Retailers turn to smartphones to track customer shopping habits
Published Sunday, May 25, 2014 11:47AM EDT
As the holiday shopping season opens, shoppers will be armed with smartphones and an array of apps that compare prices, offer gift suggestions, provide price alerts and more. (Andrey Arkusha/Shutterstock.com)
TORONTO -- Before store owner Melissa Davis started using mobile analytics, she didn't know much about her customers shopping habits aside from how many came into her trendy sneaker shop each day, and how many of them bought a new pair of kicks.
But after signing up last September with Toronto startup Physicalytics, Davis can now tell you the number of people who walk past her Ugly Dukling store at 3 p.m. on a Tuesday, how long the average customer lingers at the window display, and how many times they've shopped there.
Using wireless Internet and Bluetooth technology linked to consumers' smartphones, retailers can now track shopping patterns the same way online retailers have done for years.
The data has helped Davis make key decisions on staffing schedules, what shoe lines to carry and how to make the most of her store displays.
"I realized what colours and styles that people liked more, what made them gravitate to come into the store more," said Davis, whose downtown Toronto shop specializes in basketball shoes and streetwear clothing.
Analytics -- finding patterns in recorded data -- has long been a major component of retailing and, with the advent of online shopping, it's an area where e-commerce has always had a leg up on traditional brick-and-mortar stores. An e-tailer can tell how many times a customer has visited its website, what items they browsed and recommend products based on demographics.
Now, owners of traditional stores can have a glimpse into the same type of data.
"Generally, before this, the inside of the store was a complete black hole," said Alexei Agratchev, chief executive at RetailNext in San Jose, Calif. "Once you start shining the light there, you can improve and see pretty dramatic results."
The Silicon Valley tech start-up uses algorithms to interpret data taken from surveillance video cameras and smartphone trackers installed inside some of North America's biggest retailers.
The video cameras and Wi-Fi trackers can tell store owners important details, like how long a customer spends looking at a specific pair of jeans, whether they take them to the change room and if they end up buying them. Wi-Fi trackers, which can be set up on store shelves, gather data by automatically activating and reading anonymous identifiers in customer's smartphones.
Beyond the identifier, which is a long list of numbers unique to every iPhone, Android, or BlackBerry, retailers do not receive any other personal information about the phone owner.
RetailNext said its mobile analytics technology is used at 400 locations in Canada, including at clothing retailer American Apparel, as well as Bloomingdale's and Verizon Wireless in the U.S. The cost of buying the software to analyze the data can range anywhere from hundreds to thousands of dollars a month, depending on the depth of the information requested.
It allows stores to improve on one of the reasons people still like to shop in person: customer service.
"Today, if you compete based on your product availability and price, if that is your only differentiator, it is going to be very hard for you to stay in business as a physical retailer," he said.
Lori Schafer, executive adviser of retail for analytics company SAS Institute, said the retail industry is currently at the "cusp of a transformative shift," as more retailers realize the potential of mobile analytics, like low-energy Bluetooth beacons.
The beacons work by sending marketing messages and other information to shoppers' phones when they are in a retailer's set area.
Unlike Wi-Fi trackers, those who receive messages via beacons and Bluetooth must first "opt-in" or have downloaded a retailer's app.
Last year, Apple introduced iBeacon with the latest update of its operating system and started testing it at some of its stores in the U.S. When customers walk into the Apple stores, the beacons send a personalized "Welcome" message to their smartphones, and then a reminder for customers to update their phone software.
Other retailers in the U.S., including the department store Macy's, grocery giant Safeway, and clothier American Eagle Outfitters, are also using the technology to send customized discounts to customers' phones.
Schafer said the power of marketing directly to consumers at the "point of decision" can be paramount to a retailer's success, as customers begin to get used to the idea of receiving targeted advertisements, messages and promotions while they are shopping.
Even though the possibilities are limitless, she said retailers have been reluctant to aggressively test beacon technology due to fears of inundating the consumer with offers, or breaching their sense of privacy.
"The retailers need to know how much of the beacons they want to use and figure out whether they should crawl, walk or run (with the technology)," said Schafer, who is a director at the National Retail Federation in the U.S. and author of Branded, a book about retailers and social media.
"They don't want to get the consumers spooked, or bombard them with a lot of incentives every time they walk down a store aisle."