Dynamic Pricing in Retail: How Bluetooth & Public Wi-Fi Impact Privacy
25-05-2023 | By Robin Mitchell
The retail industry has been deploying all kinds of tactics to improve sales ever since the first market stalls were developed by man, but the rise of modern technologies such as Bluetooth tracking, Wi-Fi, and apps is giving way to more invasive marketing techniques. How have modern technologies such as Bluetooth and public Wi-Fi helped to develop unique market strategies such as dynamic pricing? Do these new tactics introduce serious ethical challenges, and how can engineers fight against such practices?
How have modern technologies such as Bluetooth helped to develop unique market strategies?
There is no doubt that of all industries, retail has benefited the most from advertisements, tracking, and data collection. By better understanding a customer, a retailer can refine what that individual is exposed to in order to encourage a sale. For example, customers who frequently Google mattresses for sale can be directed towards retailers with new offers on mattresses or be shown new products that integrate the latest features, such as adaptive cooling and changeable parts. However, such practices are generally being shunned by the public as this can often feel intrusive and potentially threatening to privacy (especially for sensitive search topics).
It is for these reasons that new rules and regulations have been deployed (such as GDPR) to prevent unauthorised data gathering on individuals by websites, apps, and even devices. Of course, the use of long terms and conditions and “I Agree” buttons can often circumvent these regulations, with people being more tracked than ever.
However, the rise of technologies such as Bluetooth and public Wi-Fi has presented retailers with a multitude of new possibilities, most of which are already being exploited to some degree. For example, some shopping areas utilise Bluetooth tracking systems that identify specific users and monitor what shops they visit or what aisle they go down. This data helps retailers identify areas that are particularly popular while also identifying areas that are of little interest (thus suggesting that a change is required). Consider the case of Macy's, a major American retailer. They implemented a system called "ShopBeacon" that uses Bluetooth technology to track customers' movements within the store. When customers with the Macy's app enter the store, they receive personalised notifications about products, deals, and rewards based on their location within the store. This real-time personalisation enhances the shopping experience and can lead to increased sales.
At the same time, public Wi-Fi networks can be used to scrape data from connected devices, whether it is through forms, linked accounts, or even what websites are visited. As public networks are entirely controlled by the operator, visited websites can be determined via DNS lookups, but data sent over SSL is still private. However, the websites being visited can give retailers an idea of what individual customers are looking for, and if combined with Bluetooth tracking, can instantly show links between shops of interest and web searches. Nordstrom, another American retailer, experimented with using Wi-Fi signals from customers' smartphones to track their movements within the store. The data collected helped them understand shopping behaviours and patterns, such as how long customers spent in specific sections, which in turn informed their merchandising and layout decisions. However, they discontinued the program after receiving customer complaints about privacy.
Dynamic Pricing – An Ethical Concern
Gathering tracking data on customers provides many benefits to retailers, but if there is one fact that always holds true, it’s that the true power of data is realised when combined with other data and systems. In the case of Bluetooth tracking and Wi-Fi, these technologies are now being exploited via loyalty apps that can target individual customers and provide unique offers and prices on items as they shop, known as dynamic pricing.
This goes beyond standard loyalty programs that monitor what is purchased and then offer deals on similar products in the future, as these prices could be determined by AI on-the-fly during a single shopping experience. In fact, this is already being done with the use of dynamic advertisement screens that can identify customers’ faces, look at their shopping history, and then play adverts on screens that may appeal to them. Airlines and online travel agencies have been using dynamic pricing for years. Prices for flights can change based on factors like demand, time of booking, and even the customer's browsing history. Similarly, Amazon uses dynamic pricing to adjust the prices of its products in real time based on demand, competition, and other factors. This strategy can lead to increased profits, but it also raises ethical questions about price discrimination and transparency.
But while retailers may state that such practices help sales and provide solutions to consumers, others believe that this type of data tracking and use of technology well resides in the area of privacy violation. According to a study published in Science, these practices raise significant privacy concerns 1. Even if a manufacturer of a smartphone has no intention of allowing such practices on their devices, Bluetooth and Wi-Fi tracking is very difficult to stop as Bluetooth devices typically advertise their presence, and Wi-Fi connections are entirely beholden to the service provider.
This invasion of privacy doesn’t just come from location tracking and identifying items of interest, but that potentially sensitive item being looked at could appear as ads for those walking past dynamic advertisement screens. Furthermore, this type of dynamic advertisement will likely not have been agreed to, thereby introducing all kinds of ethical concerns for those creating profiles on unsuspecting customers.
How can engineers fight against such practices?
There is very little that can be done about in-store tracking, as these devices will be in the control and operation of the stores. However, that isn’t to say that engineers can’t start developing new technologies to try and interfere with such tracking methods. One such potential solution is to disable Bluetooth when outside the home, or better, to remove specific features of Bluetooth when in public spaces such as device advertisement.
Another potential solution for engineers to deploy is low-level VPNs for network communication. For example, it is possible for a small desktop VPN to be installed at a user’s home, link that VPN to a dynamic name host, and then have all internet connections established by remote devices to that VPN. By doing so, public Wi-Fi networks will not be able to see what sites have been visited, with all data being encrypted between the device and remote VPN service.
Finally, engineers could even think about using adaptive radio powers in Bluetooth devices to confuse trackers on an individual’s exact location. This could be aided by unique antenna designs that can induce reflections and delayed signals, further complicating tracking. Apple, known for its emphasis on user privacy, introduced a feature in iOS 14 called "Approximate Location" that allows users to share only their approximate location with apps, rather than their exact location. This feature can help mitigate the privacy concerns associated with location tracking. Similarly, the rise of privacy-focused VPN services and browser extensions shows how technology can be used to counter invasive tracking practices.
Overall, using modern technologies to track shoppers and provide targeted ads and dynamic pricing introduces many ethical concerns, and engineers may need to start developing new solutions to try and counter this. Of course, such technologies also lead to new developments that could help to improve everyday life. Thus, engineers need to carefully balance the use of new technologies with what they provide and what they sacrifice. As an electronic engineer and the owner of a small electronics business, I've seen firsthand the impact of these technologies on the retail industry. My observations and experiences have informed many of the insights in this article.