In-Store Location Tracking: A Brave New World for the Retail Sector

Imagine going into a grocery store and instead of you picking the items you want and going to staff for help or going to checkout to pay, you receive tailored information sent straight to your phone and pay for everything automatically as you walk out. Thanks to the use of in-store location tracking, this future is drawing closer. Let’s look at what a typical retail experience could look like a few years down the line, and which companies you should pay attention to.

Types of in-store location tracking

Tracking technology is developing every day, but these are some of the most relevant today.

Geofencing

“Geofencing” involves communicating directly with customers that fall within a certain geographic area — such as a store’s premises. This is achieved using GPS signals and Bluetooth radio waves, which organizations can now easily obtain from smartphones.

Customers just need to log onto the relevant app and give their consent for that app to take their data. Then, the app sends Bluetooth signals when it’s close to “beacons” placed around the store (e.g., on the dairy aisle), in addition to the GPS data. 

There are multiple uses. On one hand, customers can access useful data about where to find certain products instead of having to ask staff, alongside other queries. Meanwhile, retailers can collect data about consumer behavior, send push notifications to customers based on their activity, and even share the information with their partners. This can be used to boost revenue.

Sensors

As if it’s not futuristic enough for retailers to know exactly where a customer is in a store, shops can also add sensors. 3D optical sensors, which can be placed on the premise to give a 3D birds' eye view of up to 1,000 square feet around it. So, retailers collect valuable data about the precise journey a customer takes in a store.

A more affordable alternative is break-beam sensors, which detect motion and send a light beam (which humans can’t see), allowing them to track who has entered or exited a store. This doesn’t provide such sophisticated data, but it’s anonymous and can be useful to track simple metrics like how many people visit a store in a day.

Token-based analytics 

An alternative to tracking people in a store is to track their carts. In this case, electronic devices known as tokens are spaces on shopping carts, which transmit data about where a customer is going. Again, this provides more anonymity while still increasing understanding about consumer behavior, although the data won’t be as rich and may exclude some people.

Leading companies

At first glance, it might seem like this technology is futuristic, but there are plenty of examples of its implementation already. The most advanced example is Amazon (AMZN). The ecommerce giant launched Amazon Fresh (previously Amazon Go) a few years ago, and has worked on creating a digitalized, streamlined experience. It now has some stores that offer a "Just Walk Out" service, meaning customers can enter and leave without even having to go to the checkout. This is made possible by sensors and trackers, which track what customers put in their basket and then charge them through their Amazon account. 

Amazon is selling tech to other retailers too.

But it’s far from the only retailer venturing into the world of in-store location training. Walmart (WMT) ran a trial using beacon technology to track customers’ movements and send them push notifications and discounts. Nisa and Target (TGT) have also tested the technology, so interested investors should keep their eye on all these retailers.

Will in-store location tracking catch on?

Just because you can, doesn’t mean that you should. To figure out whether this is a good investment opportunity, you need to know its effectiveness as a sales and marketing technique.

On one hand, it can provide customers with a better experience by cutting down on typical hurdles (like queues or asking retail workers for directions), which makes physical stores more of a rival for ecommerce. If the benefits for customers are clear enough, the trend is likely to grow, and the retailers implementing the tech will benefit.

The benefits to retailers are also clear as day. As data is collected, they can tweak their stores in ways that encourage customers to spend as much as possible. For instance, they might realize that customers spend more when they place the snack aisle close to the alcohol aisle.

However, the convenience of location tracking to customers may be outweighed by concerns about consumer privacy, which could hurt a retailer’s reputation and therefore revenue. There are also practical worries — the technology is expensive, and tools like geofencing may need a way to differentiate between employees and customers. 

Big brother is watching

The technology is here for a whole new type of grocery shopping experience, and many of the top names in the games are vying to capitalize on the potential of these tools. It could be retail’s saving grace, but investors may want to wait to see how customers feel about Amazon’s Just Walk Out shops taking their data before they bet everything on the innovations.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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