How location tracking will change the way you shop

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Indoor marketing parameters

Indoor marketing is different from e-commerce, which is geared toward online purchases. Rather, it’s about everything that happens up to the physical point of sale—something brick-and-mortar retailers know very little about.

“There is a lot of use for this information,” said Bob Rosenblatt, a consultant and former chief operating officer at Tommy Hilfiger Group. Compared to consumer apps, a lot more activity happens behind the scenes, he said, because store executives are already accustomed to reviewing and analyzing data to make decisions.

Research by Opus suggests retailers might be on the right track. In the U.S., most people already use smartphones in stores to do things like look for coupons, compare prices, or pull up product reviews, surveys have shown.

Indoor marketing builds on those habits, with the hope that consumers will allow the occasional pushed offer, or even some tracking, if they feel they are getting something out of it.

There’s plenty of futuristic thinking in the area. In a couple years, brands may be buying ads through Google not just to appear on websites, but to someone standing near a particular item in a store.

“As a brand, you could market to people in the store without paying the store, which changes the retail business in a significant way,” said Ben Smith, CEO at Wanderful Media, which operates local shopping sites.

“The playing field between online and the in-store experience will be leveled,” predicted aisle411’s Pettyjohn. Right now, websites know your preferences, but so too, he said, will stores.

Another idea is to install LED lights that blink so fast the human eye can’t see them, but the camera on a smartphone can. The light could be used to send messages or alerts to people’s phones, said Don Dodge, a developer advocate at Google.

Dodge, who helps developers build new applications on top of Google technologies, is also looking at new sensor technologies that could detect movements down to a centimeter. He wouldn’t say if it was Google developing the technology or one of numerous startups working in the space.

“There are many players in this,” he said.

Major retailers interested

Of the top 50 major retailers, Dodge estimated roughly half are looking into some form of indoor-location technology.

One of the biggest hurdles is being able to integrate all the different technologies to make indoor marketing work. “You can build a great app, but then the infrastructure may not be there,” Dodge said during a keynote at the Place conference.

Another challenge is that current GPS technology does not provide a very precise location. Some vendors said their services provide accuracy of five to 10 meters. But less than one percent of stores are using the advanced technologies discussed at the Place conference, said Alexei Agratchev, co-founder at RetailNext, which does in-store analytics for retailers like Verizon and American Apparel.

Nokia said it has mapped 99 percent of the major shopping malls in the U.S. and Europe, but has not done so at the aisle level in every case.

Privacy concerns loomed large at the show and were the theme of many questions for panelists. Last year, Nordstrom began tracking customers’ movements by following their phones’ Wi-Fi signals. Although it posted a sign telling customers they were being tracked, it ended the programthis past May, partly because of complaints from shoppers.

At the location conference this week, some said Nordstrom hadn’t done a good enough job of explaining to customers the benefits of what it was doing.

Companies need to be transparent about what they’re doing and why, said Jules Polonetsky, executive director and co-chairman at the Future of Privacy Forum.

“We’re never going to convince consumers that they should love data exchanges or marketing,” he said. But instead of burying their data gathering in a long privacy policy, retailers should promote the types of benefits Amazon offers with its recommendations, Polonetsky said, and tell customers, “We recommended this to you because you liked such and such.”

Chandu Thota, an engineer at Google, agreed that companies need to explain the benefits to shoppers. “But phones are very personal,” he said, and when stores try to gather location data, customers may be turned off by the idea.

GISi Indoors installed its Wi-Fi sensors at the Place conference to map the location of attendees, denoted by red dots on a map of the hotel displayed on a screen. Location tracking still isn’t an exact science, though. Occasionally, a red dot would zoom by, cutting across a wide swath of the hotel.

“That’s a car outside that was picked up by our sensors,” a company representative said.

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