Mobile privacy debate moves in-store as retailers mull Wi-Fi investments
By Chantal Tode
October 24, 2013
New code of conduct addresses in-store tracking
New privacy guidelines introduced this week address the tracking of mobile users’ in-store activities while also laying the groundwork for protecting consumers as retailers look for ways to engage with smartphone-wielding shoppers.
Concern over how best to protect their customers’ privacy is one of the stumbling blocks holding retailers back from wider adoption of in-store mobile services leveraging Wi-Fi and Bluetooth technology. While the new code of conduct from Sen. Charles Schumer (D-NY) and the Forum for the Future of Privacy only addresses one specific area of concern, it envisions a broader framework encompassing other mobile-enabled in-store experiences.
“Retailers are very interested in [mobile-enabled in-store experiences],” said Sheryl Kingstone, research director at Yankee Group, Boston. “The only thing stalling them right now is price and data privacy.
“Most of the retailers I speak to are very concerned about insuring that they are thinking about their consumers because they don’t want backlash from their consumers,” she said. “So, yes it is a cost structure, but it is also, what do we do about data privacy issues.
“In order to move it forward, it could help having more regulations and having consumers being opted in because then maybe, the retailers will step up and say, 'Ok, this has been approved, this is the policy we have to follow, let’s go do it.' Right now, they have no guiding principles.”
The code of conduct provides a way for shoppers with smartphones to opt-out of tracking performed by location analytics companies across multiple stores.
Right now, the guidelines focus on the location analytics companies that are providing Wi-Fi and Bluetooth technology to retailers to track shoppers across multiple stores and provide data back to retailers, such as how long their wait times are and how many customers visit more than one of their stores.
The code of conduct covers data collected using the unique MAC address identifiers for both Wi-Fi and Bluetooth.
This kind of tracking is reportedly in thousands of stores.
Some of the companies that have agreed to update their policies and contracts to provide for an opt-out that works with the code are Euclid, iInside, Mexia Interactive, SOLOMO, Radius Networks, Brickstream and Turnstyle Solutions.
The Future of Privacy Forum will also create a central opt-out that any consumer can go to and make sure their phone is on the opt-out list for this tracking.
The privacy group is also working with retailers to put up signage explaining about the tracking and how to opt-out.
One of the promises of having smartphones in the pockets of so many consumers is being able to deliver hyperlocal, personalized offers.
Approximately half of smartphone owners would be willing to share their personal data with retailers in exchange for personalized offers, according to recent research from Yankee Group.
However, in order to deliver personalized offers, retailers need some sort of in-store technology that can recognize a phone as well as receive and transmit data.
The most widely-used solution for this type of activity to date has been Wi-Fi, with some retailers setting up their own networks so they can communicate with their branded applications on shoppers’ smartphones.
From the retailer’s perspective, Wi-Fi has several limitations that has held-back them widely installing it on their own. By some accounts, less than 10 percent of retailers currently have Wi-Fi installed in their stores.
In most cases, the technology is only in a flagship store or small pilot.
The problems with Wi-Fi include that it is expensive to install and there are concerns that it can degrade smartphone batteries.
The concern over how to handle data privacy issues is one of the reasons why retailers are moving slowly to embrace mobile technology for enhancing the in-store experience.
Bluetooth Low Energy is a newer technology that has a lot of buzz around because it is much less expensive to install than Wi-Fi.
Also, BLE enables even closer proximity data collection, meaning it could conceivably be used to deliver an offer for a pair of jeans to a shopper in the jeans aisle.
"We work with a number of retail and CPG clients on the mobile shopper experience, including in-store," said Douglas Rozen, senior vice president and general manager at MXM Mobile. "Whenever personal data is collected, we ensure users provide explicit permission, so the code wouldn’t change our existing practices.
"Most importantly, we make sure prior to seeking a user's permission that the value exchange of the user to provide their location is equal if not greater in terms of the content and offers we provide back," he said.
"After all, location allows us to ensure our content has the context. With younger shoppers in particular, we’ve found that they are more likely to opt-in in exchange for rewards, offers and a more relevant shopping experience."
The Future of Privacy Forum wants the code to be inclusive of a broader array of data exchanges, including any new technologies or services that may come down the road in the still quickly evolving mobile retail space.
“We recognize that these things will converge so we have an opt in for offers or personal information if somebody does have an app and has a sign up for offers and if they were going to link this information in there, that has to be done with somebody’s express permission,” said Jules Polonetsky, director and co-chair of the Future of Privacy Forum, Washington. “We are anticipating that.”
Per Mr. Polonetsky, the idea is to get privacy guidelines in play early on so that companies can incorporate them during the building stage.
At the same time, the guidelines need to be flexible enough to accommodate how the mobile retail space will evolve.
“If you wait until the different models are all clear and final, it is really hard, you are telling companies that are earning millions of dollars in the way that they do things that they have to change practice or technology,” Mr. Polonetsky said.
“If you come in early, it is easy enough to say, can you build this the right way with respect to consumer privacy,” he said. “But the challenge is that you have a moving target and you need to understand the direction that the technology in the different models go.
“We are very focused on understanding that new smart technologies are coming down the road and we need to make sure that this is compatible with the things that are happening, such as offers.”
Chantal Tode is associate editor on Mobile Marketer, New York
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