How location tracking will change the way you shop

Can’t find an item in your grocery store? Some retailers want to help, but it could mean tracking your every move as you wander through the aisles.

In an emerging area that combines location data, marketing, and analytics, retailers are testing new ways to learn how customers shop and move about their stores, and targeting them with promotions and in-store maps on their smartphones.

The concept, sometimes called place-based marketing, uses detailed location information, often down to the shelf you’re walking past, to drive sales and give retailers more information about foot traffic in their stores. That means picking up a trail of digital breadcrumbs from people’s smartphones and mobile apps.

Some of those apps will push special deals to shoppers when they pass by a particular item. Not a Pepsi fan? Maybe you can be swayed with a discount coupon as you wander through the soda aisle.

Think of it as your grocery store trying to outsmart Google, or better yet, Amazon. Those are the players, after all, that brick-and-mortar stores see as their biggest competitors.

A challenge is to do it without trampling on customers’ privacy. Users have grown accustomed to being tracked on the Web, even if they don’t like it, but using Wi-Fi to track people as they move through a physical store can creep people out, as Nordstrom found out when it tried it last year.

Retailers hope they can persuade shoppers to trade a bit of privacy if they get something useful in return, like a better deal or some helpful shopping information.

Strategies

To do their digital sleuthing, companies are taking different approaches. One strategy is to make the smartphone a more useful shopping assistant. One company, aisle411, helps physical stores digitize and map their inventory so customers can find items more easily. Users can create lists, browse recipes, and search for products in participating stores. Searchable store maps can be accessed from the app in more than 12,000 retail locations, said CEO Nathan Pettyjohn.

The company uses Bluetooth “beacons” made by Estimote to detect when shoppers pass certain locations or aisles, so it can push them offers and other deals. The St. Louis, Missouri-based company sees itself as helping to fill the digital void that impedes brick-and-mortar stores’ ability to compete with shopping channels online, Pettyjohn said.

Estimote beacon simulation

“For any retailer who is questioning this, I would say to put yourself in Amazon’s shoes,” Pettyjohn said. “Amazon would probably want you to stay non-digital.”

He spoke Tuesday during Place, the inaugural indoor-marketing summit organized by Opus Research in San Francisco. The event attracted a dizzying variety of companies promoting their wares.

In addition to apps like aisle411, there are data-gathering companies like Euclid, Path Intelligence and GISi Indoors that track where consumers go and how long they stay there. There are Bluetooth beacon makers like Estimote, Qualcomm, and StickNFind. There are household names like Nokia, which is focused on indoor mapping through its Here business.

And there are Wi-Fi hotspot operators like Boingo Wireless, which detects passive changes in Wi-Fi signals on cellphones to measure foot traffic. The company is already using the technology in airports to give travelers estimates of security checkpoint wait times.

But while the players are many, they have one or two common goals: to give retailers more shopper information on the back end, so stores can better manage their inventory, layout and hiring practices; and to give shoppers more information on the front end, through maps, coupons, and loyalty programs.

Path Intelligence is working on the back end. It uses laptop-sized receivers to map people’s movements at a given location by reading radio-frequency signals sent between cellphones and cell towers. The technology is designed to be anonymous, so the location of the phones can be seen but not the user data stored on them.

The technology is being used in about 150 locations, including shops, malls, and sporting venues, to provide information about where people go and how long they spend there. The company says its equipment is meant to be marked and clearly visible, though ultimately it’s up to the retailer if they notify people they’re being tracked.

Path’s technology is useful, one real estate developer said, because it can help malls see whether people are going to a movie and leaving right after, or grabbing a bite to eat next door after the credits roll. That can help the mall decide whether to re-think its dining options.

Next: Who is interested in this technology?

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