The latest privacy invasion: retailer tracking
Plus 4 tips for limiting your exposure
By Minda Zetlin
If you're like most Americans, using plastic instead of cash
has become commonplace. What you may not realize, however, is how eerily sophisticated
tracking your purchase data has become.
Credit and debit card transactions leave a trail -- a very revealing
and detailed trail that is constantly being exploited for retailers' gains. A
record of your purchases, combined with demographic data and crunched by
statisticians, tells retailers personal details about you that you may not have
shared with your closest friends. But there are some things you can do to limit
This kind of analysis, called data mining, has been going on
for years, but came to prominence earlier this year after an irate father
complained loudly to the retailer Target about his teenage daughter receiving coupons for
diapers and other baby products. A few days later the man retracted his
complaint. Target had hired a statistician to analyze its customers' purchase
records and his algorithm had -- correctly, it turned out -- calculated that
this man's daughter was pregnant.
This story, recounted in Charles Duhigg's book "The Power of
Habit" and in an article appearing in "The New York Times Magazine" set off a
debate about privacy and consumer rights. It also exposed a central dilemma of
modern life: Purchase records, combined with publicly available demographic
data, gives statisticians and the retailers who employ them a surprisingly
detailed view of who their customers are, and reveal information those customers
might prefer to keep secret. Short of paying cash for every transaction and
perhaps moving to an underground bunker, there's little consumers can do about
"Tracking purchases is the most
significant way retailers gather information," says Jacob D. Furst, director of
which conducts research, workshops and courses on privacy and security issues
at DePaul University
"Bringing you into the store is always the most important thing," he says.
"Rarely do shoppers go into a store and buy specifically the items they went
there for. We almost always buy others."
Furst says most retailers don't
concern themselves with individual shoppers. "They're not going to look at one
or two shoppers or one or two consumers. They look at patterns, and based on
these patterns, they will make strategic decisions."
"The most important thing that data
is used for is to determine which products consumers prefer, and to make sure
what's on the shelf is what they want to buy," explains Kurt Jetta, CEO of TABS
Group, a consumer analytics company in Shelton, Conn. "For example, we're doing
one project for a retail chain where we found that in areas with high
African-American populations, not only do they buy African-American hair care
products and cosmetics specifically, but they buy grooming products in general
at a very high level. With that kind of information, the retailer can make sure
all those products are stocked and available for them."
Where's the harm?
If the only purpose of gathering
personal information is to sell shoppers the products they need and want, is
there any harm in it? "Every quarter we have a discussion about privacy with my
students, and there's always a debate," Furst says. "For me, the key thing is
that people be informed."
As he and others point out, there
is often a trade-off between information shared and a benefit received, usually
in the form of a discount or special offer. The most obvious case is the reward card or other retailer loyalty program that collects consumer data and tracks spending
habits, but offers special discounts in exchange. "You have to love the people who
request not to be tracked, but still want relevant ads served to them," says
Justin Miller, search engine marketing consultant at DaBrian Marketing Group.
"Sorry, people cannot have the best of both worlds."
Convenience is another benefit
consumers gain when they're willing to share information, beginning with the
ease of using a credit card for purchases, rather than cash (since most cash
purchases can't be tracked). "I love the feature in online shopping where I
enter my password and all my credit card information is filled in," Furst says.
The Credit CARD
Act limited how much they can make, and they're sitting on all this valuable
data. And today's slogan is that data is the new oil.
|-- Howard Dvorkin
Not all consumers are comfortable
with the thought of having their personal information tracked, even if the only
purpose is to send them special offers. "Omniscient retailers are like
stalkers, but without a probable threat of physical jeopardy," says Joseph
Ohler Jr., a Web developer in Black Earth, Wis. Adds Mark van de Hoek, an
engineer at Clearwire, "I make it a point NOT to deal with retailers who invade
my privacy in that fashion."
Other consumers believe it may be worth
it. "If I get enough benefit out of it -- discounts, targeted offers, etc. --
it's a trade-off that I might be willing to make," says Traci Lee Chu, vice
president of marketing at UpStream, which provides marketing performance
software. "Some retailers take 5 percent off your total bill, but you know your
purchases are being tracked."
