Tracking consumers and adjusting inventory locations to improve retail performance

An article in the Wall Street Journal titled “Hot at the Mall:Heat Maps to Track Shoppers” (December 9,2013) describes heat sensor technology and cell phone tracking software used by retailers to identify shoppers routes through the store, bottlenecks, and products picked up. One store claims to have moved candles and perfumes from low traffic to high traffic locations, reduced bottlenecks by shifting popular items to less trafficked areas of the store and reduced wait times by getting customers to shop online when queues become long. Another store owners claims to have moved scarves to the back of the store after finding customers congregating there. Can brick and mortar retailers justify such tracking as a necessary competitive response to generate efficiencies to compete with online retail tracking ? Should customers be asked for permission before they are tracked in a store, even if their individual data is masked ? Does the additional information significantly increase privacy concerns over the use of store video for security in the past ?

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24 Responses to Tracking consumers and adjusting inventory locations to improve retail performance

  1. Zimi Surana says:

    With the emergence and widespread use of internet in shopping habits of consumer, it is important for the organisation to become flexible with this development. In this scenario if retail supply chains are only optimised for stores, it will lead to lower stock turn ratio, higher inventory and higher stock-outs in some cases. This will lead to either loss or lesser revenue for the organisation. It is therefore the need of the hour for retail supply chains to adapt themselves to cross-channel inventory coordination. This though comes with a huge IT infrastructure investment and training of employees to be able to get maximum out of it. The SKU level inventory tracking is an asset for an organisation as it gives a direct lead of customer demand and market condition. this leads to high accuracy in forecasting and optimised inventory for the organisation. Cross channel inventory coordination brings transparency in the value chain and reduces bull-whip. Providing features to the customer that enhances the customer experiences and simultaneously increase the efficiency to understand the customer behaviour will be a game changer for the industry.

  2. Randy Coker says:

    In today’s environment, data tracking systems are becoming more the norm. Attendance management using RFID (http://dailynightly.nbcnews.com/_news/2012/10/14/14425733-rfid-chips-let-schools-track-students-and-retain-funding-but-some-parents-object) has even been used to track student attendance. Some are looking into the ethical ramifications into these systems (http://journals.iium.edu.my/ejournal/index.php/iiumej/article/viewFile/187/234). Until these regulations have been vetted, I am not sure whether a brick and mortar can justify these actions based upon competitiveness. If all competitors have these systems in place, will people’s actions be analyzed using predictive analytics to analyze actions before they occur? If so, this is definitely crossing a privacy line.

  3. Emily London says:

    Can brick and mortar retailers justify such tracking as a necessary competitive response to generate efficiencies to compete with online retail tracking?

    I think it is a violation of privacy to track consumer habits by their cell phones. The only case where I can see them tracking data is by online coupons and the kicks/steps feature that stores like Target now has.

    Should customers be asked for permission before they are tracked in a store, even if their individual data is masked ?

    Yes, we don’t know who else may get a hold of that information. I do not believe that individual data can be masked if you are getting the data from a personal device. Retailers are having issues with security hacks and credit card information being stolen.

    Does the additional information significantly increase privacy concerns over the use of store video for security in the past ?

    Yes, there is much more detail being taken with the cell phone method compared to the store camera. First of all, the store camera cannot track everybody’s every move. Also the image of the store camera usually isn’t the best quality. Another thing is, when does the tracking stop? I can go to a Target store and they might track me all the way at home and determine my shopping habits by what I post on Facebook or watch on Netflix. It is going too far.

  4. Paul C. Barron says:

    As it relates to in-store tracking of customer movements, I don’t think it relates at all to being more efficient or competitive with online retail tracking in particular. Just go to a small retail store (400 sq. ft.) and you’ll notice that shop keeper organizes their store, window presentation, and labels in order to catch the eye of the customer as the customer walks by, or during initial shop entrance, or if the customer walks in with a child, etc.…and they do so based on observation made with their own two eyes. So larger stores using cameras to arrange their inventory is simply a scaled up version of that shop keeper’s behavior. Further, that store is the public domain, so permission does not need to be requested—after all individual data is not even gathered by these video cameras, so there is no issue of privacy violation. I think more and more the subject of privacy is being either blown out of proportion, misapplied, or misunderstood. How can someone be offended by a video store camera recording their shopping habits when they reveal so much more on Facebook. My opinion does change somewhat when it concerns cellphones. Using browsing data to deliver a customized advertisement bar along the screen is a non-issue; however, if they gather and store personal data, then it is wrong and a privacy violation issue.

