NPR Story
2:53 pm
Thu March 27, 2014

Tracking Shopping Habits Helps Retailers Compete

Retailers are trying to find ways to better compete with online stores. Many are using high tech analytic tools to track consumer behavior through their mobile devices.

A company called iInside uses Bluetooth on mobile phones to tell big box stores, grocers, and even airports about consumers movements — where they go and how long they spend there.

Consumer tracking has raised the hackles of some privacy experts, but iInside’s CPO Patrick Blattner says his company is committed to protecting customers’ privacy.

Blattner joins Here & Now’s Jeremy Hobson to discuss how his company’s technology benefits business without compromising privacy.

Guest

Copyright 2014 WBUR-FM. To see more, visit http://www.wbur.org.

Transcript

JEREMY HOBSON, HOST:

This is HERE AND NOW.

And when you go online, you got to assume you're being tracked, especially if you're shopping. But what about when you go to a physical brick-and-mortar store? Well, you might be being tracked there too. Because if you're carrying your smartphone, companies could be able to track you. They want to know what you're doing, where you go in the mall, inside grocery stores, even in airports. Now, some privacy advocates say it is spying, but tech companies say the information collected is anonymous and can't be traced to an individual.

iInside is one company that helps retailers track and analyze consumer behavior with mobile technology. And we're joined now by the chief product officer there, Patrick Blattner. Patrick, welcome to HERE AND NOW.

PATRICK BLATTNER: Hey. Thank you for having me.

HOBSON: Well, your company uses Bluetooth to track people's shopping behaviors through their smartphones. How does the technology work?

BLATTNER: So what we do is we set up these nodes around stores, so in different locations. And what we can do is set the radio frequency size from a meter to up to 50 feet. And what we do is when you're in a store and you have your Bluetooth enabled, our devices listen. When you get within the proximity of one of our zones, we then understand the MAC ID address, and we encrypt and anonymize that, and then we can understand where that consumer is pathing(ph) through the store.

HOBSON: And why do you use Bluetooth instead of Wi-Fi?

BLATTNER: Good question. So when you look at Wi-Fi, Wi-Fi ping signals can be every 45 seconds, if you will. So you can walk a good distance in a store before you ping. In a Bluetooth setting, it's for close proximity, and you're constantly pinging signals. So we can pulse, if you will, every couple of seconds. So we can get close proximity and then dial down real small zone sizes in the proximity of about, let's say, three feet across. So...

HOBSON: So you want that real, precise information. And tell us why. What exactly are you able to do with that data?

BLATTNER: We've been able to understand where the customer goes first within a store, and we can actually set the visit length. So you have to spend a little bit of time in a certain zone before we count you as a visitor. And a lot of these areas, especially when you think of stores changing with store and store environments, and they have, you know, small 10-by-10-foot sections, you want to be able to precisely and accurately know where those people are within the store in the first location.

And the reason that's important to the retailers, because it's tied with awareness and intent to purchase from the promotion. So they can look at the promotions that have been going on and understand the first place that people go and tie that to awareness and intent to buy.

HOBSON: And you can figure out, for example, if somebody is lane hopping. Tell us about that.

BLATTNER: Yeah, in a grocery store. So think of yourself, right? So you're standing in line. You're checking out. What ends up happening a lot of times is, let's say, the manager comes over. He opens another lane up. So then you opportunistically jump over to that lane. Well, one of the findings that we found in a regional grocer was that people were lane hopping to the tune of 18 to 20 percent, which, you know, we weren't sure if that was a big number or if it was just for this regional grocer. And then we started to find out that this was a basic common phenomenon that was going on.

So of that 18 to 20 percent of people that were lane hopping, what became very important about that is that half of that, like, nine to 10 percent were actually lane hopping twice. And what that does to the customer is it adds an additional two minutes and 14 seconds onto your visit going through checkout if you lane hop.

In one of the grocery stores, it has 4,000 customers a day. And if 18 percent or around there are lane hopping on a daily basis, that's a quarter of a million people a year, right? And if you take that two minutes and 14 seconds and add that onto that, that's 10,000 hours a year, which equates to over 400 days a year of time wasted in lanes.

Now, carry that across a regional grocer of 300 stores, and if your most valuable resource is time, that's a huge, impactful opportunity for the grocers to use as a new benchmark to bring down.

