Search

Why in-store tracking might not be as bad as it sounds

Mar 25, 2014

FORTUNE -- Consumers hate the idea of retailers tracking them through their smartphones. Overwhelmingly so, in fact: As I noted yesterday, a new survey from OpinionLab shows 77% of respondents found in-store tracking unacceptable; 63% said even if their favorite store offered tracking services, they would opt out.

No matter: Retailers, marketers, and investors love the idea because it helps advertise to their customers better. And concern from consumers hasn’t dampened their enthusiasm. Companies from Apple (aapl) and Paypal down to VC-backed startups like Nomi and Shopkick have snapped up clients like Macy’s (m) and American Eagle, all looking to communicate with shoppers and learn more about their habits through smartphones, while they’re in a store.

Bill Ready is one of those enthusiasts. As the CEO of mobile payments company Braintree, he’s seen startups like Uber and HotelTonight go from zero to hundreds of millions of dollars in revenue, all by harnessing the unique properties of mobile to drive sales. Last December Braintree sold to Paypal for $800 million.

MORE: Consumers hate in-store tracking (but retailers, startups and investors love it)

Ready says mobile commerce has proven that, when optimized, mobile can drive higher order values and conversions than desktop. That question has been answered. The next phase is all about context. That’s where the in-store tracking and “beacons” come in.

Retailers are eager to take advantage of the unique contextual properties offered by mobile -- i.e., the fact that your phone knows where you are at all times. Consumers are wary about their privacy, but Ready says that’s because they haven’t experienced how powerful mobile context can be. Sure there’s the obvious benefit of offering consumers deals and discounts while they’re shopping in a store. But an app called RetailMeNot already dominated last holiday season by offering deals and discounts, without the location tracking. Deals and discounts aren’t the end-all be-all.

No, the real benefit is more high-concept. What if your phone could put together all the information it knows about you? Not only does your phone know where you are, it probably knows what you like to eat, what kinds of entertainment you enjoy, and how you like to travel. It knows what’s on your schedule for the week and where you’ll be going.

We have apps that help improve many aspects of our lives, but they don’t operate together, Ready says, “in an elegant way.” Once someone solves that -- Google’s Google Now is starting to do this for Android phones -- the benefits of sharing private information about your location and preferences will be more obvious.

“People have to experience the utility before they’re comfortable with the privacy trade-off,” Ready says. “Had you done a poll before Twitter launched to say, ‘Hey is this a good idea? Would you like it if all your text messages were exposed to the entire world?’ People would [not have responded positively].”

MORE: Apple's iBeacon signals turning point for mobile engagement

But, just as plenty of marketers have argued, consumers will be willing to trade privacy once they see the benefit, Ready says. With Twitter, “I know I’m giving up privacy, but getting great utility in return,” he says. “People in the last 10 years have been consistently giving that trade-off. They have to make the conscious choice.”

The onus is on app makers to provide that context in a way that’s not invasive. Consent is tantamount (almost all in-store tracking is opt-in). And marketers can’t change the rules as to how they’ll target people and what kinds of information they’ll be sharing with others. “People will trip over things like privacy concerns, and they’ll do things that sound spammy and like spying on the user,” Ready says. “If they do it right, it’ll feel like a concierge.”

All products and services featured are based solely on editorial selection. FORTUNE may receive compensation for some links to products and services on this website.

Quotes delayed at least 15 minutes. Market data provided by Interactive Data. ETF and Mutual Fund data provided by Morningstar, Inc. Dow Jones Terms & Conditions: http://www.djindexes.com/mdsidx/html/tandc/indexestandcs.html. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Terms & Conditions. Powered and implemented by Interactive Data Managed Solutions