Your data in perpetuity
If today's uses for customer data are
benign, it's not hard to imagine more-sinister scenarios in the
not-too-distant future. "Let's say you buy a lot of unhealthy products," says
Marilyn Prosch, associate professor at the Arizona State University's W.P. Carey School of Business, and cofounder of a
data privacy lab. "Can that information be used when you later apply for health
It's even more disturbing to
consider what credit card companies might do with your data. In addition to
such information as your employer, income and other information gathered when
you applied for the card, they also have more complete data on your spending
than any individual retailer.
"If a person buys a new TV at an
electronics shop and furniture at a furniture store and linens and towels at a
bed and bath store -- and is still at the same address as the previous 10
years, it may mean that person is getting a divorce," says Howard Dvorkin,
founder of ConsolidatedCredit.org.
A credit card company may keep close watch on this account, since the financial
pressures of divorce can cause people to default on their debts.
So far, he says, this is how credit
card companies are using the data they gather, and in many cases, their own
agreements limit how much of your information they can share with third
parties. But, Dvorkin says, both things can change. "They're legally obligated
to provide privacy policies that tell you what they will do with your data. But
there's a school of thought that says if they've disclosed that they're going to
share your information and you don't object, they have permission to do it. The
devil is in the details of the credit card agreements -- and 90 percent or 95
percent of credit card holders never read them." You can opt out, he adds, "But
opting out might mean they don't offer you credit."
He believes that in time, credit
card companies will sell the information they have about their customers to
other companies to make up for fees they can no longer charge. "The Credit CARD
Act limited how much they can make, and they're sitting on all this valuable
data. And today's slogan is that data is the new oil," says Dvorkin. Companies that purchase
such information will likely use it mostly for marketing, but it could be used
for other purposes, such as making employment or insurance decisions.
4 tips to minimize data sharing
Given the potential for retailers
to invade your privacy, and possibly use data in ways you don't want, the
logical choice would seem to be to withhold all personal information when
making purchases. There's only one problem: It's virtually impossible to do. "It's
really hard to imagine a situation in which you never give out personal
information," Furst says. "That would amount to staying inside all the time
behind locked doors."
Nevertheless, here are four techniques
for at least reducing the amount of personal information you share with
retailers, although they come with varying amounts of inconvenience:
cash or prepaid gift cards. These can't be tracked back to an individual, so they don't produce
any information for data miners to use. One strategy is to use cash or prepaid cards when making purchases you might want to keep private, such as hangover
pills, cigarettes or certain medications. This approach can help you protect
your privacy, but don't expect that protection to be absolute. Even if the only
purchases you make with credit or debit cards seem completely innocuous,
statisticians may be able to infer personal information from them. Target, for example, found one strong indicator of pregnancy is the purchase of unscented
give up information willingly. "If a retailer asks for your phone number or
ZIP code, you can ask 'Why do you need to know?'" Jetta says. "My dad does that
all the time." And if you don't like the answer, you can politely refuse to
provide that information.
overshare online. Stop and think before filling out membership forms at
online stores, since most offer the option to complete your purchase as a
"guest." By the same token, unless you're completely comfortable sharing all
your Facebook information, don't log into online stores using your Facebook
This is good advice even if you
think sharing your Facebook info is no big deal. "Keep in mind that 80 percent
of people in this country can be identified with only three pieces of
information: Their birth date, gender and ZIP code," Prosch says. "Once a
company has that, it can get your name and address and start sharing your
one's idea of fun, but it's useful to know whether and how a company will share
your information with others, and sometimes instructions are provided for
opting out of data gathering or sharing. Check the Privacy Rights Clearinghouse for up-to-date
information on which companies are gathering your information and what, if
anything, you can do about it. Google, which many people use for searching the
Web, storing photographs, email, shopping, and more, can pose a particular
privacy concern. There are instructions for opting out of much of Google's
tracking that you can find by clicking the "privacy and terms" link on the
Google home page.
Ultimately, though, there's nothing
you can do to fully prevent retailers from learning a lot about you. "If I took
the voter roles and census data for a neighborhood, I could go to Google Earth
and look at how many houses have jungle gyms and overlay census income data and
identify the average square footage of the houses, and I could identify which
houses have kids," Jetta says. "I could identify when they were born and
understand the probability that within the next three years another one's going
to be born. The combinations are infinite. Those are publicly available sources
of information that you can't shut down, and there will always be a
statistician like me to figure it out."
See related: New medical FICO score sparks controversy, questions
Published: May 14, 2012