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8 Ways Retailers Use Big Data to Track You

Retailers are monitoring your moves and buying habits in-store and online in various, surprising ways.

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Have you ever wondered how some retailers seem to have a sixth sense when it comes to the things you need, or want? How did they know you were looking for a pair of heels, or a crib? Was it incredible guesswork that they sent coupons for luggage just as you started planning a vacation? The answer is no. It's not luck, or guesswork, or a coincidence. Retailers have many methods available to them to learn, track, and take advantage of your personal shopping habits. Here are eight that you may never have considered.

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1. Store Loyalty Cards

Have you ever wondered why certain discounts and promotions are available only to loyalty card holders, when the cards are completely free to get? Well, this is one of the prime ways retailers — grocery stores in particular — can track your spending habits. You'll notice the effect instantly when the receipt machine spews out a whole bunch of coupons for you after you pay for your groceries. These are coupons based on what you have just bought, and what you have purchased in the past. And as the coupons are printed on demand, they are different for every customer.

But it's not just about food and household supplies. When you buy a more expensive item, say a big screen TV, a carpet shampooer, or a piece of furniture, the store stores that data, too. Soon, you'll get email offers and mailed coupons for discounts on TV mounts, cleaning supplies, and furniture polish. If you've tied your loyalty card to an email and phone number, you could get coupons in your inbox, or as a text. And the more you shop, the more they know about you, and the more they can target you with specific offers designed to get you spending.

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2. Your Phone Number

When you reach the checkout in many stores, you will be asked for your phone number. Most people just give it out without even thinking. If you ask why, you will probably be told something like, "we just like to know where in the state our customers are coming from." While that's not untrue, there is way more to it than that. It's also another reason loyalty programs like to tie your phone number and email address to the card.

Once you give up that phone number, you are handing over all of your purchasing information to the retailer. And if that retailer is very savvy, such as Target, they can analyze it with some sophisticated software to discover just what your future may hold, and how they can be there for you. Take the example of a young woman who was buying things that Target associates with an upcoming pregnancy (for example, cocoa-butter lotion, magnesium supplements, a large purse, and a powder blue rug). Target sent this girl a circular featuring a lot of maternity clothing and baby furniture. Her parents were furious, until they found out later that she was actually pregnant. As reported by Forbes, Target knew about the baby before the girl's own parents did. And Target also assigns every single customer with a "pregnancy prediction score." Scary? Many people think so.

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3. Your Smartphone

This is not about the phone number, but the technology used in your smartphone. Through a technique known as geofencing, which uses Wi-Fi and/or Bluetooth, retailers are automatically alerted to your presence as you approach, enter, and browse the store. And once again, Target is one of those retailers that is on the cutting edge of this technology.

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If you have an app like Cartwheel installed on your phone, you may notice that offers pop up as you enter the Target store (or, after a few minutes of browsing). This is not a weird coincidence. This is all part of Target's strategy to get you spending more in their stores. And of course, as they already know a lot about your shopping habits, they can serve up the coupons and offers that are most likely to get you opening your wallet. Make a purchase using the app, and bingo, you have just given even more information to their database. Now they know not only what you're buying, but how effective their instant offers are; and they can tailor them to be even more successful in the future.

4. Free Wi-Fi

They say nothing is really free, and in this case, it applies to Wi-Fi. We all love free Wi-Fi because it prevents us from eating into our own data plans, and it's usually a lot faster than 4G. But there is a price to pay for it, and that price is information. It may seem very Orwellian, but these days, stores can use their Wi-Fi service and your phone to track your shopping habits in real-time while in the store. They know which aisles you're visiting first, which offers keep you occupied the longest, and can even trace the path you take from the entrance to the checkout.

While it's harder (but not impossible) to capture this data on a person-by-person case, it is usually used as a research tool to help stores improve the shopping experience. If certain aisles are more successful than others, they will know why. If there are areas of overcrowding, they can be fixed. The aim is to get people spending more, and that is most likely to happen when the customer is happier in the store, and ready to peruse for a longer period of time. So the next time you use Wi-Fi anywhere from a bookstore to a warehouse store, remember… your every move could be tracked.

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5. Website Cookies

If you don't know already, a cookie is a small piece of data stored on your computer, tablet, or phone by a website's server. It is used to help keep track of your movements within the site, and is usually very helpful. For instance, it can store the last page you visited, autofill forms, or provide suggestions based on your last visit. But, it can also assist the retailer behind the website, supplying them with information about your previous visits and purchases, your searches, and your overall shopping habits. This is often a benefit to you, as you may receive offers to entice you to buy something that you left in your shopping cart.

It can also be used against you. A prime example is vacation searches. The more you search, be it for a hotel or flight, the likelier it is that the prices will actually go up. The sites know you're looking for a vacation, and when something is in demand, the price rises. By browsing anonymously, or using a VPN (virtual private network), you can stop that. Websites can also sell this cookie information to a third party, and it is common these days for sites to refuse entry if you turn off cookies. They want to know everything about you. You can also routinely clear your cookies, which may cause a few pages to load more slowly.

6. Purchasing Data

Quite often, you will see language like, "We do not sell or share your information with third parties" on websites, forms, and other methods of collecting your personal information. That's because it has become common practice for many retailers to store, collate, and sell the information of millions of customers for a profit. In the age of online retailing and phone shopping, big data is huge. The more retailers can know about you, the more targeted their campaigns can be. If a company wants to specifically focus on white males, ages 31–40, who smoke, drink, and subscribe to a sports package, they can buy that list. It can be expensive, initially, for retailers to buy this data, but it can really pay off because their message is laser-focused on the audience they want to reach.

All of these methods mentioned above — including phone numbers, loyalty information, and website patterns — can be collected and sold. When they are in control of it, they can build on the data, creating a picture of you as a consumer that is so detailed, you may be shocked by its accuracy, and invasion of privacy.

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7. CCTV Equipment

Smile, you're on camera. We are in the age of eyes in the sky, and big brother on every street corner. Cameras are also a major part of every store's infrastructure, and if you think they are only there to monitor shoplifters, think again.

As The Guardian reported earlier this year, facial recognition software can determine who is entering the store, and how they are reacting to certain displays and promotions. If you're a guy with a beard, and there is an endcap devoted to grooming products, the retailer wants to know if you're reacting to it. As this technology develops, it will not be unusual to see specific ads targeted to certain consumers as they walk through the store. Expect to see ads for maternity products being displayed on LCD screens as a pregnant lady walks past, which change to ads for toys as a family with small children pass by the same area. This is not decades away; this technology is already being perfected. If it sounds like something from Minority Report, it's not far off.

8. Social Media

You probably have at least a Facebook account, and possibly Twitter, Instagram, Pinterest, SnapChat, and FourSquare. While these are all great ways to share information and keep in touch with friends, they are also a boon for retailers, who also have a massive presence on these platforms. Brands and retailers can push offers and information at you 24/7, and sophisticated software can help them interact with you. They know if you "like" certain products or advertisements. They provide links to let you instantly purchase products and services that have been sent to you. They give out rewards for sharing offers and coupons. And the more you do it, the more they learn about you and your habits.

Some people have started multiple social media accounts — one for personal use, and one that does not share as much private information — for this very reason. You are being watched constantly on social media, and you are being targeted with specific offers based on data that has been collected.

Be careful out there.

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This article is from Paul Michael of Wise Bread, an award-winning personal finance and credit card comparison website.

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This article is from Wise Bread, not the Kiplinger editorial staff.