Big brother has nothing on big retailers.
Thanks to big data, merchants are learning how to accurately predict their customers' behaviors, wants and needs. And they are getting eerily good at it.
In fact, in less than 20 years, it's possible that by using predictive analytics, a retailer may know exactly what a customer wants before they even realize it.
"Retailers will be able to predict what we need when we need it," said Chris Donnelly, managing director for retail at Accenture Strategy. "And their predictions will continue to get more refined until eventually they will be able to predict what skirt or shirt you are going to buy."
It's all about making the shopping experience more personalized and delivering things in context for consumers, said Brendan Witcher, an analyst at Forrester Research. And that means studying their customers more closely in new ways.
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"Yesterday retailers inferred what drove customer behavior, but today they are thinking differently because of big data," explained Witcher. "Tomorrow retailers will be utilizing big data solutions to understand the customer from beginning to end."
But just how far will they go?
How retailers will get inside your head
From what you post on social media to the location information captured in your phone, retailers are already starting to collect more data from third-party sources to get inside your head—and in your wallet.
"Retailers have the biggest of big data," Donnelly said. "And that pile of data is only getting bigger and bigger every day. ... They know more about their customers than anybody else."
New technologies and platforms, like beacon technology and social sites, are equipping retailers with new information about customers that allows them to create a tailored shopping experience for individuals, said Mallory Duncan, the general counsel for the National Retail Federation.
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For example, Macy's is using iBeacons to communicate and push promotional offers to customers while they are in the store. And Wal-Mart has used social data from Twitter to discover product trends in specific geographical locations to help better cater inventory to that specific demographic.
"There's this notion of consumers being a new data source. Retailers can begin to use social mining tools and sift through broad data and make sense of it and bring it into the mix. It's not just looking at what it sold last year but also looking at what consumers are doing right now," said Jill Puleri, IBM's retail global industry head.
In the not so distant future, merchants may also have the ability to find out details like your age, gender, ethnicity, clothing size and even your emotional state as soon as you walk through their door, Duncan said.
Through facial detection—different from facial recognition technology, in which a positive identification can be made—retailers can gather a quantitative analysis on a consumer based simply on facial features.
Eventually, though, retailers may go a step further and adopt facial recognition systems, Duncan said. Unlike face detection, facial recognition technology can ID a consumer by analyzing and measuring their face when they enter the store. This data is then transmitted to an archived database. If a match is found, then the merchant will immediately be alerted to the consumer's personal information and other details, such as buying history. A number of high-end stores and hotels are already testing this technology to zero in on celebrities and other VIPs who enter their store.
"Envision a world in which customers register for loyalty programs and they are immediately recognized when they are in a store. The retailer can immediately give you your discounts and quickly check you out, because they know who you are," Duncan said.
One day retailers may even tap data collected by wearable devices to help serve up offers to consumers, said Gene Alvarez, an e-commerce analyst at Gartner.
For example, if a person has opted into a loyalty program where they have agreed to share certain data, a retailer may notice when that customer is near and push an offer to them via Google Glass. It could then have the customer pay via Glass and lead the customer to the item to pick it up via a virtual map, Alvarez said.
Smartglasses could also collect information about where you are shopping and what you are looking at to help the retailer better market products to you, Donnelly said.
But while all of these scenarios promise to offer consumers a higher level of ease and benefits, the question remains: When it comes to data collection, are retailers crossing the privacy line?
"This is one of the greatest challenges between now and 2020 in terms of context and relevancy," Alvarez said, adding, "How do we use it without creeping out our customers?"
The 'creep factor'
Industry experts admit that while big data unlocks new ways to appeal to consumers, it could also present a number of privacy hurdles.
"There is a huge creep factor. As [retailers] get more information about consumers, they have to be more diligent about how they use that information," Witcher said.
Merchants should aim to impress the consumers, not surprise them, Donnelly explained.
Gautam Hans, a lawyer at the Center for Democracy & Technology, agrees, saying that the primary way to do this is by giving the customer the ability to choose to share their information. "Opting in is the only way to allow consumers to choose what is happening with their data," Hans said. "And once they opt in, consumers need to understand ... that these profiles are being created."
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Consumers, however, appear to increasingly be okay with sharing their information, as long as they get something in return.
According to an IBM study of more than 30,000 consumers, 36 percent of consumers said they would share their GPS location with retailers, whereas the year prior only 19 percent of consumer were willing to share that same information.
The study, which was published in January, also found 38 percent of consumers said they would share their mobile number to receive texts from retailers and 32 percent revealed they would share their social handles.
"It's amazing in some ways how much consumers will share if they get something in return," Donnelly said. "On one hand, they are concerned, but on the other, they go ahead and share a lot of data."
—By CNBC's Cadie Thompson
