Deloitte predicts that in 2011, 25 percent of North American big box and anchor tenant retailers will begin offering free in-store Wi-Fi access to shoppers. In 2012, the proportion should continue to rise in North America and start to spread around the world.

Until now, cellular data was the only connectivity available inside most large stores, and many customers did not have a phone or data plan that enabled Internet access. Also, cellular signals can be highly variable: weak signals and low speeds are common, especially deep inside a store. Without Wi-Fi, the in-store online experience is often frustrating and dissatisfying.

Offering Wi-Fi access is not yet an accepted retailing practice¹. Although Wi-Fi has become pervasive in cafes and in the common areas of malls, individual retailers feared that consumers would use their smartphones or tablets and the Internet to comparison shop. Retailers do not stock flyers or catalogs from their competition...why would they provide a data pipe that tells customers the same or similar merchandise is available at a competitor, possibly for a better price?

Conversations with large North American retailers suggest that this fear may have been misguided. When shoppers do in-store online comparison shopping, preliminary and anecdotal evidence suggests the likelihood of purchasing appears to go up, not down. A common reason why shoppers do not make a purchase is that they are paralyzed by the lack of knowledge: “is this item available elsewhere for a much better price?” When an online search reveals that competitor’s prices are similar, many shoppers proceed with the purchase at the store they are in, rather than drive around just to save a few dollars. Although some sales are lost, experiences from early adopters and other comparison technologies suggest that is more than offset by connected consumers being less likely to leave without purchasing, and ending up spending more².

In-store Wi-Fi would enable customers to use the retailer’s digital sales tools to answer basic questions and to find out if the item they want is in stock. This would allow in-store employees to spend their time on more valuable activities such as handling detailed questions and increasing service and sales, instead of responding to routine inquiries. Stores could deploy Wi-Fi tablets as interactive catalogs and order entry systems. And certain products, such as Wi-Fi enabled TVs, could be demonstrated more effectively.³Broadly speaking, some retailers view Wi-Fi as a way “to further enhance the customer in-store experience.”⁴

Even if shoppers use a store’s Wi-Fi for personal activities (e.g., checking email, other legitimate web browsing) they are likely to spend more time in the store, perhaps increasing their impulse buying and total spending. Also, very few customers are likely to “park” themselves in the store just to use Wi-Fi, as most retailers do not provide tables and chairs.

In-store Wi-Fi could enable a variety of advanced push applications. Localization would allow for precise targeting: shoppers in the linens section could have information or discounts pushed to their mobile devices. Up-sell offers could also be pushed: a shopper who buys a barbecue grill could be instantly sent an offer on patio furniture that could either be purchased in store or though the website for home delivery.

Another benefit for retailers who offer in-store Wi-Fi is collection of customer data. Depending on Wi-Fi user agreements and local privacy laws, various levels of in-store customer information could be collected, retained and analyzed. At the most basic level, Wi-Fi would enable a retailer to map customers’ physical paths through the store⁵. In addition, a retailer could gather email addresses and cell phone numbers to add to its customer database⁶. Some retailers offer customers the option to sign-up for free Wi-Fi access by logging in through third-party social media sites such as Facebook. This enables a retailer to collect other useful data, such as age, gender, birth date, relationship status, occupation and personal interests.⁷However, the availability of such data depends on what users are willing to share publicly via Facebook and in their privacy settings. Once gathered, customer information could be retained and used on future visits to direct the customer to a personalized landing page with targeted promotions.

When customers are logged in to a store’s Wi-Fi network, it is possible to track their online activities, including the web searches they conduct and the websites they view. This can provide useful information about which competitive shopping destinations are most frequently used. Taken to an extreme, the precise content of their activities could even be monitored and acted upon in real time by, for example, delivering a coupon or sales pitch to customers’ devices in response to their browsing behavior. This would enable retailers to serve advertisements more relevant to a customer’s interests – a practice known as online behavioral advertising (or internet-based advertising). Retailers could also aggregate data collected from web traffic and then match it against real-time in-store purchases and subsequent online purchases.

Bottom Line

In-store Wi-Fi presents retailers with a number of minor challenges. Retailers will probably need to build more and better apps to enhance the in-store experience. They may also need to upgrade their Wi-Fi equipment and network connectivity to support additional connections. However, based on experiences from some early in-store deployments, the costs to address these challenges are not material to most large retailers⁸.

Far and away the biggest challenge relates to privacy and customer data. This is not a new issue for many retailers, but in the context of Wi-Fi it will likely require greater awareness of the changing regulatory and legal environment.

Data monitoring, collection, retention and behavioral advertising have been the subject of much regulatory debate by watchdogs, regulators, privacy advocates, and consumers in the US, Europe, and Canada alike.⁹ For example, two separate privacy bills have been introduced in the US, with both the Commerce Department and the Federal Trade Commission expected to issue independent reports providing businesses with regulatory guidance on privacy issues.¹⁰ Collection of customer data over Wi-Fi networks has also been in the news recently. Although the story had nothing to do with the retail industry, and involved inadvertent data collection, it demonstrates how sensitive this issue is for regulators and the public.

In providing Wi-Fi services to customers, retailers must understand and stay abreast of regulatory changes and shifting public sensitivities about online tracking practices. This can help them strike the right balance between maximizing data performance and respecting customer privacy.

¹What’s the TAM and Where Are the Remaining Sweet Spots?, ABI Research, Q1 2007: http://www.abiresearch.com/research/1000462-Wi-Fi+in+the+Retail+Vertical

²Source: conversations with key US and Canadian retailers – September – November 2010

³Sam's Club to offer Wi-Fi access, mobile app, CNET News, 10 August 2010: http://news.cnet.com/8301-1035_3-20013167-94.html?part=rss&subj=news&tag=2547-1_3-0-20

⁴Nordstrom Upgrades Store, Online Technology as Part of $69 Million Spend, Retail Info System News, 22 November 2010: http://risnews.edgl.com/retail-news/Nordstrom-Upgrades-Store,-Online-Technology-as-Part-of-$69-Million-Spend56744

⁵Tracking Shoppers with Wi-Fi and RTLS, Datamation, 5 December 2008: http://itmanagement.earthweb.com/mowi/article.php/3789256/Tracking-Shoppers-with-Wi-Fi-and-RTLS.htm

⁶Many retailers have excellent data bases from online shopping done over PCs – they have much less good customer data from mobile devices. Source: conversations with key US retailers – September 2010. Some estimate that each email they add to their database can be worth up to $150 in future revenue.

⁷Online Privacy Policy, Boldstreet Wireless: http://www.boldstreet.com/privacy.html.

⁸Easy Wi-Fi at Retail Locations, A Devicescape Application Note, January 2009: http://devicescape.com/assets/docs/DS_EWF_Retail_Whitepaper.pdf

⁹Expectations for Consumer Consent in Interest Based Advertising: Regulatory and Industry Positions in the United States, Europe, and Canada, Jordan Prokopy and Megan Brister, BNA Privacy and Security Law Report. Vol. 9. No. 21. Pp. 775-779.

¹⁰Stage Set for Showdown on Online Privacy, New York Times, 9 November 2010: http://www.nytimes.com/2010/11/10/business/media/10privacy.html