Indoor Location Companies Announce Consumer Privacy Rules

Most major US retailers are employing or testing some form of location-based, indoor analytics. Using WiFi and in some cases other technologies, such as closed-circuit cameras or bluetooth beacons, retailers can now tell when and where shoppers went in their stores.

There’s a ton of valuable information that has never been available before: where consumers spent time in stores and for how long, their paths through the store, whether a display impacted purchases, the relationship between staffing levels and purchase activity and so on.

These insights are possible because a critical mass of consumers carry smartphones. And it represents a revolution for retailing. But there are also important privacy issues.

Nordstrom, for example, which was testing a system to anonymously collect shopper data and disclosed it to the public was unfairly accused of “indoor surveillance.” This combined with other developments in the burgeoning “indoor analytics” segment raised privacy concerns and came with the usual chorus of complaints from Washington, some of which were justified and some of which were just familiar political grandstanding.

Senator Charles Schumer was the most vocal politician to raise concerns about indoor location and privacy. This morning he and the Future of Privacy Forum announced a code of conduct that will govern indoor analytics and seek to protect consumer privacy.

The initial signatories to the code of conduct are Euclid, iInside, Mexia Interactive, Nomi, SOLOMO, Radius Networks, Brickstream and Turnstyle Solutions. This list doesn’t cover all the companies in the indoor analytics space, but I expect that others will generally abide by these rules as will retailers themselves.

The code offers ways for consumers (other than keeping their phones off) to opt-out of being tracked in stores. Consumer data will also be made anonymous and clear disclosures will also be posted. Sometimes people in this discussion (including politicians) forget that closed-circuit video has been in stores for a generation. That’s much more intrusive because it captures pictures of individuals. (The “online privacy” debate generally ignores offline data collection and targeting practices which are typically more comprehensive and intrusive than what’s going on online.)

As part of the newly announced code of indoor privacy, companies will also be required to gain affirmative consent if retailers want to later contact shoppers based on in-store activities. Finally the code says that any in-store data won’t be used for determining eligibility for employment, credit, health care or insurance. These are good rules and will give consumers confidence (hopefully) that nothing nefarious is going on.

Most indoor analytics will ultimately benefit consumers by helping retailers optimize staffing, create better store layouts and reduce lines and wait times. Beyond this there are a range of additional benefits to consumers from indoor location, which is the next major frontier in location based advertising and targeting.

Multiple surveys show that consumers are willing to share their location for tangible rewards or benefits (e.g., deals, loyalty points). And retailer apps will increasingly take advantage of indoor location to optimize the consumer experience.

Indoor analytics and smartphone data are already being used by companies such as Placed and PlaceIQ to help track the offline impact of online and mobile advertising. In addition Google, Facebook and Twitter are also getting into the act, trying to connect the dots from digital ad exposures to in-store visits and purchases.

Offline analytics and indoor location are fascinating and revolutionary, though little understood, new areas with much more to come.