‘Tis the season: Retailers collecting customer data to boost sales

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Santa is an outstanding example of data collection: He knows when you've been sleeping, he knows when you're awake. Retailers in Canada aren't quite at that level – not yet, anyway – but over the holiday shopping season they're using an array of sophisticated tools to track everything from your movements inside the store to what you buy. And with new spam legislation on the horizon, they're more eager than ever to collect personal information.

Retailers have always wanted to know about their customers. Now, however, the amount of data and tech tools at their disposal is unparalleled. As Canadians do their holiday shopping, retailers are monitoring their path and their purchases – information which, in the aggregate, will be used to reconfigure store layouts and make staffing decisions.

Much of this data will also be individualized, helping retailers create detailed profiles of customers.

"The amount of data being produced today is an exponential multitude of what we've had in the past," says Marc Fischli, chief operating officer of Dunnhumby France, the U.K.-based "customer science" firm that was so good at predicting the behaviour of Tesco's clients that the grocery chain bought a majority stake in the company. "Now you can literally personalize the shopping experience of a household or person."

Every large retailer is doing data mining and customer tracking to some degree, experts say. Understanding customers through data is big business. The open source analyst firm Wikibon has forecast that the big data market will hit $50-billion (U.S.) by 2017, Forbes reported last year.

The potential insights can be invaluable. What you shop for over the holidays tells retailers plenty about who you are, and therefore what you might buy in the future. "Is it a family that buys a lot of books as presents? Is it a family that buys a lot of toys? Is it a family that likes to indulge for Christmas with a huge feast?" Mr. Fischli says. "You can start to create what we call a customer or household's DNA."

That DNA can be "as sophisticated as you want it to be," adds Mr. Fischli, whose company Dunnhumby includes Metro and Canadian Tire among its clients. "You can see whether a household is particularly adventurous and likes to try new things or not.…You can see whether people are time-conscious and like to cook prepared meals as opposed to everything from scratch."

Canadian Tire has been working with Dunnhumby since 2010. "All of the work that we do with respect to data and mining of the data is meant to really try to understand what is relevant to customers at different times of the year," says T.J. Flood, senior vice-president of marketing at Canadian Tire retail.

Much of the information Canadian Tire uses will be aggregated, and therefore anonymous. But it is still incredibly useful: If it finds that two products are often purchased together, they may be grouped alongside each other on the shelves, or next to one another in the flyer.

Both Canadian Tire and Dunnhumby declined to provide specific examples of patterns that have emerged from analyzing customer data. But in the holiday season, for instance, data mining of purchase information gives the company insights into what the hot sellers of the season may be.

"At this time of year we launch a lot of new products, so you'll start to get an early read on customer acceptance of those products," Mr. Flood says.

Of course, Canadian Tire, like many other retailers, will also collect information about individuals, whether through e-mail addresses, telephone numbers or loyalty card programs. It will use this information to tailor offers to specific customers. "If you are a customer that uses our auto service centre, we may send you coupons for oil changes," Mr. Flood says by way of example.

Dennis Hogarth, a privacy and security expert with the Consumers Council of Canada, says shoppers should be aware that when stores ask for a phone number or postal code, they can use it to glean reams of information that will likely go into a database where it may remain forever.

"Once they've got your phone number, they've got you," Mr. Hogarth says. If the number is listed in a telephone directory, it's relatively easy to trace it to your name and address. A postal code can be used to collect a swath of data, including income and education levels, as well as the ethnic makeup of an area.

Many retailers are eager to collect such data with new anti-spam legislation on the horizon that will require businesses to get consent or have a pre-existing business relationship with a consumer to send commercial e-mail, or risk fines of up to $10-million.

"Everybody is rushing to try to get that established business relationship with you," Mr. Hogarth says. What a pre-existing relationship is, exactly, is still up for interpretation, but volunteering your e-mail address or phone number may suffice, he says.

As long as there is something in it for them, many customers will gladly give their information, says Jennifer Lee, a partner in consumer business at Deloitte. The company's annual holiday survey found that 62 per cent of Canadians are not offended and are neutral to retailers analyzing their shopping and purchasing behaviour, while 26 per cent are willing to share more personal data in return for preferential treatment or special offers.

"Customers will give their information willingly if there's a strong value proposition and value exchange," Ms. Lee says. "What that means in English is, 'I'll give you my information, but I want something for it.'"

Even if you are not providing your e-mail address or purchasing goods, you are still being tracked by many retailers. Prism Skylabs, a San Francisco-based startup, has been making headlines this year for its ability to provide retailers with "heat maps" that show where people are in a store, how they move through a space and even what items they've touched.

ShopperTrak, a Chicago-based foot traffic counting company, uses stereoscopic cameras and technology that detects cellphone signals to monitor how people move through a retail store. The company operates in approximately 90 countries, including Canada, although it does not disclose the names of customers. "But we've got a very healthy business in Canada," says Chetan Ghai, chief of product development at ShopperTrak.

With retailers looking for every advantage they can get, the technology to help them track customers is becoming more and more sophisticated.

"Data collection on customers is not something new," Ms. Lee says. "If you think about loyalty programs, that's all analyzing customer behaviour and their purchases. Where I think technology is taking us is that now retailers want to track you before you buy anything."