Retailers Snooping on Holiday Shoppers Raises Privacy Concerns

Prism Skylabs(NEW YORK) -- Only Santa, maybe, knows if you've been naughty or nice. But management at some 1,000 retailers this holiday season knows where you've been standing, how long you've had to wait in the checkout line, and which sweater or necktie you admired most while shopping.

New technologies for tracking shoppers in-store, in real time, make this possible. Some rely on signals emitted by customers' smartphones. Another uses images from store security cameras.

Prism Skylabs' technology analyzes security camera images to give retailers "heat maps," on which hot colors such as red or orange denote the items customers are finding most desirable.  he colors are determined, say, by how long a customer has stood in front of an item or how many times the item has been handled.

Jules Polonetsky, executive director of the Future of Privacy Forum, a think tank in Washington, D.C., tells ABC News that the past few years have seen more retailers adopt customer-tracking technology.  Everyone from malls to big-box vendors to small coffee shops is testing some sort of system, he says.  He thinks the situation has reached a turning point this shopping season with Apple's introduction of customer location-sensing iBeacon technology, which can send a variety of information -- including details on products, special offers and events -- to shoppers standing near new iBeacon transmitters.

Whether a tracking technology qualifies as "creepy" (Polonetsky's word) depends in large part, he says, on whether data is being collected on specific individuals, rather than on unidentified customers en masse. Prism's heat maps fall into the second category.

Steve Russell, Prisms' founder and CEO, says tracking systems that use cellphones to match data to individuals are invasive.

"We're an alternative to that," he says.

Once the security camera pictures have been analyzed to produce heat maps, he says, all visual trace of consumers is expunged. All that's left is an abstraction of how customers as a group have spent their time shopping.

"Before, a merchant could only look at the register to see what was selling," says Russell.  "Now, you can see what products shoppers are spending time with.  If somebody is picking something up and playing with it but not buying it, that tells the retailer the item may be overpriced.  In the past, merchandising decisions typically have been made based on a merchant's gut feeling.  Here's a way to make them based on data."

Shoppers often have no inkling they're being tracked by Prism. Nordstrom says it tested a technology called Euclid between September 2012 and May 2013. The system tracked customers using the Wi-Fi signals of customers' smartphones.

"Using this type of technology," said Nordstrom in a statement at the end of the test, "is one way we can learn about our customers' foot traffic and find additional opportunities to improve the service we offer them. Through the Euclid test we got some great feedback from our customers."

That feedback, says Polonetsky, was not all positive: "Even though Nordstrom had put signs up saying there was a test being conducted, some consumers said, 'Huh?'" They did not take kindly to being monitored and used social media to complain, says Polonetsky.

Others complained directly to the store itself.  Nordstrom, asked by ABC News about negative feedback, had no comment.

This fall, the Future of Privacy Forum joined forces with Sen. Charles Schumer and a group of suppliers of tracking technology to try to hammer out a code-of-conduct agreement that would protect shoppers from the involuntary invasion of their privacy, while, at the same time, allowing merchants to collect data supplied voluntarily.

The code requires merchants using such technology to display clear, in-store signage that tracking technology is being used.  It further requires them to tell customers how they can opt-out of tracking altogether.

Depending on what the customer wants, says Polonetsky, and on what up-front disclosures are made by merchants, these technologies have the potential either to leave the shopper feeling flattered or feeling as if they've entered some negative, Matrix-like environment.

Copyright 2013 ABC News Radio

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