  5. Patrick Lee says:

    Yes, brick/mortar can do so. Tracking is all ready being conducted for security reasons. Costs drive revenues, inventory and products available to customers. I’m of the opinion that expanding IT to capture trends;control inventory and customer purchases would aid in more finite inventory patterns and more focused supply chain decisions. Customers wouldn’t need to be asked….the process is just like Journalist do when faceless photos are taken for reports on obesity or issues with children. I don’t see privacy being an issue…the data is capturing purchase patterns for correct inventory, thus minimizing supply chain irregularities.

  6. Frank Griffin says:

    The recent tracking technology improves flow inside the store and allows for overall better customer service by ensuring the popular products are well stocked. This benefit, I believe out ways the possible downside. If individual data is masked, this technology is no more invasive than security cameras. Customers today are not asked for permission to have security cameras watch them, so I do not feel they need to be asked for permission for this technology. Technology advancements or alternative use for technology will always create social questions on the proper or improper use. I do agree we need to have these types of conversations involving technology to ensure we advance socially along with the technology and there is less imbalance. But as far as store tracking goes, I do not have a problem with this at all.

  7. Jimmy J. Guerrero says:

    Tracking individuals to identify behavioral patterns, whether in store or outside, is not necessarily a new thing. However, as tracking technology improves it can easily encroach more and more into our lives with the potential downside of becoming completely invasive. Reality these days indicates we are continuously being monitored since we all walk around with one or more “artificial implants”, which track our every move. The range and capabilities of these devices determine the type of data, accuracy, relevance, etc., they are able to collect. The issue that will “cook our noodle” is how this collected, and so available, personal data is put to use by the entities or organizations collecting it. If we as a society do not focus on handling this information from an ethically responsible standpoint, then there are no limits to what the outcome could be.
    Should consent or permission be asked from people before tracking them…? I don’t think so since making people aware of being tracked will automatically alter their otherwise normal behavior.

  8. Sooin Kim says:

    On site tracking information would be definitely interesting competitive advantage for retail shops probably not only to define the display SKU and its space usage efficiency but also to understand how the “interest”-“trial (put-on)”-“purchase” behavior and its time element for instance.
    I am not aware of the privacy regulation on this tracking but I expect the data collection would be okay under the condition to disguise individual information (e.g. fase, etc) and “inform” the customers who entering the shop about the camera observation. The shop can even use this as a marketing element potentially.

  9. Matt Geddie says:

    As the world moves to e-commerce, online stores have very focused data and metrics, I think it is only right that brick and mortar begin to invest in systems where they can properly reward their highest spending and most loyal customers, along with removing blockages to make the customer’s experience more enjoyable.

    Similar to online, when you visit a store you step into their “business”, I believe as a consumer you should understand you are on private property and are at will too tracking. Kroger has been utilizing a tracking system for a couple years now and is one of the main projects they reference due to their continued growth and success. You will always have the 10% who have an issue with the system, yet if retailers properly utilize the data and improve the customer experience, the consumer will be fine with it.

  10. Peter says:

    I totally agree with Matt in regards to brick and mortar stores investing in data systems and the customer’s understanding that they voluntarily go to that business. There are many ways the individual can protect their privacy electronically and if an individual is concerned they are free to do so. If a store was actively defeating an attempt of a consumer to protect an identity of data, then there should be concern. However, normal interaction in a store should be expected to be observed by a monitoring system and if you have electronic devices, they will be interacted with. This is a way for the store to maximize service for the customer and profit for themselves. If a store isn’t doing it, they will be eclipsed by a store that does.

  11. Mike Flatt says:

    I agree with Matt in general but would find myself likely in the 10% that he references. I’m a capitalist and believe that we have a right to earn provided we do no harm but and am torn as to whether this can be considered harm or not. Philosophically I could get behind this with either an Opt In precursor or at a minimum an easy Opt Out process.

  12. Oswin Joseph says:

    I think it can be justified – it makes for a better shopping experience for the customer; focused discounts for the customer which creates value; alleviates bottlenecks and ultimately helps the brick and mortars compete with the online retailers.

    I don’t think the store needs to ask the customer for permission as long as the store has no access to any data on the customer’s phone – though the notice of tracking of a customer should be prominently displayed at the front.

    I don’t think so in these scenarios that the use of store videos increases privacy concerns.

