We Know Where You Are…

The use of mobile devices among virtually all U.S. consumers has led to a strong trend among U.S. retailers to leverage such devices in developing technology solutions for both retailer and consumer benefit. We see this most prevalent in the development of mobile apps grocers develop to assist shoppers in tracking products and promotions of these products.

However, there are other ways in which retailers can tap into the consumer mobile devices that can also be of benefit to the retailer – that is, if these methods aren’t killed off by the government before they have a chance to prove themselves.

There is a debate circulating regarding one type of technology being used by retailers to increase in-store sales through data that leverages signals from shoppers’ mobile devices to enhance product placement and customer convenience.

This technology, developed by Path Intelligence, a UK company also assesses the optimum type and location of retailers in malls. The system is comprised of monitoring units installed throughout stores and shopping centers, and these units calculate the movement of consumers by sensing and measuring signals from their mobile phones. The data is continuously transmitted to a processing center where statistical analysis establishes the path of shoppers within the store and the shopping center.

Sensing data in this way can provide intelligence on specific areas of consumer interest within a single location as well as the nexus between consumers and the stores at which they shop. Practical applications include determining high traffic areas within the store, the strength of merchandising promotions, and how traffic patterns change throughout a given period of time. The retailer can access the information through a secure web-based reporting system. No information is collected that can identify the owners of those mobile devices being tracked.

However, Senator Charles Schumer (Democrat, NY), a legislator with a record as a consumer protection advocate made some challenging remarks regarding this technology, and vigorously objected to technology being tested over the year-end holidays in malls in California and Virginia to identify consumer foot traffic patterns. Indeed, he characterized the technology as an invasion of consumer privacy, and the tests were suspended following his comments.

Schumer claimed that the consumer should be given the opportunity to "opt in" as opposed to opting out: “If retailers want to tap into your phone to see what your shopping patterns are, they can ask you for your permission to do so,” said Schumer. “It shouldn’t be up to the consumer to turn their cell phone off when they walk into the mall to ensure they aren’t being virtually tailed.”

Although Path Intelligence asserts that all information is anonymous, Schumer has called on FTC Chairman Jon Liebowitz, to review it to determine whether it violates any existing regulations. Schumer’s emotionally charged claims that consumers’ phones are being “tapped” and they are being “tailed” require some fact checking.

Identifying consumers’ buying preferences is a fundamental goal of merchandising. Data collected from grocery delivery services provides information on choices and demographics. Identifying consumer traffic patterns in stores is hardly a new concept – milk is located in the rear of the store to drive traffic the length of the isles. Product placement on shelves has been the subject of studies conducted since the 1950’s. The resulting information has served the interests of retailer and consumer alike.

“This data is critical to grocery retailers in these constrained times as it allows them to quantify the space inside their stores and categorize different sections as high traffic/low traffic,” says Sharon Biggar, co-founder and CEO of Path Intelligence. “We think of it as treating the store like a Monopoly board. This enables the grocery retailer to accurately price and to lift revenue by selling high traffic, end-of-aisle space to manufacturers and having the data to back up the pricing for that space.”

Before jumping to the conclusion that sensing data collection is Orwellian, consider how and where it’s being done. There is nothing in the U.S. that restricts companies from currently collecting “probe” data on an anonymous basis from hundreds of thousands of cell phone users to derive traffic flow information based on the movement of cell phones in cars and on public transportation. The technology to which Schumer directed his comments is based on similar concepts.

Like data available to GPS users, information informing consumers about discounts on commonly purchased products or the ease of locating them in a store – not to mention shopping in a conveniently located store – is akin to finding the best route to a desired location.

Online retailers have long enjoyed the advantage of knowing their customers’ choices and identities based on the data collected through their online transactions. In the extraordinarily competitive and cost-sensitive retail grocery business, sensing data provides unbiased information from a large customer population and is a viable substitute for information readily available to online retailers.

The real question is whether the data collection is anonymous or, in fact, a process that identifies the individual or collects data from which the consumer can be identified.

“We cannot identify the individual from the information that we receive,” says Biggar. “The Information Commissioner in the UK has declared that the information we detect does not include personal information that can be used to identify an individual. Our system detects the temporary mobile subscriber number or TMSI. Detecting the TMSI tells you nothing about the handset itself, nor the individual owning that handset. Only the mobile networks can associate a TMSI number with a cell phone number.”

One of Senator Schumer's concerns was that even if Path could not identify an individual, its data could be linked to other data that could be used to identify the consumer. For example, could a third party link Path’s data to sales data or CCTV data.

This is not the case, says Biggar. “It’s not possible for a third party to link the data to an individual, no matter how circuitous the route,” she says. “The data we provide is aggregated information. We don't say phone '1243' went to aisle three to aisle five, rather our data would show that 1000 phones went from aisle three to aisle five. We can’t identify the consumer and the aggregated data does not provide any basis for others to do so. ”

Emotionally charged statements by a US Senator predictably plant seeds of suspicion. When made without a solid factual basis, they can be harmful to the interests of private enterprise and consumers alike as a negative impression lingers long after the public has moved on to the next sound bite. We would be remiss to kill such valuable technology without viewing all the facts, as it offers tremendous benefits for both retailers and consumers alike. As George Washington aptly put it: “Bad seed is a robbery of the worst kind: for your pocket-book not only suffers by it, but your preparations are lost and a season passes away unimproved.”

Editor’s note: We’d love to hear our readers’ opinions about this technology – do you think it’s too Orwellian, or does it offer great potential benefit to your stores? Email your response to [email protected], and we’ll post your answers in a future issue (with your permission, of course!)

Gerald O. Sweeney, Jr. is a partner located in the Chicago office of Barnes & Thornburg LLP. He is a member of the firm’s Litigation and Intellectual Property Departments, and can be reached at [email protected].