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Location-based services: Controversy at every level

Lamont Wood | Jan. 22, 2014
Like it or not, commerce increasingly involves keeping tabs on the customer's location.

GPS signals typically don't penetrate buildings, so determining presence inside a store requires additional technology. Meanwhile, if the information is shared with other stores, it raises all sorts of questions, notes Evan Schuman, founding editor of the Storefront Backtalk newsletter and a retail technology consultant.

"As you enter a gift store they could know you just left a flower store -- but what if you were a married man buying for another woman?" he suggests, adding that stores are not sharing such data yet.

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.

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.

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.


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