Digital’s final frontier: Tracking the customer journey through retail space

Since most owners leave their cellphone wifi switched on, their whereabouts can be sensed by triangulating the wifi pings their phones emit when looking for nearby networks. A store’s wifi access points can be reconfigured to track and analyze these pings — and thus measure aggregate customer behavior in a physical environment.

One company, Euclid Analytics, recently commercialized this technology:

Leaving aside for a moment potentially thorny privacy issues, automated brick-and-mortar analytics systems like Euclid Analytics, greatly improve on the manual methods the retail industry has traditionally had to use to track customer journeys through a physical store. This opens up a whole range of interesting applications, such as the comparative testing of retail displays, loyalty programs linked to the customer’s presence in a store, and dynamic employee allocation to alleviate check-out congestion — just to name a few.

Traditional retailers can certainly use the help; their industry is feeling the pressure from e-commerce players, even though the e-tailing revolution has only just begun: As this recent industry report shows, global online sales are still at just 4% of total retail sales, though with online growth far outpacing nearly stagnant total growth.

We all know one reason for this ongoing disruption: With lower overhead costs, the e-commerce sector can underprice its bricks-and-mortar competitors. But another less obvious competitive advantage has been the superior analytics that the e-commerce industry has developed, first to understand customer behavior and then to dynamically adapt their virtual storefronts to maximize sales.

That second competitive advantage may now soon dissipate. If traditional retailers begin incorporating methods and tools inspired by e-commerce, and allow themselves to be transformed by the insights these tools give, then they may well be able to capitalize once more on the convenience and entertainment consumers clearly get from a physical shopping experience.

So the technology is there, ready for deployment; but the business models and ethical boundaries are still untested, which opens opportunities for more agile business developers able to ask (and try answering) such questions as — What are the most effective business models for these new data sets? How do we get management teams to realize that this is business critical? How do we respect customer privacy and show that we do so?

Large retail chains such as GAP, IKEA or Tesco could easily set up pilot projects to explore these questions. It would cost them relatively little but provide a large potential upside. Related benefits could include offering free in-store wifi, which in turn enables consumer services such mobile applications for shopping assistance. Combine all this with Bluetooth-based positioning technologies such as Apple’s iBeacon and Qualcomm’s Gimbal to facilitate an even more seamless engagement initiated by the customer.

The privacy risk is not to be underestimated, however. Even though Euclid’s system is pseudonymous, with each mobile device identified and tracked only through a fixed unique ID transmitted via wifi, it is entirely possible over time for a back-end system to link these unique IDs with personal data gleaned from concurrent iBeacon opt-ins, if the consumer has opted to make themselves known to the retailer. If the privacy expectations of consumers are not respected by the industry, or undermined by unscrupulous actors, consumers may well choose to modify their behavior en masse to circumvent the logging of their wifi devices — for example, by turning on airplane mode when shopping, having an app do it for them automatically near offending stores, or by choosing stores that have no-tracking policies.

But if the technology does prove socially acceptable, then there is no reason to limit it to within the store. You could use wifi to track foot traffic outside the store, collecting data on how many people pass by at different times of the day and week. Such information is valuable to property owners and realtors, because it enables entirely new pricing models for commercial space.

One day, it may seem obvious that online user tracking and analysis methodologies would eventually invade the physical world, but for now, it’s a brave new world, awaiting its brave new business developers.