Shoppers checked out as retail giants receive holiday gift of Big Data

Holiday-decked shopping malls are buzzing with customers, and online shopping sites are working overtime as the Christmas-season buying bonanza reaches its zenith this weekend.

While retailers celebrate their chance to turn big profits, they have their eye on something else: collecting your data.

Jess Hare, who just bought her mother a new cellphone for Christmas, didn’t mind much what companies do with her information. “I figure that everybody does it,” she said as she stood in the parking lot of a Walmart on a frigid day in Alexandria, Va. “As long as I’m not getting too much junk mail, if it means the stores offers me the things I want, it’s probably good.”

Hare will likely start receiving advertisements and coupons based on her recent purchase in the mail soon — and possibly more than she’s expecting.

The holiday season is a great opportunity for retailers, especially big firms like Walmart and Target, to collect hundreds of thousands of data points on consumer behavior. That coveted insight is used to predict future purchases, shape decisions about what to stock and develop strategies for sharply targeted advertising.

In a year when Edward Snowden was nearly named Time magazine’s person of the year for the information he released about how the U.S. government tracks its citizens, a similar level of close tracking by the private sector has been largely neglected.

Big Data, as it is popularly known, allows retailers to collect information based on age, gender, location and purchasing habits to identify shopping patterns that can be used to sell more goods. Among the more dystopian pursuits of Big Data collection are mannequins outfitted with cameras that employ facial recognition to capture demographic information, and technology that uses customers’ cellphone Wi-Fi signals to track where they go in the store and for how long. The increasing popularity of online and mobile shopping is accelerating the trend.  

“This (technology) is where all of the buzz is right now,” said Brian Kilcourse, a managing partner at RSR Research, a Miami-based retail technology consultancy. Kilcourse says the key for retailers is connecting online, mobile and in-store shopping. At this point, he said, it’s too early to know to what extent Big Data will increase profit margins. “Retailers are working very hard on these fronts,” he said.

While retailers are enthusiastic about the intelligence they can gather using new technologies, many consumer advocates worry that the level of corporate surveillance has troubling implications for privacy and even discrimination. 

“Retailers talk about connecting the dots,” said Lee Tien, an attorney with the Electronic Frontier Foundation. “But the dots they are connecting are people.”

The ability to collect and mine information can allow retailers and other users of Big Data to pick up on details that customers might want to keep private or may not even know about. The people surrendering their information — often unwittingly — aren’t always so happy about that.

In one of the most notorious cases, reported by the New York Times magazine last year, Target’s data collection and analysis techniques discovered that a young woman was pregnant and sent special offers for baby clothes and cribs to her family’s house even before she had broken the news to her parents.

She was still in high school, and her father complained to the manager of their local Target, who apologized. When he manager called the father later to apologize again, the father said, “It turns out there’s been some activities in my house I haven’t been completely aware of. She’s due in August. I owe you an apology.”

A poll by the Pew Research Center earlier this year found that 86 percent of American Internet users have taken steps to protect their privacy online and that 28 percent have tried to avoid being observed by advertisers specifically.

 “I try to give as little information as possible,” said Kathy Denneler, a 64-year-old standing outside a Walmart where she had just bought dominoes and candy.

She said she always refuses to give Walmart or any retailer her phone number or ZIP code when prompted. “I guess that’s the way it works these days, but maybe I’m just old fashioned. I don’t want them to know everything about me.”

Retailers say that information is anonymized before it enters their gigantic databases, but it can include data about race, income, location, gender and specific shopping habits.

But it is more than just what Tien calls “the creepiness factor” that has some people concerned.