Geofencing: How retailers use smartphones to track shopping habits
“How about some new headphones? They’re on sale”: If you walk past a store using geofencing, a message like that could pop up on your phone – the latest way retailers are trying to win customers.
Smartphones are becoming ever more important for retailers, with the share of items purchased via mobile devices increasing all the time; geofencing offers sellers a new way to take advantage of smartphones.
With geofencing, customers who have downloaded a store’s app as well as activated push notifications will get an alert when they pass by.
Most people always have their smartphone with them, which means that, theoretically, they’re always accessible for advertising. More and more shops want to exploit this potential, says Ulrich Spaan, from the EHI trade research institute in Germany.
It’s not just limited to advertising. For example, merchants can also record their customers’ smartphone activity while in the store.
“With the help of the data analysis, the operator can better understand customer flows and, for example, adapt ranges, opening hours, shop design, staffing or marketing to the needs of the customers,” explains a spokeswoman for Minodes, a firm that compiles anonymised movement profiles for retailers.
However, retailers want personalised, rather than anonymous, data, Spaan says. “That’s the goal of most firms – that the customer enters the store and the dealer can see their whole profile,” he says.
This could work primarily through the apps that many retailers now offer. With site-specific offers and coupons, they want to entice customers to register. The retailers can then connect certain shopping behaviours to individual smartphones to gain insights.
Different technologies can be used to track how an individual customer behaves, Spaan says. For example, beacons: small Bluetooth transmitters that can be mounted on the wall, in the lighting or in electronic price tags, and which work similarly to GPS tracking. These beacons communicate directly with the customer via an app.
Technologies such as beacons use a combination of information about the needs and interests of customers, along with their location within the shop, to provide tailored offers and recommendations, says Stephan Tromp, the German Trade Association’s deputy chief executive.
“At the end of the day, this is nothing different from what has been happening in online retail for a long time,” Spaan says.
However, people tend to be more concerned about their data protection and privacy in “real life” than online.
Daniel Arp, from the Institute for Systems Safety at the Technical University of Braunschweig, recommends that people think carefully about what information they’re willing to entrust to which company.
“Once personal data is in circulation, it’s hard to regain control of it, and the potential danger of data misuse rises,” he warns.