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Attention shoppers: You are being tracked

Adam Jeffery | CNBC

Like dozens of other brick-and-mortar retailers, Nordstrom wanted to learn more about its customers — how many came through the doors, how many were repeat visitors — the kind of information that e-commerce sites like Amazon have in spades. So last fall the company started testing new technology that allowed it to track customers' movements by following the Wi-Fi signals from their smartphones.

But when Nordstrom posted a sign telling customers it was tracking them, shoppers were unnerved.

"We did hear some complaints," said Tara Darrow, a spokeswoman for the store. Nordstrom ended the experiment in May, she said, in part because of the comments.

Nordstrom's experiment is part of a movement by retailers to gather data about in-store shoppers' behavior and moods, using video surveillance and signals from their cellphones and apps to learn information as varied as their sex, how many minutes they spend in the candy aisle and how long they look at merchandise before buying it.

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All sorts of retailers — including national chains, like Family Dollar, Cabela's and Mothercare, a British company, and specialty stores like Benetton and Warby Parker — are testing these technologies and using them to decide on matters like changing store layouts and offering customized coupons.

But while consumers seem to have no problem with cookies, profiles and other online tools that let e-commerce sites know who they are and how they shop, some bristle at the physical version, at a time when government surveillance — of telephone calls, Internet activity and Postal Service deliveries — is front and center because of the leaks by Edward J. Snowden.

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"Way over the line," one consumer posted to Facebook in response to a local news story about Nordstrom's efforts at some of its stores. Nordstrom says the counts were made anonymous. Technology specialists, though, say the tracking is worrisome.

"The idea that you're being stalked in a store is, I think, a bit creepy, as opposed to, it's only a cookie — they don't really know who I am," said Robert Plant, a computer information systems professor at the University of Miami School of Business Administration, noting that consumers can rarely control or have access to this data.

Some consumers wonder how the information is used.

"The creepy thing isn't the privacy violation, it's how much they can infer," said Bradley Voytek, a neuroscientist who had stopped in at Philz Coffee in Berkeley, Calif. Philz uses technology from Euclid Analytics, of Palo Alto, Calif., the company that worked on the Nordstrom experiment, to measure the signals between a smartphone and a Wi-Fi antenna to count how many people walk by a store and how many enter.

Still, physical retailers argue that they are doing nothing more than what is routinely done online.

"Brick-and-mortar stores have been disadvantaged compared with online retailers, which get people's digital crumbs," said Guido Jouret, the head of Cisco's emerging technologies group, which supplies tracking cameras to stores. Why, Mr. Jouret asked, should physical stores not "be able to tell if someone who didn't buy was put off by prices, or was just coming in from the cold?" The companies that provide this technology offer a wide range of services.

One, RetailNext, uses video footage to study how shoppers navigate, determining, say, that men spend only one minute in the coat department, which may help a store streamline its men's outerwear layout. It also differentiates men from women, and children from adults.

RetailNext, based in San Jose, Calif., adds data from shoppers' smartphones to deduce even more specific patterns. If a shopper's phone is set to look for Wi-Fi networks, a store that offers Wi-Fi can pinpoint where the shopper is in the store, within a 10-foot radius, even if the shopper does not connect to the network, said Tim Callan, RetailNext's chief marketing officer.

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The store can also recognize returning shoppers, because mobile devices send unique identification codes when they search for networks. That means stores can now tell how repeat customers behave and the average time between visits.

RetailNext also uses data to map customers' paths; perhaps the shopper is 70 percent likely to go right immediately, or 14 percent likely to linger at a display, Mr. Callan said.

Brickstream uses video information to watch shoppers. The company, based near Atlanta, sells a $1,500 stereoscopic camera that separates adults from children, and counts people in different parts of a store to determine which aisles are popular and how many cash registers to open.

"Watching where people go in a store is like watching how they looked at a second or third Web page" on an online retailer, said Ralph Crabtree, Brickstream's chief technical officer.

Cameras have become so sophisticated, with sharper lenses and data-processing, that companies can analyze what shoppers are looking at, and even what their mood is.

For example, Realeyes, based in London, which analyzes facial cues for responses to online ads, monitors shoppers' so-called happiness levels in stores and their reactions at the register. Synqera, a start-up in St. Petersburg, Russia, is selling software for checkout devices or computers that tailors marketing messages to a customer's gender, age and mood, measured by facial recognition.

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"If you are an angry man of 30, and it is Friday evening, it may offer you a bottle of whiskey," said Ekaterina Savchenko, the company's head of marketing.

Nomi, of New York, uses Wi-Fi to track customers' behavior in a store, but goes one step further by matching a phone with an individual.

When a shopper has volunteered some personal information, either by downloading a retailer's app or providing an e-mail address when using in-store Wi-Fi, Nomi pulls up a profile of that customer — the number of recent visits, what products that customer was looking at on the Web site last night, purchase history. The store then has access to that profile.

"I walk into Macy's, Macy's knows that I just entered the store, and they're able to give me a personalized recommendation through my phone the moment I enter the store," said Corey Capasso, Nomi's president. "It's literally bringing the Amazon experience into the store."

Nomi then uses Wi-Fi signals to follow the customer throughout the store, adding to the information it maintains. "If I'm going and spending 20 minutes in the shoe section, that means I'm highly interested in buying a pair of shoes," Mr. Capasso said, and the store might send a coupon for sneakers.

If these methods seem intrusive, at least some consumers seem happy to trade privacy for deals. Placed, a company based in Seattle, has an app that asks consumers where they are in a store in exchange for cash and prepaid gift cards from Amazon and Google Play, among others. More than 500,000 people have downloaded the app since last August, said a company spokeswoman, Sarah Radwanick, providing information like gender, age and income, and agreeing to be tracked over GPS, Wi-Fi and cellular networks. Placed then sells the data to store owners, online retailers and app developers.

"I would just love it if a coupon pops up on my phone," said Linda Vertlieb, 30, a blogger in Philadelphia, who said that she was not aware of the tracking methods, but that the idea did not bother her. Stores are "trying to sell, so that makes sense," she said.

By Stephanie Clifford and Quentin Hardy of The New York Times

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