Beyond lower overhead costs, online retailers have a big advantage over regular old brick and mortar stores: they can track every move made by customers while on their website. This allows them to recommend personalized products based on past purchasing or viewing history, test whether a certain layout or even font helps boost sales, and generally optimize a website based on heightened customer understanding.

In comparison, physical stores may seem hopelessly old fashioned, forced to decide how to lay out a store or which coupons to offer based on guesswork. But brick and mortar retailers have much more tech savvy than generally realized, and may even be approaching an understanding of their customers that will make online retailers jealous. 

Today’s New York Times reports on the practice of stores using people’s smartphones to record their movements around the floor by tracking the signals given off as they search for a Wi-Fi signal. This gives physical stores the customer data to change the storefront to increase the percentage of passing foot traffic that enters the store or note a lack of staff during busy times. If a customer provides personal information by downloading the store’s app or entering an email address to use the in-store Wi-Fi, the article goes on, then the store can send personalized recommendations or coupons.

Without using mobile data, companies have long understood their customers thanks to membership cards or credit card charges. Journalist Charles Duhigg gives the example of Target in the New York Times Magazine:

Whenever possible, Target assigns each shopper a unique code — known internally as the Guest ID number — that keeps tabs on everything they buy. “If you use a credit card or a coupon, or fill out a survey, or mail in a refund, or call the customer help line, or open an e-mail we’ve sent you or visit our Web site, we’ll record it and link it to your Guest ID,” [Target employee] Andrew Pole said.

Also linked to your Guest ID is demographic information like your age, whether you are married and have kids, which part of town you live in, how long it takes you to drive to the store, your estimated salary, whether you’ve moved recently, what credit cards you carry in your wallet and what Web sites you visit. Target can buy data about your ethnicity, job history, the magazines you read, if you’ve ever declared bankruptcy or got divorced, the year you bought (or lost) your house, where you went to college, what kinds of topics you talk about online, whether you prefer certain brands of coffee, paper towels, cereal or applesauce, your political leanings, reading habits, charitable giving and the number of cars you own. 

Each company then turns to its predictive analytics department to understand “not just consumers’ shopping habits but also their personal habits, so as to more efficiently market to them” by, for example, sending personalized deals such as baby products to expecting mothers in emails or coupon books.

Stores also may enjoy an insight that online retail lacks: the ability to read the emotion on a customer’s face. The aforementioned Times article describes that an alternative way to record customers’ movements through the store is with tracking cameras. The cameras have the added benefit of being able to determine a customer’s mood. “If you are an angry man of 30, and it is Friday evening, it may offer you a bottle of whiskey,” one company behind the camera software told the Times, a bit worryingly. Until Amazon convinces everyone to browse with their webcams on, that is a bit of insight that will evade online retail.

This post was written by Alex Mayyasi. Follow him on Twitter here or Google Plus. To get occasional notifications when we write blog posts, sign up for our email list.

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