Location Analytics: All About Watching You

Forget Big Brother (or at least tuck that paranoia away for now). It's Big Retailer you should be worried about watching you.

And I'm not talking about those security cameras you pass on your way in and out of the big box store around the corner. That's kids' stuff to retailers in 2013.

Today's retailers want to know you so well that they're investing in technology that will let them track your movements from one location to another -- and yet another -- so they can see what you're buying and where. The impetus behind their interest in your every move is to gain such deep understanding of consumer behavior that they can fine tune inventory, pricing, and merchandising to their most-optimized states. Think of Target, a poster child for retail analytics, and its Guest ID program I mentioned in my post from earlier this week, Retailers Want Their Way With You.

Enabling this technology is location analytics, which combines a consumer's credit card information with geographic information system (GIS) data. Retailers mix that all up, look for patterns, and gain new understanding of how, where, and why shoppers do their thing.

Think of the way consumers interact as being "an ant farm of actions and transactions," suggests Simon Thompson, director of global business solutions at Esri, a GIS provider, in an October 2012 MIT Sloan Management Review interview.

Every transaction that goes into a point of sale system is not only recording something about the buyer and something about the product, but it’s actually recording the relationship between those two things. So if I, as a retailer, can backtrack to where the person making a purchase came from, I can make a connection to the type of transaction they’re doing.

If you think about it, Thompson says, your credit card is a "little GPS tracker." He painted this scenario:

An aggregator, for example, can discover that I went out to Joseph A. Banks and I bought two suits. And then I went to Marshalls and I bought a pair of new shoes. Then I went to Target and I bought the latest J.D. Robb novel. An aggregator can discover that I did one on the way to the office and then I went out at lunchtime and bought the J.D. Robb book. But then I discovered the sale at Joseph A. Banks and took advantage of proximity to that. So it wasn’t a planned activity. When you start mining geospatial data, these patterns become highly relevant.
There is a real capability to use mapping and location analytics to zoom in -- to really put a lens on top of your data that says, 'tell me something about this with these characteristics in terms of the who, the what, the when.' Then you try to understand the why, and use the where as the framework for all of those other questions that you want to ask.

Thompson told MIT SMR that Esri has thousands of customers using location analytics to watch customer movements. "In fact," he added, "we’re probably approaching hundreds of thousands."

Location analytics could well be the quintessential big-data application, as Financial Post writer Mitchell Osak notes in an article published yesterday. The technology's uniqueness, he said, "traces to its ability to mine insights between the interplay of unstructured data like physical location, geographic context, behavioral activities and social habits."

Being able to "overlay these location-centered insights with structured data found in existing databases like the census, internal CRM information and traditional geospatial technology that collects static information on roads, homes etc." boosts its power even further.

Retailers, of course, aren't the only types of businesses interested in and using location analytics. Restaurant chains are too, as are grocers, for example. Aren't we, after all, what we wear and eat?

Does the idea that you're being watched as you shop and dine bother you? Does it bother you so much so that you'll stop using credit, and coupons, if you haven't already? Share your thoughts below and take our latest Quick Poll, Credit Watch, at right.