Privacy Fears Hit Retailers' Big Data Analytics Plans by Jeff Bertolucci

18/01/2014 09:50

Brick-and-mortar retailers plan to link in-store analytics with shoppers' mobile devices. Shoppers say not so fast.

Top 10 Retail CIO Priorities For 2014
Top 10 Retail CIO Priorities For 2014
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Privacy will "almost certainly" be the leading big data issue this year as consumer advocates focus on controversial spying activities of the US National Security Agency (NSA), according to a new 2014 predictions report from global consulting firm Stratecast | Frost & Sullivan.

If this prediction holds true, it's unclear how it might impact big data efforts in the retail industry, particularly a new class of in-store analytics systems that use WiFi-enabled devices -- typically smartphones -- to gather information on customers' shopping and purchasing habits.

Why kinds of systems? Silicon Valley startup Euclid, for instance, sells analytics software that can uses a shopper's smartphone's WiFi signal to monitor his or her movements inside a store and in front of it.

It's not a stretch to suggest that consumers may react negatively to stealthy monitoring apps, despite the fact that their movements are closely tracked by online retailers as well. As public awareness of in-store analytics grows, a consumer backlash isn't out of the question.

"I talk with people who I didn't think thought about this much, and they say, 'Oh yeah, I turn my WiFi off when I go shopping,'" said Stratecast | Frost & Sullivan analyst Jeff Cotrupe in a phone interview with InformationWeek.

This type of shopper reaction, if common, will create a challenge for retailers, who have a lot to gain from in-store analytics, said Cotrupe, who manages Frost & Sullivan's big data and analytics global program.

"It's a great thing for retailers," said Cotrupe of mobile analytics. "It's one of these really, really essential things they need to be doing in addition to using customer data, crunching numbers, comparing different in-store sales, and scanning QR codes to indicate which flavor of peanut butter you like best."

Privacy-wise, there are at least three levels of mobile analytics in the physical retail space. Some systems require a customer opt-in, others don't.

Location-based analytics firm Digby, for instance, has the least furtive approach.

"Their claim to fame is that they help retailers, the brick-and-mortar folks, compete and survive in the age of Amazon," said Cotrupe. "They do mobile apps and barcodes and integrated mobile marketing campaigns."

Smartphone-toting customers have to download and install the Digby app, which makes the mobile analytics process relatively transparent. Customers get discounts, deals, and other perks for their efforts.

"That's the biggest level of involvement a consumer has with one of these (services)," said Cotrupe. "In order to interact, they have to download the app" and agree to the terms of service.

Nearbuy Systems, which was acquired recently by RetailNext, another in-store analytics provider, requires a little less effort on the consumer's part.

"You have to log into the retailer's WiFi network in order for their system to monitor you," said Cotrupe. "That's a slightly less level of involvement. You didn't have to download an app, and you didn't have to log in."

The opt-in approach sends a clear message to shoppers: "Hey, if you don't want to do this, don't log in," said Cotrupe.

The third -- and most stealthy -- level of WiFi analytics is Euclid's approach.

"You don't have to log in or take any proactive step," said Cotrupe. "If your (mobile) device has the WiFi turned on, and if that device comes within range of their system, they're able to monitor you."

This is the sort of big data operation that raises the hackles of privacy advocates, and understandably so. To ease critics' fears, Euclid and retailers plan to make their intentions clear, Cotrupe said.

"What Euclid does is make people very aware," he added. Retailers put signs in the windows to inform customers, who can scan a barcode to avoid being monitored by the WiFi analytics software.

While Cotrupe believes in-store analytics can help brick-and-mortar retailers, particularly smaller vendors, compete with online giants like Amazon, he's sympathetic to consumers' privacy concerns.

"I do appreciate the need for privacy," he said. "People have the right to turn that WiFi and location stuff off, and that's great."

Jeff Bertolucci is a technology journalist in Los Angeles who writes mostly for Kiplinger's Personal Finance, the Saturday Evening Post, and InformationWeek.

