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Mobile phones act like 'cookies' in stores

February 18, 2014

Through a special arrangement, presented here for discussion is an excerpt of a current article from Commerce Anywhere Blog.

Online retailing has many advantages, which companies like Amazon have magnified with great success. Since the early 1990s, technology has enabled great leaps forward for e-commerce sites while the brick-and-mortar world has remained relatively stagnant. Yes, there are pockets of in-store innovation that have certainly improved the customer experience inside stores, but by-and-large the web world retains a big advantage.

Tax legislation is finally being passed (on a state-by-state basis for now), which helps level the playing field a bit. And by the same token, next-day delivery detracts from offline's allure of instant gratification. Both physical and digital stores continue to up the ante, and consumers are the big beneficiaries.

One huge advantage of e-commerce sites is context awareness — knowing who's browsing products, along what path, for how long, from what geography, etc. The nature of the web allows online retailers to "watch and learn" how customers shop and even to influence their behaviors along the way. But this notion of context isn't strictly limited to the web, at least not anymore. Mobile phones are acting like web cookies in the physical world, opening up possibilities that retailers only imagined were possible online.

The table below shows some online capabilities alongside some similar offline capabilities.

Assuming the right hardware is installed in the store and the customer has opted-into being tracked via the retailer's mobile app, a world of opportunities are suddenly accessible. We can follow customers on their journey through the store, noting where they dwell and which items they touch. These data points yield improved store layouts, better assortments, and more localization. Furthermore, we can give intelligent recommendations, make personalized offers, and award/redeem digital coupons as they shop, enhancing the overall customer experience.

So much of the same context the online retailers take for granted is now available to brick-and-mortar stores for both analytics as well as real-time engagement. None of these in-store capabilities are really that new, but the idea of combining them to provide a holistic view is where we're going. And when you track events across both stores and e-commerce, you have contextual shopping at its best.

Discussion Questions:

Will mobile phone tracking capabilities help brick & mortar stores even the playing field with online selling around context awareness? How would you compare the ability to use in-store analytics to personalize the physical experience with what's possible online?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

What's the likelihood that, in exchange for relevant information and offers, consumers will be willing to be tracked in-store to the same degree as online?

Comments:

I think David has it right that we are ushering in an era of more context relevant in-store experiences, and better real-time engagement via mobile. Given that the shopper provides the expensive hardware (smartphone) and the retailer investment is so small, I believe in-store mobile will succeed where a lot of other in-store technologies did not.

In the short term, I'm less bullish on the in-store analytics applications. I do think in-store analytics have great promise, but I think their are some institutional impediments to adoption. First of all, brick-and-mortar retail has a long tradition of not leveraging quantitative analytics. Less than half of retail stores have basic traffic counters (which are dirt cheap), and the very few retailers that do have traffic counters have institutionalized the data they provide. Even fewer in-store merchants use online digital analytics (which are rich in shopper insight and pre-shopping activities). So I don't see in-store mobile magically turning old-school merchants into data scientists.

Perhaps it will take a generation for the organizational change to occur. Or perhaps a new retailer will emerge and demonstrate a strategic advantage through in-store analytics. But I don't see it happening organically.

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Jason Goldberg, VP Commerce Strategy, Razorfish

If retailers can gather data about consumers' shopping patterns and habits, they should be able to deliver a better shopping experience. It's not a matter of evening the playing field with online merchants. It's about the smart use of the data.

Most brick and mortar retailers are reluctant to spend the large sums of money needed to analyze all of the data. What they can do is make loyalty programs more personal and easier to access via mobile devices and work to streamline the shopping experience through systems that can guide consumers to what they are looking for in stores and speed checkout. These are two compelling areas where consumers would appreciate the help and retailers could gain by bettering the shopping experience.

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Max Goldberg, President, Max Goldberg & Associates

There really isn't a clear answer here -- if we are being honest.

The "right" conclusion would have to be based on facts not yet in evidence such as: where will consumers draw the line between convenience and privacy concerns; how many of those in-store analytic engines will get hacked and what will the consequences be; why are people in the store in the first place (i.e., are they showrooming, killing time, drawn by a destination offering, etc.).

Mobile clearly has the potential to level the playing field to some degree for certain transactional elements, but I think we need to be a tad more judicious before declaring it to be the salvation of physical retailing.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

These tracking capabilities will only help brick & mortar stores if the tracking provides the shopper being tracked with REAL value. Tracking - whether online or in-store - is perceived as an annoyance and an invasion of privacy unless it is done to provide value, not just another nefarious method to slam the shopper with meaningless and out-of-touch promotional dribble!