HOBSON: Although it doesn't do anything about my dilemma, which is getting into the 10 items and under lane and being behind a lot of people that have a lot more than 10 items in their cart. But anyway, we'll leave that for another day. Patrick, what about what you're doing in airports? People might find this pretty fascinating that you want to monitor how much time people are spending in the TSA lines so that the retailers on the other side of security can have more time with their customers.

BLATTNER: Airports are probably the most profitable malls in America. If you think that the amount of people travelling through airports and the disposable income they have to spend, you know, come to find out that for every minute you're on the other side of TSA, it's about a dollar in revenue to the airport. So there is huge money and huge revenue tied to it. So more efficiencies in getting people through TSA are important.

HOBSON: OK. So there is some criticism, and I'm sure that some people listening to this are saying, wait a minute, who gave you the right to monitor what I'm doing with my cellphone or where I'm moving around within a shopping area or an airport?

BLATTNER: Mm-hmm. You know, one of things, we've been advocates in and lead the way in the privacy council that's been enacted about a year and a half ago. And most recently, there was a code of conduct that was signed with Senator Schumer of New York, and we were a lead in that. And what we do, I have no information on the consumer at all. We encrypt and anonymize and aggregate all the data up. And so we're trying to lead the way in being consumer advocates but also helping retailers, you know, grocers, as well as mass transit areas, be more efficient in their businesses.

HOBSON: Well - but do you think anybody is going to believe, especially given all we found out about how much we're being spied on, that you can't go in and figure out exactly who it was and un-encrypt your data?

BLATTNER: Well, you know, our whole business is founded on this premise, and that's why we're leading the way with the privacy council. And we've gone through a number of - we've had to go through a number of hoops in having people kind of look through how we encrypt and anonymize to prove that what we are saying is accurate and that you cannot backwards engineer it to then go and access the customer at a later date. So we've gone through a number of hoops to actually be able to get into airports and work with airports as well as grocers and big box retailers.

HOBSON: What's the next step for you? What's the future of this technology?

BLATTNER: Well, you know, it's a good question, because as, you know, as you look at what it takes to actually get into these locations, you have to put hardware inside. So if you think about GPS, GPS takes you up to the store. But you're going to have to put hardware in big box retailers or grocers to actually understand traffic patterns and behavior. And historically, there's been cameras, you know, for theft protection, et cetera, set up in stores and grocery stores.

But where these things are going is the big box retailers have to compete with the online companies such as Amazon, right, as they have these physical spaces to optimize. So what we're able to do is we're able to help them understand how to more effectively optimize. And where you then can take it is getting more granular in the detail and the data and understanding where the employees are versus where the customers are to help better engagement for the retailer with the customers who have spent time to go into their stories.

HOBSON: In other words, so long to that 15-minute break that was supposed to only be 10 for the employee and the store.

BLATTNER: You know, it's being more efficient in your business, right? And we have a number of ways to display this information that are helping retailers, kind of, pair those two together. You know, a lot of companies think in terms of having a help button, right? You press the help button, someone would come and help you. But if we can show the retailer where the majority of the customers are at different times of days a week, you know, we can help them more effectively staff appropriately and pair those two together so they can help the customer.

But also, at the end of all of this, if retailers do not optimize their stores with these physical footprints spread across the country, the online retailer is going to put them out of business. So they have to get more effective and more efficient in how they do business, and some of that is using technologies like ours.

HOBSON: Patrick Blattner, chief product officer for iInside, which helps businesses track and analyze consumer behavior. Patrick, thanks so much for joining us.

BLATTNER: Thank you very much for having me.

ROBIN YOUNG, HOST:

And a quick note, Jeremy, Radio Free Asia is reporting that an order has gone out to North Korean students to cut their hair like leader Kim Jong Un, a buzz cut around the bottom and long on top. But apparently, no one is doing it, except for our director, Mark Navin.

HOBSON: Presumably not out of loyalty to Kim Jong Un.

YOUNG: We will tweet a picture...

HOBSON: We think...

YOUNG: ...yes @hereandnowrobin. HERE AND NOW is a production of WBUR Boston and NPR in association with the BBC World Service. I'm Robin Young.

HOBSON: I'm Jeremy Hobson. This is HERE AND NOW. Transcript provided by NPR, Copyright NPR.