Mobile, cloud, and BYOD blur the lines between work and home, forcing IT to envision a new identity and access management strategy. Also in the The Future Of Identity issue of InformationWeek: Threats to smart grids are far worse than generally believed, but tools and resources are available to protect them. (Free registration required.)


Which Information Do Consumers Most Closely Guard?

By Ilana Westerman and Gabriela Aschenberger

January 29, 2014

We know that consumers don’t always understand how companies collect their data, and that these misconceptions can create a trust gap between retailers and shoppers.

This doesn’t mean that consumers are completely unwilling to share their data with retailers, though. Our team at Create with Context surveyed 800 consumers in the U.S., asking them which information they’d be willing to give up in exchange for 50 percent off of three different items: a gallon of milk, a large-screen television and a new car.

The survey results—which reflect consumer attitudes, rather than actual behavior—show that 97 percent of respondents said they’d be willing to give up at least one piece of data about themselves in exchange for a discount.


But shoppers don’t guard all their information with equal vigilance.

Our research shows that consumers place a significantly higher value on some pieces of personal data than they do on others. Respondents were most likely to share their names with retailers, and least likely to share photos and files stored on their phones—with items like their current location, their credit scores and their fingerprints falling at different points along the spectrum.

When we analyzed the numbers more closely, we discovered that the survey responses sorted into five distinct “clusters” —groups of survey questions that asked about similar types of personal information, each of which a similar number of consumers were willing to share.

Directory Information

The information that consumers were most willing to share in exchange for a discount were—in order—name, phone number, age and address. Consumers were also relatively comfortable sharing their current location, which we included in this cluster. It’s interesting to note that much of this data is traditionally considered personally identifiable information (PII) —and is, therefore, the subject of privacy laws—and yet consumers are least protective of these bits of information. It’s possible that consumers consider this information less sensitive because much of it is readily available in online phone directories, and because they are accustomed to providing this information when signing up for programs like store loyalty cards.

Interests (Offline)  

After basic directory information, the next data points consumers were most comfortable sharing concerned their interests.  We’ve divided the category of “Interests” into offline and online, because respondents were twice as willing to provide their offline interests as they were their online interests. That difference in attitude may signal an inherent apprehension surrounding digital data, since in reality consumers’ online and offline interests are likely to be similar to each other. The survey items that fell into the offline interests cluster included one about what books and magazines consumers read, and a more general item about “what your interests are.”

Interests (Online)  

This cluster is composed of questions about what consumers buy, what they search for online and which apps they use on their phones and when. Again, it’s interesting to note that consumers were only half as likely to share this information as they were their offline interests.

Sensitive/Financial Information  

Consumers were understandably apprehensive about sharing data in this cluster, which includes items like their incomes, their credit scores, their passport photos and their fingerprints. In every cluster, consumers were more willing to share information for a discount on the big-ticket items like a large-screen television and a new car than they were for a couple of dollars off a gallon of milk. But the increase in consumers willing to share information for the new-car discount was especially large in this cluster, perhaps because people are accustomed to giving access to their incomes and credit scores when financing a vehicle. This may suggest that consumers are more comfortable giving their information in scenarios where they’ve done so in the past, or when they see a clear rationale for doing so.

Personal Digital Data

This is the cluster of data that consumers guarded most closely, and it includes info such as where they’ve been, their phone’s address book, e-mail messages they’ve sent and received, pictures and files stored on their phones and their social networking connections. Consumers were five times less likely to share this type of information than they were basic directory information like their names and addresses.


In our next post, we’ll look at just how closely consumers guard their personal digital data.

Read more:


The Truth About Why Stores Track You by Mike Feibus


Apple's iBeacon and other "contextual awareness" technologies might soon pop up on your smartphone as shopping advice. That's not as frightening as it sounds.