  13. Dan Skinner says:

    I agree with Paul C. Barron, this tracking is only scaling up what is already done by shopkeepers, and taking it electronic.
    I also agree with Oswin Joseph that this is the next logical step for brick and mortar stores.
    I do feel that stores that collect such data have a responsibility to maintain anonymity of their patrons. Currently, Big Brother is Watching, and those who fight against it are painted as enemies of progress. If we cannot stop this move toward big data, then we can at least fight to keep our personal, individualized data from being retained. None of these stores has the budget to employ solid e-security, so the prevention of personal data collection has to be done on the front end.

  14. Sandra Aldana says:

    As many have said, there is not much difference between the tracking you get when you go to a e-commerce where all your clicks, location, and habits are recorded than when going to a store. That said, there are two areas of concern.

    1. The store should not access any of my devices. They can check consumer’s movements and patterns as well as age, gender, etc. but it should stop there. As Emily said, where is the boundary? If you are shopping in a mall, would they track you all the way to your car and be able to identify you?

    2.The 10% that have problems with this as mentioned by Matt and Mike will have it very difficult to do any shopping, as they will not have alternatives. This problem increases as we are talking about older people for which their privacy threshold might be different than for those who live and breath on a digital world.

  15. M. Moore says:

    Brick and mortar retailers should take advantage of the latest technologies to improve their customer’s experience, that being enticing customers to various parts of the store to reduce crowding, direct them to multiple checkout counters to disperse queue and purchase time while also enhancing their ability to highlight merchandise that the retailers want to sell.

    As a customer leaves their home they are now in the uncontrolled world of monitoring. As an individual enters a store, it should be understood they could be taped for their security and the security of the employees along with controlling losses due to theft. So as your image can be captured, so can your thermal and digital profile. These various customer “Signature” can be used to improve the retailer’s customer service and efficiencies in getting products in front of the customer for consideration.

    Tracking the customer’s digital signature may be of concern. The key will be that is only track the signal location not user and information transferred. If that level of anonymity cannot be established retailers could offer apps that customers could download and agree to be monitored while in their store.

  16. LaBaron Hartfield says:

    I think there is a consensus among the respondents (including myself) to this blog post, that there is there are benefits to be gained from retailers accumulating shopper data to improve the shopper experience and drive sales. As data is collected, the privacy and protection of that data should be of the upmost concern – data collected of the individual and amassed bulk data.

    A far more far more interesting aspect to me is the ownership and permissions of the data once it has been collected. This article discusses capturing the data for the retailer’s own use, however should they be allowed to share data or commingle with other data sources gathered by others (i.e. using Facebook login and the fact you were looking at a shirt at a department store). Should retailers be allowed to sell marketing data on customers to other retailers (cameras may be owned and operated by landlords and not retailers).

  17. Courtney Metzger says:

    Like others, I believe the stores have the right and should use the data they collect to increase efficiency in their system. However, LaBaron, you bring up an interesting point. While I personally am open to this use of data, thinking of other end users and where the data (or video footage) may end up makes me uncomfortable.

    That said, like online retailers I believe the stores still have the right to utilized the data and to sell it. .I personally have not stepped into a shopping mall for at least a year. As online retailers continue to increase their responsiveness, these property management groups and retailers are going to have to continue to reinvent themselves to compete.

  18. It could be possible to classify our shopping habits but every individual likes to preserve their identity and could feel uncomfortable to know that they are not special. I think each customer is special even though they only have money to exchange for a product.

    I generally tend to get the stuff I need no matter where they are located in the store. When possible and often I go through the entire store and then start purchasing what I need. I hope other consumers also do the same and allocate time for shopping when possible and not purchase products what they don’t really want. To save shopping time, customers could make use of the store’s staff when they are searching for any specific product.

    I think customers should be asked for permission if they are tracked in the store for purposes other than detecting theft. I would like to call the term as “Residue Purchases” where shops make customers purchase products that the customers did not Want to purchase when they entered the store (as it amounts to tempting customers to purchase). I think stores should be taxed more for encouraging residue purchases just in order to increase sales.

    I feel less uncomfortable when online stores do the same tracking because it is just not as natural purchase as it is in a physical store. Though I do not think online tracking is same as physical store tracking, I think online stores should also ask permission for using the data for such analysis and taxed more if so will be done.

    I think it does increase privacy concerns for the stores using the video other than for detecting theft. Optimizing inventory positions and detecting hot-spots could be done may be during the early days when a store is opened and using already done research studies. It will be helpful if customers are informed of such usage by the stores so that branded companies can opt to stay away and deem such practices as cheap.

