Nomi Corporation, a startup that uses Bluetooth and Wi-Fi technologies to track customers via their smartphones as they shop in stores and malls, reached a settlement Thursday with the Federal Trade Commission after a complaint was brought against the company.
Nomi usually installs sensors in a store or makes use of the existing Wi-Fi hotspots to collect data on all smartphones that are looking for a Wi-Fi connection in that store. Usually, the company stores MAC addresses on its servers of all clients, some of whom only passed by the retail store. Later, Nomi can have a clearer view of a smartphone user’s shopping habits by tracking their MAC address in all participating stores.
But the FTC learned that Nomi could also collect data on the smartphone’s manufacturer or its signal strength. Additionally, it recorded the date and time when the smartphone was close to a sensor. The company would later sell all these precious data to brick-and-mortar retail stores to help them gain an advantage against online stores.
As of October 2013, the company had nearly 50 clients which used location-tracking sensors within their stores. Nomi declined to disclose the name of its clients. According to the FTC, Nomi tracked more than 9 million smartphones in the first three quarters of 2013.
What Nomi and other location-tracking companies do is very similar to online stores practice to use tracking cookies to learn more about their potential clients’ habits. The precious data Nomi and others collect is subsequently sold to retailers for profit.
Such companies can tell their clients how many people pass by their store, how many enter that store and how much time they spend shopping there. Retailers can also learn what mobile devices their clients use, how many of their clients come back to their store or visit another store in their chain.
RetailNext, a company similar to Nomi, even provides its clients with video footage on their customers gathered from the CCTV cameras across the store. Brickstream, a company bought by Nomi last year, used videos to allow retailers know which of the smartphone users were adults and which were children.
Location-tracking companies are not legally bound to tell customers that they are being watched when entering a store. And in many cases they would rather not do it. In 2013, one of these companies tested the technology in a store and warned customers through a sign. The store had to cancel the test because many customers complained about being tracked.
Image Source: Nomi