid Analytics. Customers protested, and Google ended the test a few months ago.
US Senator Chuck Schumer and the Future of Privacy Forum, an industry group, agreed on privacy guidelines requiring clear, in-store signage by retailers using tracking, as well as providing customers with opt-out information.
But despite privacy concerns about indoor location marketing, demand is booming. ABI Research projects the market at $4 billion by 2018. In addition to retail applications, enterprises would be able to use the technology to track and manage assets. Another research firm, MarketsandMarkets, pegs demand lower, at $2.8 billion that year, up from about $450 million this year.
— Mitch Wagner, , Editor in Chief, Internet Evolution