In Depth

Location-based services: Controversy at every level

Like it or not, commerce increasingly involves keeping tabs on the customer's location.

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Shopkick -- the service that Stevenson uses -- bills itself as the most popular location-based service gathering data at the presence level. Since its introduction four years ago, Shopkick has been based on a box that emits a 21,000Hz tone overlaid with a modulation that is different in each store, explains Cyriac Roeding, co-founder and CEO of Shopkick. A free app on the user's smartphone hears the tone, decodes the modulation and decides what store its owner is inside of.

Shopkick
Mobile app Shopkick gives customers loyalty points -- convertible to gift cards and cash -- just for walking into a participating store, among other transactions.

Adults cannot hear tones higher than 16,000 Hz, and so shoppers are unaware of the signal, Roeding says, adding that while dogs -- some of which enter stores as service animals -- can hear the tone, it is not loud enough to bother them.

The company started shipping the product in 2010, and its ultrasound boxes are now emitting pulses in about 10,000 stores in the U.S.; the company claims revenue of $500 million annually.

Roeding says Shopkick users spend 30% to 60% more than other customers when shopping. For her part, Stevenson says her shopping habits have changed "just a little" since adopting Shopkick. "It might bring new products to your attention that you might not have noticed," she says.

Department

Beyond knowing that a customer has entered the store, the merchant might like to determine the position of the customer within the store. Traditionally this has been done with routers that triangulate the strength of the Wi-Fi signal of a customer's smartphone. The Wi-Fi emissions of a phone can be tracked passively, without any need for the owner to opt in, and each phone can be identified uniquely through its MAC address, although the tracking system will not know who owns the phone. There may also be a store app that provides various shopping services, but also encourages the customer to opt in so the store system can identify him or her.

"Any meaningful retailer has some effort in this space underway," says retail industry analyst Charles Golvin.

The most recent development has been adding Bluetooth low-energy (BLE) detectors, confusingly called beacons, to the triangulating routers. BLE is part of the Bluetooth 4.0 standard used on late-model smartphones, and permits one-foot detection accuracy with small, inexpensive devices that have a battery life of several years, explains Kevin Hunter, director of product management at Qualcomm Retail Solutions. Passive tracking with Bluetooth is possible just as is done with Wi-Fi, without any need for the phone's owner to opt in, notes Schuman.

"It costs 40 bucks, you stick it on the wall, and its batteries last five years," adds Roeding, whose firm is offering BLE as an enhancement for its Shopkick system. "It can also remind you to open the app in the store, if you opted into that; the fact that the user had to remember to open the app was a drawback in the past," he says.

The resulting location data is not usually overlaid on a map, as that would involve the additional expense of mapping each store, Hunter adds. The stores are typically content to know what department the user is in, he notes, so they merely need to label the beacons by location.

Privacy?

But map or no map, customers are being electronically followed around the store. Storefront Backtalk's Schuman recalls a department store that put up a sign telling customers that their smartphone's Wi-Fi emissions were being tracked unless they went to a website and entered their phone's MAC address to opt out -- generating so many complaints it stopped the tracking.

"The lesson is that the customers don't like it -- or that putting up the sign was a bad idea," he notes.

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