Measurement and analytics are vital in today's marketing landscape but it is what for, how and why you use these insights that will bring success. Find out what your customer values and then enable the correct technologies and workflows to reward your shoppers and customers. They'll reward your efforts in return.

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Adrian Weidmann, Principal, StoreStream Metrics, LLC

All good points in this article, but there's one troubling phrase that highlights the difference between Internet and mobile: "Assuming the right hardware is installed in the store and the customer has opted-into being tracked...."

By default, web browsers track people (in the US) via cookies or beacons. For b&m retailers, it's a different scenario with a conspicuous opt-in option. It's almost assured that shoppers in the real world will never knowingly opt-in to being tracked at the levels they passively accept online. So there will never really be parity between the two.

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Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive

I have a LOT of prejudice on this topic. I think tracking consumers via their mobile phone wifi is a real mistake. To assume that it's okay because we do it online is backwards thinking.

Consumers are getting tired of re-targeting ads that let them know they're being tracked. So thinking we can do something similar in store is getting very close to killing the goose that lays the golden egg.

If there's a conscious opt-in on the part of consumers, it's fine for the current visit only, but at a time when consumers are complaining about the amount of data retailers are collecting (and can't keep safe, by the way), it would be suicidal to track and hoard MAC addresses, even if they are theoretically "hashed." Anything hashed can be de-hashed.

Times are changing, the pendulum is swinging and my very best advice to is be extra cautious around consumers' data. The reaction to the Target data breach, and even the kickstarter.com data breach, was stronger than anyone expected. Acxiom's aboutthedata.com web site now contains verbiage promising that you won't join any class-action suit before it allows you to go into the data itself.

Be wary.

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Paula Rosenblum, Managing Partner, RSR Research

Only to the extent that it improves or enhances the shopping experience. I work in technology and we tend to overlook the application of the technologies and instead focus on what's possible in terms of the specific actions that are possible and data to be captured. I think that's a gating factor to the take up of these in-store technologies among retailers and CPG manufacturers alike.

Having said that, I do think the in-store experience can be highly personal in a manner similar to an online store. I wrote about several applications on MobileMarketer.com recently.

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Gib Bassett, Global Program Director for Consumer Goods, Teradata Corp.

I don't think anyone feels cookies gives them a better or personalized experience. It's bad enough I'm stalked across the NYT and Facebook based on any simple search.

The promises of big data to deliver coupons and contextual shopping ring hollow for a better customer experience.

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Bob Phibbs, President/CEO, The Retail Doctor

I don't think it will level the playing field for a while. First of all, it's like comparing driving versus walking. No matter how you improve the walk, driving is simply faster and easier.

Second, most people are fearful of allowing access to their phones. I have written numerous blogs, articles and book chapters on "big data." The recent news of the government tracking the texts and conversations of Verizon customer has most people scared of "big data" when it comes to their phones. The convenience associated with getting coupons does not out-weigh the concern associated with giving access to your phone to retailers and other apps.

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Janet Dorenkott, VP & Co-owner, Relational Solutions, Inc.

I'm with Jason - I've seen the questions retailers who have implemented in-store analytics ask of their data and it's so basic as to be depressing. How many people came into the store? What was the conversion rate? What was the most visited department?

Translating the tracking mechanisms from online to store is fine, but I would really like to see someone take the more sophisticated questions that online retailers are asking of their data and translate it into the types of questions that stores should be asking.

But all that said, there are a lot of corporate myths that exist about stores and what happens in them, and retailers need to be receptive to blowing up those myths in the face of data.

But all of this is contingent on in-store analytics getting implemented in a way that makes tracking valuable. And if retailers aren't very VERY respectful of customer privacy as they implement these technologies, they may find their hands tied - by angry consumers.

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Nikki Baird, Managing Partner, RSR Research

This article is exactly 100% right-on, although I don't really see most bricks stores doing much about it, with "apps" being an overlay provided by a third party, and difficult to impact the way stores already work. Secondly, most of the apps are not as comprehensive as the potential in the online/offline table details. Nor are their accuracies anywhere near the accuracy of online tracking.

Then there comes the nut kernel difference - besides all the logistical issues. The online experience is between a human and a screen, to which they are giving intense attention. The store is a 360 degree experience, more like a bubble the shopper is inside, with the screen being a total wrap-around on the interior surface of the bubble - including ALL the senses - plus other people, etc., etc.