When I talk to people about indoor-tracking tools like iBeacon, which Apple launched at its US stores last Friday, they're both fascinated and frightened. They quickly appreciate how helpful a connected world can be when it knows where you are and what you're doing. But the steady of stream of news about privacy intrusions -- mostly by the NSA -- makes them wonder if the cost of allowing access to more personal data is really worth it.

Apple introduced the iBeacon feature as part of the iOS 7 launch in September. It makes use of the iPhone's Bluetooth radio to communicate with other iOS 7 devices as well as compatible sensors placed at strategic spots around Apple stores. Among other things, the close-range nature of Bluetooth can be used to pinpoint a shopper's whereabouts to deliver location-specific messages. For example, someone with an older iPhone might get a trade-in offer while checking out the newer models.

Location is the cornerstone for contextual awareness, a collection of efforts aimed at giving our smartphones the tools they need to begin making timely, relevant suggestions and even take action on our behalf. Understanding that we're standing in front of the smartphones rather than the tablets is an important piece of the puzzle.

Apple isn't the first to implement a Bluetooth indoor-tracking system. For example, the Miami Dolphins' Fin Club app uses Gimbal -- a set of location-aware developer tools from Qualcomm -- to send in-stadium discounts to fans. In fact, Apple isn't even the first to outfit stores with its own iBeacon platform. Shopkick is motivating shoppers inside several Macy's stores with reward points and special offers based on where they are.

Contextual awareness isn't just about commerce, though it would be a benefit if all it did was offer up ads that we care about. (A philosophical question: if we receive pushed ads that actually interest us, are they spam?) There are efforts under way by transportation authorities to deliver updated train schedules when you're standing near the track and by museums to push information about the artist when you're admiring a painting.

Understanding where we are at the moment is a big step on the way to empowering our smartphones to understand us, but it's just the first step. There's a lot of innovative work underway that promises a suite of novel benefits -- but require access to even more of your personal information. Instead of showing you an ad for the cordless drill you're admiring, for example, the app on your phone might instead point you to a scarf in another corner of the store because it knows your spouse has a birthday coming up. And it knows you haven't bought her anything yet.

The demand for insight into ever-more pots of your personal information is increasing just as the backlash from ongoing NSA revelations is making consumers more aware of the digital fingerprints they're leaving behind, and increasingly wary of those with access. Privacy has become such a front-and-center issue that a group of companies with access to mounds of personal information -- and who stand to lose a lot if the public's posture on privacy continues to stiffen -- this week lobbied the federal government to reign in espionage. You don't see Apple, Google, Microsoft, and Facebook coming together on much of anything these days, so it's clear they all understand what's at stake for them.

I like to say that we won't need to worry about our digital privacy precisely because we're all worried about our digital privacy. If the NSA leaks have taught us anything, it's that there's a right way and a wrong way to collect personal data. Tell us what you want to collect, ask our permission to collect it, and give us something in return that we find of value and most of us will be on board. Skip any of those steps and we're not.

It's why customer backlash forced Nordstrom to pull its in-store customer research, which surreptitiously tapped the WiFi signal from customers' phones to track them around the store. And at the other end of the spectrum, it's why Shopkick has been able to attract more than 6 million downloads of its tracking app by offering discounts and reward points.

I'm producing a conference next spring that's bringing together industry leaders in this fast-developing field to hash out these and other contextual-awareness issues. The conference, called MarketsofOne TechSummit, will be held April 10, 2014, at the Four Seasons in Palo Alto, Calif.

In the meantime, there's no need to worry about all these new requests for our personal information. Provided we're all worried about it, that is.

Apply now for the InformationWeek Elite 100, which recognizes the most innovative users of technology to advance a company's business goals. Winners will be recognized at the InformationWeek Conference, March 31 and April 1 in Las Vegas.

Mike Feibus is principal analyst at TechKnowledge Strategies, a Scottsdale, Ariz., market research firm focusing on mobile client technologies. You can reach him at


Will Privacy Concerns Stop or Stunt The Power of Predictive Analytics?