Video surveillance systems and cell phones are now being used by brick and mortar retailers to track consumer behavior in ways not anticipated a few years ago. One retailer reports a 20 percent sales gain after it began using one of the new consumer tracking technologies.
Merchants know that the better they understand consumer behavior when it comes to buying, the more stuff they can sell to them. In the online marketing world, your surfing and buying habits are tracked by online retailers, ad networks and data warehouses. Behavioral tracking on the Internet is controversial because of privacy issues. I’ve written previously about efforts to preserve consumer privacy amid such technological capabilities. You can find those posts here.
Until recently the only ways brick and mortar retailers could obtain insight into consumer behavior has been through the use of loyalty programs, coupons and consumer surveys. The information is collected over time to provide information that can be used to target consumers based on their previous buying habits.
What these programs do not tell stores is the behavior of consumers before the purchase took place. What aisles did they visit? What products did they show an interest in? How long did they linger and where? Consumer surveys about such things are often unreliable because consumers often say one thing and do another.
These questions are now being addressed through the use of new in-store technologies to give retailers a better handle on how consumer behave in malls or individual stores. These systems track your behavior whether you buy or not. The intent is to better understand what kind of in-store variables affect the purchasing process.
While in-store consumer behavior tracking is not wide-spread yet, it is growing as the technology becomes more sophisticated. How well it will be accepted will depend on the return of investment it generates. At least one store claims a 20 percent improvement in sales after implementing one of the technologies.
What kind of technologies can provide this consumer data to retailers?
Repurposing Security Cameras: There are at least two vendors, RetailNext and 3VR, that use video from a store’s existing video surveillance system to help retailers understand consumer behavior.
RetailNext’s software analyzes the video from a retailer’s security system and correlates it with sales data. Their software can also integrate with other hardware appliances, e.g., motion sensors, radio-frequency identification (RFID) chips, etc to expand understanding of consumer behavior. The software provides information formerly not available to stores regarding how consumers traverse the store and interact with displays and products.
Knowing which areas of a store sees more traffic allows retailers to better position sales staff, point-of-purchase displays and specific merchandise. Coupled with specific hardware appliances, it could even provide information as to how often a product was touched or picked up by consumers.
RetailNext now has about 40 retailers as clients, including Family Dollar and American Apparel. Montblanc, a luxury retailer, has been testing the technology in one store for over six months. Rodrigo Fajardo, Montblanc’s brand manager in Miami reports that the RetailNext’s software has helped boost sales by 20 percent and that they plan to expand its use to a dozen locations.
3VR, a maker of security systems has a similar method for tracking consumers while they are shopping. T-Mobile, in Bellevue Washington uses their technology in some of its stores to track consumers’ movements within their stores, including how they move around, how long they view certain displays and which phones they pick up and for how long. 3VR reports that they are now testing facial recognition software that could identify the sex and approximate age of store visitors. This would allow their clients to segment in-store consumer behavior by these variables.
Cell Phone Tracking: At least one vendor, Path Intelligence, has been selling technology (Footpath) that tracks a cell phone’s signal to track consumer movements within a building. The company based in England states that it currently tracks more than one million customers a day in Europe with its technology. It is used primarily by malls and not individual stores because of the limitations of cell phone positioning. The resulting data can be used by stores and mall operators to determine the areas with highest consumer traffic. Some malls also use the technology to determine the nationality of their visitors using the country code at the start of their phone numbers.
Path Intelligence says it doesn’t record anyone’s identity and alters the phone number before storing it so that the data cannot be linked to a specific person. The malls post signs near their entrances and at directories that inform shoppers that their cell phones are being tracked and advise them to turn them off if they don’t want to be tracked.
Footpath has been introduced in the United States and two malls started to use it. The testing was suspended after privacy objections were raised by Senator Charles Schumer. Both retailers and their tracking vendors say that their efforts are no more intrusive than what is done by online retailers and ad networks.
Despite the privacy concerns, expect these kinds of in-store consumer behavior monitoring technologies to become more common as they become more robust. Retailers are looking for ways to make decisions to improve sales based on real data instead of what are considered “best practices.” If Montblanc’s 20 percent sales increase can be replicated by other retailers, expect in-store tracking systems to become as common as online behavioral tracking systems.
One example of questioning best practices is RetailNext’s analysis that consumers pay greater attention to products placed in the center of an aisle. Conventional wisdom is that consumers pay more attention to the end of an aisle and that’s why food distributors pay a premium to locate their products there.
Real data always trumps conventional wisdom!