Having said all this, as qualification, David Dorf's perspective remains right on, in terms of the online technology/perspective being brought to the store.

I should add that translating the highly focussed online experience into the "bubble" experience in the store, even with massive computing power mediated by smart devices, will require a great deal more sensitivity to how flesh-and-blood humans live. Smart watches and Google Glass are potential helpful additions to the smartphone, but it does seem we are still a long way from the endgame here.

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Herb Sorensen, Ph.D., Scientific Advisor TNS Global Retail & Shopper, Shopper Scientist LLC

Tracking for data is one thing. It's a powerful way to get some in-store analytics that have only been available to online merchants.

However, there is more to this technology. It allows you to personalize the shopping experience. The key to the tracking capabilities is to do it with permission. This is like asking permission to send messages via text, email, etc. I've seen some amazing technologies coming down the pike that are tied to tracking the consumer once they walk into the store.

Imagine walking by an item and alerting the consumer via their phone to the item being on special. Or making that item special-priced just for the consumer, because of their frequent buying patterns.

There is also a technology called "Directional Audio." It is an audio system that broadcasts verbal messages to the consumer based on where they are standing. Anyone just a few feet away won't be able to hear the message, but the audio is crystal clear and loud to the consumer. The technology tracks the consumer's phone and then delivers personalized messages (that includes the consumer's name). Cool "stuff."

Bottom line is that once the technology is more mainstream, and the customer buys into it, just as they accept receiving text and email messages, the shopping experience will be enhanced.

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

If the privacy issues are overcome, there is the possibility of gathering more consumer data that can be used to create personalized experiences. BUT brick & mortar stores on the whole are not fully utilizing the data they have now about consumers purchases to personalize offers and experiences. More data can be useful, but is not a solution. Analyzing the data and determining appropriate insights is a bigger challenge.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

Surely there are opportunities to collect data and drive sales using the sort of GPS-enabled "engagement" tools discussed in the article. But there is also a caution raised by other panelists about privacy concerns.

I teach a B-school class to college seniors, and at last night's class I happened to mention some of the Oracle technology. (I participated last summer in a RetailWire webinar on the subject.) There was a surprising amount of backlash from these Millennials, whom I expected to be open to the idea. The potential intrusiveness of these technological leaps is something that retailers need to think carefully about.

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Dick Seesel, Principal, Retailing In Focus LLC

Completely agree with Jason and Nikki here. One aspect that doesn't seem to get sufficiently addressed in discussions around in-store capabilities is the consumer-facing experience that will surface these capabilities in an effective, connected fashion. It is unlikely that it'll be a third-party experience and given the fairly fundamental gaps that exist in the first-party mobile experiences, be it an app or a website, there are bigger challenges for retail brands to address first.

Arvind Krishnan, CEO, Swym Corporation

Well, I think offline store capabilities are there, right now for the taking by virtually any format of brick store merchant. I see even more effective technologies than iBeacon hitting stores as we speak. I see more ubiquitous adoption of digital coupons. And internationally, payments have become more secure and faster than in the U.S.

Yes, technologies are there now to effectively generate compelling reasons to shop brick stores. The next step for brick store merchants is to evaluate their true information needs and determine which technologies can most efficiently satisfy those needs.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

Nice piece. I especially like the comparison table. That table also reinforces the value of linking web and in-store analytics, browsing and buying, probably via frequent shopper numbers. If this is done, I wonder if it will reduce our shopper marketing emphasis on navigation in favor of personalization and simplification. Isn't it possible that optimizing navigation is actually an anachronistic view?

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Joel Rubinson, President, Rubinson Partners, Inc.

What the online and mobile software cannot do is differentiate between customers, market researchers and the competition. The owner/retailer is then left with data that is always unreliable. Judgment calls for new product and changes to floor plans can, and often are, the result of data that is enriched to benefit vendors and/or the competition. There are ways to statistically analyze data and filter users to reduce the amount of non consumer input but even these system checks can be fooled with relative ease.

Then there is the common user effort to rid themselves of being tracked and observed. The user is always a step behind advances in detection and tracking, but these back and forth efforts are costly to the retailer and cause a continuing shadow of doubt in the report data reliability. Both e-commerce and brick & mortar retailers are then again forced to leverage sale persuasion with price, availability and of course, customer service. So why not just spend the money on secure methods to make the software easier and more fun for the user?

'gjarnoldjr'

Technological advances will never be the edge that b&m stores have. It's live, we'll-trained sales people who have the ability to observe customers in real time and can instantaneously engage customers with open-ended questions that lead to sales.

