Privacy Issue

Big retailers becoming more like Big Brother?

Cox NewspapersNovember 21, 2012 

— Saks associates can let you know your favorite jewelry is on sale, Lowe’s can tell you how much garland you bought last year and somewhere underneath it all, computer programs are tracking every purchase and every social media “like” to build a better profile of you.

Does this feel creepy, or convenient, for customers? It depends on when and how retailers reveal what they know about you.

Expect to have some ah-ha moments during your holiday shopping this year, said Kurt Kendall, retail specialist with Kurt Salmon consultants. But it’s nothing like you’ll experience in the near future, when retailers get social media fully integrated into the customer profiles they create. Someday soon, retailers will be pushing you to buy that exact sweater you pinned on your Pinterest account.

Even today, stores are not revealing all they know about the customer because they don’t want a backlash, Kendall said.

“You want to be personalized. You don’t want to be creepy,” Kendall said. “People do not want to feel like they’re being stalked.”

Retailers operate on extremely tight margins, and pioneers in big data could increase operating margins by more than 60 percent, a recent McKinsey Global Institute report states. Retail is a sizable portion of the economy, but has been shrinking, and the industry’s overall share of consumer spending has dropped, the study found.

So stores use data mining to try to sell more to the customer.

Natalie Ellis of Lake Worth, Fla., said she gets emails from Amazon pushing a product the minute she buys something online. But as a participant in the online retailer’s loyalty programs, she expects the interaction.

“I don’t have a problem with targeted marketing as long as they’re telling me about a sale or something I buy,” Ellis said.

To some extent, stores have better information because they are tracking purchases and behaviors themselves, rather than just buying a report that describes the general demographics of their customers. Retailers supplement this with data mining from outside sources, but even with vendors such as Foursquare, they can access customer information in real time.

Saks Fifth Avenue CEO Steve Sadove said the new information helps associates better serve customers. When a sales associate rings up a customer, he has that person’s online and in-store buying history at his fingertips. Data translates to better stores and better customer service, he said.

“We’re clientele based,” Sadove said. “The associates build relationships with their regular customers.”

Luxury brands invest in a higher level of service and empower associates with these types of information, Kendall said.

But even small shops can use something like Foursquare, which offers a free dashboard to track customer check-ins.

Most of the time, customers cooperate in their tracking. They check in on Foursquare, they join loyalty programs and they give their email to receive notices of sales. But not everyone realizes how sophisticated and pervasive data mining has become.

Digital spying is everywhere, said Jeff Chester, executive director of The Center for Digital Democracy.

“Distinctions between offline and online are being rapidly obliterated and that’s because of the growth of mobile phones,” he said.

Data about you is being gathered everywhere you go because people use their smartphones to check websites, play games and get directions. And that data is being compiled and sold.

Chester said people should be concerned about their privacy, because the government has few safeguards, and we rely on the agreements companies like Google and Facebook have made to be more careful when collecting data.

Niko Karvounis, co-founder of startup Quovo, which uses data tracking to shape investor portfolios, said people would still sign up for Facebook and Google even if they realized the extent of the data gathering because the services are so useful.

“I think the issue as a business is you just have to be sensitive about how you act on that information,” he said.

Target found that out earlier this year when it sent baby-oriented product promotions to a teenager based on her behavior, but her family didn’t yet know she was pregnant. However, such programs as Lowe’s MyLowes account get buy-in from the customer for tracking, and the home and garden retailer suggests more things to buy at your request.

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