business news in context, analysis with attitude

The Wall Street Journal has an excellent piece about how the US Congress, concerned about privacy issues and the growing perception that technology companies care less about it than they should, has begun scrutinizing “how advanced technology increasingly follows shoppers around bricks-and-mortar stores.”

The story looks at how beacons are being used “to detect customers’ smartphones as they enter the store, allowing them to ping shoppers with promotions as they browse —and see where they linger,” and how “facial-recognition technology is being marketed to retailers as a way to flag people who have previously shoplifted or sought refunds for stolen merchandise.”

The Journal writes that “retailers say new technologies are largely aimed at improving the shopping experience, helping old-fashioned stores stay competitive with online merchants. In-store tracking helps alert customers to sale items, for example, and facial recognition can let shoppers breeze through checkout stands by speeding up the payment process.

“Stores say they’ve been forced to adopt high-tech data collection tools like beacons to remain viable as consumers do more shopping online. But in-store beacons haven’t been as impactful as hoped, often sending promo messages only to customers who have the store app open, for example. So while there is trepidation, there’s also strong interest among retailers in moving to the next stages of technology, particularly facial recognition.”

Sen. Roger Wicker (R-Mississippi) recently said, “It is clear to me that we need a strong, national privacy law that provides baseline data protections [and] applies equally to business entities—both online and offline.”

The Journal goes on: “The inclusion of bricks-and-mortar stores in privacy legislation is supported by online companies like Inc., where executives are concerned that internet businesses could be singled out for restrictions. But it’s drawing concern from traditional retailers who worry that their cutting-edge technologies could be banned or disrupted if they are included under the privacy law.

“Retailers also fret that uniform privacy rules could limit their ability to use longstanding data-collection techniques such as customer-loyalty programs. A landmark privacy law passed by California last year prohibits discrimination against shoppers who decline to share certain personal information. That could restrict businesses’ use of loyalty programs and leave stores vulnerable to litigation, retail groups say.”
KC's View:
There are competing interests at work here. Retailers - at least the savvy ones - understand that data is the coin of the realm. The more they know about their customers, they better they can serve them. (Of course, they also know that they can sell this data to outside parties, which gives them another revenue line on balance sheets that often are in distress.) This applies to both online and physical retailers, though the online variety - especially Amazon - has really shown the power of actionable data well acted upon.

But clearly, there are privacy concerns. Facebook has illustrated this vividly, and just last week, the story about how Amazon may be listening in to customers via their Alexa-powered system managed to get all of our antennae up.

This all is complicated, and I’m not going to solve the problem here. But it seems to me that a bottom line to the discussion has to be a high level of transparency - tell people what data you are collecting, explain how you are using it, delineate what the advantages are to shoppers, and then create an opt-in mechanism that empowers the customer to make the decisions.

Retailers need to be passionate, resolute advocates for the shopper. It is harder, it may not necessarily maximize every revenue option, but in the long run, it is the best and most defensible position.