One reason retailers may not find traffic trackers useful is that they don't reflect the accurate number of "buying units." For example, when a family or couple walks into a store, they may each only represent a single purchase.

A large number of stores already track shoppers via closed circuit TV, so I'm not sure if allowing a store to track you by mobile device is that much of a leap in privacy concerns. Much more of a concern would be whether this practice would make shoppers more vulnerable to hackers accessing private information.

'RetailRetell'

The data made available by these in-store analytic devices will eventually be dumbed down to the point that the data generated will only be useful as a geiger counter of activity in the store. This easy and cheap for the retailer technology is intrusive and the consumer isn't going to put up with it.

Improving the in-store experience to compete with the online experience requires retailers to invest both time and money in technology and behavioral strategies that equip associates with the tools they need to provide the service the customer wants when they want it after making the trip to the store.

Understanding what's happening inside the store is interesting, but doing something about it is crucial for survival. Retailers should spend their resources mapping the in-store experience and creating measurable and technology enhanced business processes that automate the engagements between the customer and the associate.

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Marge Laney, President, Alert Technologies, Inc.

I, like several others of you, have been around this great industry for several decades and over all these years I have not seen retailers use of in-store analytics as a strong suit. Don't think it's gonna happen here either. Or at least not this way.

Let's go back and remember just why we needed to use tracking for online success, hmmmm? Wasn't it because we couldn't see the consumer and we didn't know what they wanted while on our sites? We did this in order to help provide the "same" level of service the consumer could get in the store.

In the store is where the sales associates, if they are doing their jobs, can see what the consumer is up to. See what they pick up. See what they take into the dressing room. See what they pair together.

If we want to find more success in-store, let's focus on using our technology to improve the level of service they are getting and the experience they are having. We can personalize in person. Can't we?

Lee Kent, Let's meet share and succeed in Retail, YourRetailAuthority

Great comments! A few additional things to consider:

1. There are lots of different types of sensors available including WiFi tracking, bluetooth beacons, cameras, infrared detectors, XBOX kinect, etc. Many of these are deployed today -- you just never noticed.

2. These sensors can either track people anonymously or in some-cases, by an identifier. It depends on what the retailer wants to accomplish and their relationship with the consumer.

3. There is active legislation spearheaded by Senator Al Franken (yes, the guy from SNL) for opt-in rules.

4. For this to work, both retailer and consumer must see benefit. Ask your teenager if they'd like a 10% off coupon for A&F beamed to the mobile phone whenever they enter the mall. They'll opt-in if they get something in return. Look at all the people with loyalty cards.

5. This isn't going to happen overnight. Two steps forward, privacy siren, one step back. Repeat.

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David Dorf, Sr. Director of Technology Strategy, Oracle Retail

Being tracked online and being tracked in the store are two different things, and the consumer knows the difference. The former is sort of expected nowadays, while the latter is kind of creepy.

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John Karolefski, Editor in Chief, CPGmatters.com

Mobile phone tracking will not permit in-store retailers to even the playing field with online selling, since a number of the data sources available online are not present in-store, particularly on source data. Mobile phones will probably not permit retailers to know what consumers have seen and where they have visited prior to arriving at the store, which is critical to improving online performance.

In addition, online has the ability to "re-merchandise" the store for each individual customer, which in-store cannot achieve.

However, mobile store tracking does permit retailers to gain insights for customer behavior, which can lead to improving the store experience overall by changing store flow, merchandising in general, etc.

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Mark Price, Managing Partner, LiftPoint Consulting, Inc.

I believe there are a few challenges to the success of mobile tracking:

1) Opt-in: In North America, consumers are tracked online whether they opt in or not, making it much easier to gather more data on their online habits. I think most of us can agree we get pretty tired of the online re-marketing ads following us around the web and wouldn't choose to opt-in for a real world version of them. In order to actually deliver extra value to consumers in exchange for their data, retailers will have to come up with personalization and promotional benefits that are compelling enough to encourage users to opt in.

2) Privacy: Even though it is in theory very similar, being followed around the web is somehow less concerning than being followed around physically. Furthermore, retailers will have to convince consumers that their data is absolutely secure (especially in light of the recent Target data security breach).

3) Utility: It is only worthwhile collecting the data if you are going to actually do something with it. Are retailers prepared to derive insights from the collected data, and tailor responses based on them?

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Alexander Rink, CEO, 360pi

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