The field of retail science is well-established – it’s been around for decades – although it has largely remained under the cultural radar. Lately, there’s been a lot of media buzz about the latest innovation in retail science: the use of in-store location tracking technology. Businesses high and low, from Nordstrom to Family Dollar – and even local businesses like Philz coffee (where I live in San Francisco) – have recently started using location tracking to gain insight into their customers’ in-store movements.
Here’s a summary of how this tracking technology works. Your smartphone continually “pings” a signal outward in an effort to gain Wi-Fi connection. Since each phone has a unique ID, companies are able to leverage this signal to determine their customer’s shopping behavior. The technology doesn’t do anything rogue – like hack into your phone and steal your contacts – but it acts almost like a customer “fingerprint.” The customer doesn’t need to opt-in; it just happens when you enter the store and your phone does its thing.
At this point, the dominant use of this technology is to determine in-store customer movement and the amount of time they spend at a location on the retail floor. Over a period of time, it maps how customers move, where they get stuck, how much time they spend in one spot, and (if they’ve been in the store before) how long it’s been between visits. As you can imagine, for retailers this is valuable information because it helps them better meet their customers’ needs. With these details, shopping centers as well as individual retailers are able to provide more amenities, a better mix of stores within a retail center, and better customer service (like the right seating configuration for the couches in the lounge area). And customers benefit because they will ultimately be able to get a store that’s more conveniently designed, easier to navigate, and with a merchandise mix that’s better catered to their needs.
An emerging, although not yet dominant way of using this technology, is to layer on to this “fingerprint” to demographic data: Are you a big spender? What categories do you usually shop? What do you frequently buy in that store?
The future of retail will be leveraging this technology to create a fully dynamic in-store experience that’s more catered to each unique customer. Promotions and details will be able to be synergistically linked with the customer as they move around the store. A frequent buyer of soy milk? Here’s a coupon for a new soy milk brand that’s pushed to your phone as you pass through the milk aisle.
In many ways, what we’re seeing is what people have become accustomed to while they’re using the internet. On your computer, digital cookies passively track your online behaviors so that ads and promotions can be tailored to you. This will be a similar dynamic, however, in-store.
A critical piece for companies to remember as they implement these new tracking technologies is that this approach only solves for part of the puzzle of how to best meet customer needs. Location tracking determines what people do in store, which is a really great research foundation. However to paint the full picture so that stores can create the best experience for their customers, they need to understand why that person is spending an extra two minutes in the pain medicine aisle versus in the allergy section. Ethnographies, shop-alongs, and in-depth customers interviews are essential to pair with in-store tracking: it provides them the voice of their customer.
I’m excited to see how consumers and retailers will feel this technology impacts the in-store experience.