Euclid Analytics and Rethinking the IoT for Consumer Goods
Companies like Euclid Analytics are “uploading” the retail store environment.
In the past, the “internet of things” (IoT) referred mainly to the integration of non-computing technology and the world of digital media, through products such as Bluetooth-enabled toasters (seriously) or cars with sensors that track speed and acceleration. Measures of IoT devices tend to exclude smartphones, tablets, and computers from their count.[1] However, given the role that smart devices can play in bringing offline “things” online, is this appropriate?
Euclid Analytics is leading the way in the retail space to bring the products on the shelves of stores into the digital age.[2] The company “uploads” the customer’s experience of retail products in a physical brick-and-mortar store using a combination of smart phones, the existing wireless infrastructure, location sensors, and a precise understanding of the store layout.[3] This gives the company the ability to determine the shopper’s exact location within the store and, therefore, the products with which he or she is interacting.
Nordstrom was one of the first stores implement this technology, starting with 17 retail locations.[4] With this technology, they were able to map out customer pathways through the store, measure the length of time shoppers spend interacting with certain shelves or displays, and generate a heat map for which products customers interacted with the most.[5] Retail stores previously relied primarily on point of sale data to gather information about the shopping experience and product effectiveness, but now the retailers can understand more holistically which products customers interact with, how long these interactions last, and whether these interactions result in a purchase.
Should this framework be considered a part of the IoT? Even though the sensors monitoring the “things,” the physical inventory of the store, are not contained within the products, the data still applies to each specific consumer good or device. It is akin to a holiday sweater looking back at the customer, observing what part of the store they came from, recording the amount of time spent sifting through the options, and finally taking note of whether this interaction led to a purchase.
Unfortunately for Nordstrom, this experiment in customer analytics ended before it could reach its full potential. When customers learned that their shopping habits and location were being monitored, it provoked a backlash of negative media and public opinion.[6] Shortly after the experiment began, Nordstrom asked Euclid Analytics to withdraw the program from the stores. A spokesperson for Euclid called the incident “unfortunate,” and said, “Better data means a better shopping experience, but you don’t have sacrifice privacy to get there.”[7]
Other companies are finding less intrusive means of pioneering the use of mobile applications to understand how consumers interact with specific retail products. For example, Shopkick is a mobile application that encourages shoppers to check in to participating stores, turn on wireless and location services, and scan potential purchases in exchange for gift card rewards.[8] By leaving the tracking feature up to the consumer and incentivizing shoppers to use it, the companies are able to collect the same data as Euclid Analytics but without the discomfort of feeling “monitored.” This service is more transparent from the customer’s perspective, and the application has been adopted by stores like Macys, Sports Authority, and Old Navy.[9]
Euclid’s business model has the potential to create a great amount of value by providing retailers with better shopping data and enabling them to more effectively get products into the hands of consumers. However, the company is struggling to capture this value because consumers aren’t incentivized to participate. Going forward, they should adopt an approach more similar to Shopkick, which delivers on this value proposition by giving shoppers a reason to play.
Mobile applications from companies like Euclid and Shopkick are generating meaningful data about the interface between consumers and retail products that helps store owners optimize things like store layout and design, product placement, and product selection.[10] It is only a matter of time before all retailers are asking: “How can we bring our shelves online?”
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[1] Nordrum, Amy. “Popular Internet of Things Forecast of 50 Billion Devices by 2020 Is Outdated.” IEEE Spectrum.
[2] Euclid Analytics. Accessed November 15, 2016. Website: http://euclidanalytics.com/products/. (745)s To Track in Store Customer Behavior.”Retail products product effectiveness, product placement, and product selection. Iwa
[3] Ibid.
[4] Cohan, Peter. “How Nordstrom Uses WiFi To Spy On Shoppers.” Forbes.com. May 9, 2013.
[5] Ibid
[6] Dwoskin, Elizabeth and Greg Bensinger. “Tracking Technology Sheds Light on Shopper Habits.” The Wall Street Journal. Accessed at: http://www.wsj.com/articles/SB10001424052702303332904579230401030827722
[7] Ibid.
[8] Shopkick Incorporated. Shopkick.com. Accessed at http://www.shopkick.com/how-it-works.
[9] Ibid
[10] Brandon, John. “5 Ways to Track in Store Customer Behavior.” CIO.com. Accessed at http://www.cio.com/article/2383681/retail/5-ways-to-track-in-store-customer-behavior.html.
It’s interesting to see retail analytics solution from Euclid. There are a few other companies working on similar solutions including RetailNext and my previous company. I think what they can take a step further is to integrate online and offline data and provide a even better shopping experience through omnichannel marketing. With that said, the challenges to integrate and make sense of all the data still remain huge. It’ll take time and resources to achieve.
Great post, Tom! There’s an interesting paradox within this shopping behavior and location monitoring technology: retailers like Nordstrom will face backlash when they employ this in physical stores, but they are using similar technologies to monitor online shopping and web browsing behavior and not facing nearly the same scrutiny. Having an ecommerce platform offers all of the data that retailers are now looking to acquire within stores: customer pathways within the website, how long they spend on a given category or product page, bottlenecks within the checkout process. I wonder if this is because consumers have just become accustomed to this being the price to pay to shop online, and are not yet willing to fundamentally shift their thinking of what constitutes physical shopping norms. If this is the case, I think retailers will still see low opt-in penetration for this (even with incentives), as it requires a fundamental consumer behavior shift – which, as we’ve learned, is incredibly difficult to accomplish.
Cool topic, Tom! One of the things I find really interesting is finding a balance between gathering data and respecting peoples’ desire not to be monitored. How can we convince folks that, in certain scenarios, the gathering of specific information can actually be beneficial. In this case, it might improve customers’ overall experience shopping in a large retailer. As mentioned above, this data is already being tracked online, but clearly there is something customers are deeply uncomfortable with when it comes to tracking more live or in person information. Nordstrom took the route of not being transparent with customers. I wonder if there is any way to help customers be more informed. How would a company even go about explaining the test they are running? Is there any amount of marketing that could convince customers that they are not being monitored just for monitoring’s sake? I am not sure we will ever reach a stage where customers will buy into this idea, so it will be interesting to see how companies adapt and find new ways to gather information on customer behaviors.