Shoppers’ location data used by stores

WASHINGTON - Signals emitted by smartphones leave a digital trail that retailers can follow to find out how long shoppers linger in front of a sales rack or languish in a checkout line.

A growing number of mobile-analytics companies use the Bluetooth and Wi-Fi beacons broadcast by smartphones to help retailers monitor customers’ movements in shopping centers, casinos, restaurants, hotels and airports.

One such company, iInside of Yorba Linda, Calif., describes on its website that its sensors can pinpoint a customer’s location within a single yard of floor space.

On a larger scale, mobile carriers such as Sprint, AT&T and Verizon also use location data gleaned from cell towers to send ads for nearby businesses to customers’ phones, for example, or to prepare marketing reports about how many subscribers visit a city’s football stadium - and what kinds of applications they use during the game.

Proponents of the technology say the data gathered helps brick-and-mortar retailers compete with online rivals by personalizing and streamlining the customer experience. But consumer advocates warn that the mobile-tracking trend underscores the need for stronger privacy laws. Federal regulators are taking a closer look at the practice.

“Our understanding is that in many cases this is basically invisible to consumers, so we want to look at whether retailers or the companies they’re using are notifying customers of what’s going on,” said Amanda Koulousias, a staff attorney with the Federal Trade Commission, which recently hosted a seminar about mobile tracking in Washington, D.C.

Businesses that collect and sell mobile-location data are eager to demonstrate that they’re capable of selfregulation. In a move timed to coincide with the FTC’s seminar, the Future of Privacy Forum, a research center in Washington, announced the creation of a website, smartstoreprivacy.org, that allows consumers to opt out of having their locations mapped by participating companies, including iInside.

The same group of companies signed a voluntary code of conduct, agreeing to collect only “depersonalized” location information unless customers give consent, and to alert customers to the use of tracking technologies by promoting the use of datacollection signs in stores.

“At the end of the day, I think market forces prevail, and those retailers and other businesses that violate the trust of their consumers will be punished by the marketplace more than anything else,” said Jim Riesenbach, the chief executive officer of iInside, who was a panelist at the FTC seminar.

Riesenbach pointed out in an interview that surveillance in stores is nothing new,although mobile technology allows retailers to analyze customer behavior in greater detail than ever before.

“There have been camera systems in stores for many years, not only for a surveillance standpoint but also from a traffic-counting standpoint,” he said. “There’s systems in stores that allow retailers to check how many people walk in the door and how many people walk out the door and things like that, and so what we’re doing is taking that to a much more granular level.”

Here’s how it works: Riesenbach’s company sets up sensors in clients’ stores. The sensors pick up probes emitted about every 60 seconds from Wi-Fi-enabled smartphones, and continuously by Bluetooth-enabled smartphones. The probes include a 12-digit code, known as a MAC address, which is unique to each phone.

Using a scrambled version of the MAC address, the sensors can monitor how long a customer waited for a cash register, which aisles the customer browsed and how many times that customer returned to a store or visited different stores in the same chain.

The data compiled don’t include personally identifiable information such as users’ names or addresses. In that sense, proponents say, it’s similar to a real-time traffic map that shows cars identified by license plates.

More retailers are quietly testing the technology. The number of stores that installed iInside’s sensors grew eightfold last year. Riesenbach declined to identify any of his company’s clients, however.

His reticence speaks to the sensitivity of mobile tracking,as businesses try to take advantage of the new technology without alienating customers.

“Our clients are basically private about what they are doing,” he said. “They don’t know how it’s going to be reported; they’re worried that things can be taken out of context.”