If Consumers Give Retailers A Greenlight On Privacy, Who Will Set Limits?

There was a lot of animated subscriber reaction to our story from last week about retailers potentially using license plates for CRM efforts. But the takeaway was that consumers, even if made furious, are likely to blame anyone other than the retailer for the snooping. That raises an even more frightening question: If consumers will not blame store chains, who in the merchant community will apply their own brakes?

The license plate/mobile situation is the latest example of a retail industry, pressured by an ailing economy that is sending household name chains into bankruptcy and forcing an ever-growing list of store closings and layoffs (Eddie Bauer's Chapter 11 bankruptcy filing on Wednesday, June 17, is just the latest example), trying to push the cash drawer envelope more and more on privacy issues. This effort is made all the easier because of improvements in technology, the ubiquitousness of smartphones and the fact that many younger consumers have an attitude toward privacy that is lightyears more flexible than preceding generations.

Beyond license plates, how far have some tried pushing the envelope? How about having tiny video cameras on store shelves, to watch and see what consumers do with products, zooming in on what they're reading on a cereal box and what actions they take? Or examining social web site and instant messaging posts and using software to look for emotional clues and secretly using that to make sales pitches? Earlier this month, Sears admitted to being involved in an extensive online effort that went beyond shopping cart examination and included, according to the U.S. Federal Trade Commission, review of online bank statements, drug prescription records, video rental records and library borrowing histories.

Mark Rasch is the former head of the U.S. Justice Department's high-tech crimes unit and today is an attorney specializing in retail law. He's also a Washington, D.C., resident who recently got a parking ticket courtesy of the police there using their license plate tracking technology. (He parked in one spot and then moved his car three blocks away, but was hit with a ticket for having parked in that overall zone for more than two hours, even though he hadn't been parked in any one spot for more than two hours.)Rasch, who works with a lot of the largest retail firms on legal issues, said he has no doubt that retailers will quickly embrace license plate tracking and a wide range of other techniques that are certain to test the U.S. consumer's toleration for privacy aggressiveness as we approach 2010. "If retailers see it driving business, they'll absolutely do it," Rasch said. "The technology to do this is getting easier and cheaper. Yes, it will happen."

The issue is much more about consumers' evolving attitudes about privacy. Is a car parked on the street private, when anybody walking down the sidewalk or driving down the road can see it? What about in the driveway? In a covered garage? Does it make a difference if it’s a covered garage, does the privacy equation change if it's owned by the city, by an apartment building landlord or by a shopping mall?

Consumers "don't see retailers as being in the information business so they won't punish them for information abuses, unless they're personally affected by the (privacy) breach," Rasch said. "And even when they feel personally affected, how does the chain react to their concerns? If that consumer feels treated fairly, (that consumer) may even reward the retailer. It's all about customer service."

Ironically, the success of these privacy-limit-testing plans rests upon the consumer public never learning of them. Put another way, the best way to leverage consumer secrets is to make sure that consumers never learn retail secrets.

If the local department store suddenly knows exactly what you're considering buying and makes a compelling offer right before you buy a rival brand, that's example of personalization and being attentive to customer needs. But that's only as long as the secret of retail data-gathering techniques stay secret. As the overquoted line about sausage making goes, "People love to eat 'em as long as you don't make them read what's really inside them."