Creepy developments in retailing

Gathering more information about customers is always appealing. If you know what customers are thinking, you should be able to serve them better. Tracking how people move through the firm’s website has long been seen as one of the advantages of on-line retailing. Now the Wall Street Journal reports that conventional retailers may be able to gather similar insights — albeit in a somewhat surreptitious and kinda creepy manner (New Wi-Fi Pitch: Tracker, Jun 18).

Wi-Fi giant Boingo Wireless Inc.  is getting ready to test a system that tracks traffic patterns in malls and stores by using the signals emitted by shoppers’ smartphones as they hunt for Wi-Fi networks. Meanwhile, start-up Nearbuy Systems is trying to sell retailers on technology that cross-references the websites shoppers visit on their phones with their physical location in the store.

Venues like stores, malls and airports are installing Wi-Fi networks to please smartphone-toting shoppers, who use them to get faster Internet access and avoid cellular-data charges.

But Wi-Fi technology also lets the network operator keep tabs on what users are doing—from where they’re standing to what websites they’re viewing. That lets retailers learn in what aisle shoppers are most likely to point their iPhone’s Web browser to Amazon.com. Mall owners have a new way to judge which storefronts attract the most foot traffic. And owners of Wi-Fi networks can turn their antennas into virtual billboards, charging a premium for ads sent to users’ phones in prime locations.

Here is technology provider Nearbuy System’s pitch for what they can do.

As someone who has thought some about retail operations. These are interesting systems. For example, I have seen systems that use cameras to track how customers move from one part of the store to the next. However, those don’t usually track individual all the way through; they can tell you that 70% of customers entering through the west-side doors turn right but they don’t follow the bald guy in the striped shirt each step of the way as he moves through the store. Following a cell phone allows closer tracking of just how an individual moves up and down aisles. The trade off is that it is only a subset of customers.

Offering on the spot coupons or information may be welcomed by some customers but I have to think that most would find tracking the web sites they are viewing as intrusive. I am also not sure whether that information all that useful to the retailer. I would have thought a retailer could tell where they are losing sales to online retailers just from tracking sales over time. Is it news to Best Buy that people tend to check the price of expensive items (like TVs or laptops)?

How sellers use information they come across also has relevance for another Wall Street Journal article. This one is about Orbitz and how they tweak search results based on your computer platform. Turns out Mac users are big spenders (On Orbitz, Mac Users Steered to Pricier Hotels, Jun 26).

Orbitz executives confirmed that the company is experimenting with showing different hotel offers to Mac and PC visitors, but said the company isn’t showing the same room to different users at different prices. They also pointed out that users can opt to rank results by price.

Orbitz found Mac users on average spend $20 to $30 more a night on hotels than their PC counterparts, a significant margin given the site’s average nightly hotel booking is around $100, chief scientist Wai Gen Yee said. Mac users are 40% more likely to book a four- or five-star hotel than PC users, Mr. Yee said, and when Mac and PC users book the same hotel, Mac users tend to stay in more expensive rooms. …

A Mac search for a hotel in Miami Beach for two nights in July displayed costlier boutique hotels on the first page of results, such as Sagamore, the Art Hotel and the Boulan South Beach, that weren’t displayed on the PC’s first page. Among hotels appearing in both searches, some pricier options (such as the $212 Eden Roc Renaissance and the $397 Fontainebleau) were listed higher on the Mac. Overall, hotels on the first page of the Mac search were about 11% more expensive than they were on the PC.

So is this helpful to shoppers? It could be. They are not offering Mac users worse deals; they are merely making it easier for them to see the deals they apparently prefer. Clearly, there are some Mac users who are going to be harmed (imagine a grad student who happens to own a Mac) but most could be better off.

The bigger question here is what other seemingly superficial categories might matter. Male vs. female, geographical location, education level etc are all obvious ways to slice and dice a customer base. Operating system preference seems much less tied to economic behavior (outside the fact that Macs are usually more expensive). This also becomes more relevant if firms start offering different prices (as opposed to presenting different orders) as a function of these characteristics.