  19. Meera Gursahaney says:

    As a consumer I am all for retailers making my experience better. However, the potential benefits would need to be weighed by each retailer against not only upfront financial costs, but also the cost of lost business from consumers who may feel that their privacy has been violated. Customers should not be asked permission before this technology is used since they have made the choice to enter the public domain by entering the store. Stores should however post that this technology is in use to give consumers the opportunity to not enter the store if they feel that strongly about it. I don’t think there are any additional privacy concerns over what already exists from when you enter a store and are on camera to when you pay with your credit card and coupons customized to your spending habits print out.

  20. Brian Karabelski says:

    I believe brick and mortar retailers should be doing tracking. They are at a significant disadvantage to online retailers especially those that offer free shipping.

    Whether we agree with it or not, as soon as we leave our houses (or even sooner) we are most likely being monitored in some fashion. Through security cameras, public space cameras, traffic cameras and many other possible monitoring systems that we aren’t aware of. When we walk into a store as a customer, we are fair game as well. As with many items in the world today, how far we are being monitored and to the depth they are gathering information, may be a concern.

  21. Rodney Williams says:

    I believe that in order for brick and mortar stores to compete with online retailers then using this technology would be an important advancement. This will allow stores to filter customers to popular items, present less popular items to more customers, and allow stores to continuously adjust to customer traffic and buying patterns. Customers are able to shop online buy searching for exactly what they are looking for, if brick and mortar stores are able to direct customers to exactly what they need/want then it will make them more competitive against the online stores. Secondly, they would be able to use technology in a way that online retailers have been using for years. Online retailers have been tracking customer search and purchase history in order to tailor advertisements and products to what they believe that customer is most likely to be attracted to. Using the infrared technology would provide retailers a comparative advantage.

    As far as permission or privacy concerns go, it depends on what information is gathered and how it is used. Customers are already subject to surveillance recording for security reasons in most establishments. At least the infrared technology will only use heat signatures and not actually faces as in security cams. I believe that since the identity is masked and it is only being used for buying and traffic patterns, then I do not see it as a violation of privacy especially since surveillance footage or online tracking is not seen as privacy violations.

  22. Yana Simanovsky says:

    The ability for retailers to track consumers makes sense as long as the information is used in moderation. Meaning, the technology can’t be used to identify specific consumers or track their whereabouts. It has to be mega data. It has to be general data so that is what I mean in moderation. As others have stated, online retailers track us with cookies right now so it was only a matter of time before brick and mortar establishments found ways to compete with them. My hope is that consumers like us can benefit by reduced costs because retailers become “smarter” about volumes and what they place in their inventory so I don’t have to pay extra for their bad decisions.

    If the data collection is used in this way, I could see greater support being offered toward the use of this technology.

  23. Brianne Keyes says:

    I am not adamantly opposed to the tracking especially if it leads to an improved or enhanced shopping experience, however, like many others have said I would want it to be as “anonymous” as possible, not access my device or personal data, etc. Where I most question this method is more fundamental to the success and role of brick and mortar stores. As L.B. and others have touched on, I also do not frequent shopping malls and if I do, it is for a very specific pre-planned purchase that would take A LOT to sway me from my intended purchase or it is to research a purchase that will ultimately occur online. As I think more and more savvy consumers are moving away from brick and mortar stores (minus the exception for time constrained purchases or a worthwhile bargain) I doubt the results of such programs will ultimately influence today’s customer or shoppers of the future, therefore, not making it an efficient or justified investment for retailers.

  24. C. Thomas says:

    From a pure business perspective, I think it is essential for brick and mortar stores to continue to innovate if they are going to survive in an ever-changing marketplace in which purchasing is becoming increasingly e-centric and mobile. So, yes I believe they can justify this practice in order to stay competitive.

    From a personal perspective, I don’t want to be tracked while I’m in a store and will always opt out if given the option. We currently have laws in place which prevent the transmission of patient data for privacy reasons (HIPPA), so I think a more interesting question would be, “is it our right to have personal traveling and shopping data to be kept private like healthcare information?” The reason I think this is an interesting question is due to the amount of personal data that is recorded on us on a daily basis without our knowledge. From security system video footage, to CCTV monitoring in public places (even on the highway as we travel), to smart phone applications tracking our every move a lot of data is gathered about us every day. If the answer to the question is that we do have a right to keep our movements kept private regardless of if we are in a retail store, driving on the highway, or shopping online, much of what currently goes on in our lives would have to change dramatically.

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