How Retailers Use Smartphone Apps To Track and Target You

The way business is done has changed; retailers are increasingly leveraging smartphone apps to enhance the shopping experience, streamline operations, and boost sales. These apps, which many users download for convenience, discounts, or loyalty rewards, are also powerful tools for retailers to track those users behavior, deliver targeted advertising, and even adjust pricing dynamically while the user is in the store.

Estimated reading time: 9 minutes

Yes, these technologies offer benefits like personalized offers and seamless shopping, but they also raise questions about privacy and consumer consent. Let’s explore how retailers are using smartphone apps to track and target users in stores. I’ll address dynamic pricing and targeted advertising and inform you what these practices can end up meaning for you.

Disclaimer: This article was written with the help of AI, AI tools, and AI research. Images have also been AI-generated.

How Retailers Track Shoppers Through Smartphone Apps

Retailers use various technologies embedded in their mobile apps to monitor customer behavior inside physical stores. These technologies include but are not limited to

• GPS and geolocation: Many retail apps request access to a phone’s GPS, allowing retailers to pinpoint a customer’s location within a store or even detect when they are nearby. For example, a shopper walking near a Macy’s store might receive a push notification with a discount code, as reported by ABC News in 2017. Such notifications are often timed to coincide with a customer’s proximity to a store, encouraging impulse visits.
• Bluetooth Beacons: Small, inexpensive Bluetooth devices called beacons are placed throughout stores to communicate with smartphones that have the retailer’s app installed. These beacons can detect a customer’s precise location—sometimes within a six-foot radius—and send tailored notifications, such as product details or coupons. For instance, Target uses beacon technology to send store-specific deals and product recommendations based on a customer’s in-store location and shopping history.
• Wi-Fi and Other Sensors: Retail apps can also tap into a phone’s Wi-Fi or even microphone to track movements. According to University of Pennsylvania professor Joseph Turow, retailers use these technologies to follow customers through different sections of a store, connecting their physical movements to online data profiles. This allows retailers to build a comprehensive picture of a shopper’s habits.
• Third-Party Tracking: Companies like Cosmose track anonymous smartphone movements across millions of devices, primarily in Asia, for retailers like L’Oréal and Burberry. By analyzing data from apps with location services enabled (e.g., weather or ride-sharing apps), Cosmose can tell if a customer visited a specific area, like a makeup counter, and serve targeted ads on platforms like WeChat or Google.

These tracking methods enable retailers to gather real-time data on customer behavior, such as which aisles they visit, how long they linger, and whether they try on items without purchasing. This data fuels personalized marketing and operational improvements but often operates with minimal consumer awareness

Dynamic Pricing: Tailoring Costs in Real Time

Dynamic pricing, where prices adjust based on demand, customer behavior, or other factors, is increasingly facilitated by smartphone apps. Retailers use the data collected from apps to fine-tune pricing strategies, ensuring they maximize profits while remaining competitive. Here’s how it works:

• Real-Time Price Adjustments: Artificial intelligence (AI) systems integrated with retail apps analyze data such as purchase history, market trends, and in-store behavior to adjust prices dynamically. For example, a retailer might lower the price of an item for a customer who frequently browses but rarely buys, as noted in a Forbes article on AI in retail. This approach helps convert hesitant shoppers into buyers.
• Personalized Pricing: Apps allow retailers to offer customer-specific discounts based on their shopping habits. For instance, a loyal customer might receive a push notification with a personalized discount on an item they’ve viewed online, while another shopper sees a different price. According to a Shopify report, targeted pricing strategies based on customer segmentation can improve overall margins.
• In-Store Promotions: Beacons and geolocation enable retailers to offer time-sensitive deals when a customer is near a specific product. For example, a shopper lingering in the coffee aisle might receive a coupon for a complementary product, like filters, to encourage an additional purchase. Target has successfully implemented this strategy, as highlighted in a trade marketing article.

While dynamic pricing can benefit consumers with tailored discounts, it also raises concerns about fairness. Shoppers may unknowingly pay different prices for the same item based on their data profile, and those without apps may miss out on exclusive deals

Targeted Advertising: Personalized Promotions at Your Fingertips

Smartphone apps are a cornerstone of retail media, enabling highly targeted advertising that reaches customers at critical moments in their shopping journey. According to EMARKETER, 65.8% of US smartphone users were expected to use retail apps in 2024, making them a key channel for advertising. Here’s how retailers use apps for targeted ads:

• In-Store Ad Delivery: Retail apps deliver ads directly to a customer’s phone while they shop. For example, Target reported that 75% of its guests (and 93% of Gen Z shoppers) browse its app or website in-store, creating opportunities to serve ads for in-store deals or complementary products. These ads are often based on real-time location data and past purchase history.
• Omnichannel Integration: Retailers combine in-store tracking with online data to create a seamless advertising experience. If a customer clicks an online ad and later enters a store, beacons can trigger ads related to that product. Cosmose’s technology, for instance, allows retailers like L’Oréal to convert casual in-store browsers into buyers by serving ads on external platforms after they leave the store.
• Loyalty Program Integration: Many retail apps, such as those from Amazon or Target, integrate with loyalty programs to offer personalized recommendations and promotions. By analyzing purchase history and in-store behavior, retailers can craft ads that resonate with individual preferences, increasing conversion rates. A Forix Commerce article noted that customers using retail apps are more likely to make purchases than those who don’t.

Targeted advertising enhances the shopping experience by offering relevant promotions, but it can feel intrusive when customers realize their movements are being tracked to deliver these ads.

Privacy and Ethical Concerns

The use of smartphone apps for tracking and targeting has sparked debates about privacy and transparency. Many consumers are unaware of how much data they share by enabling location services or installing retail apps. As Joseph Turow noted, retailers often mimic online tracking techniques, using GPS, Bluetooth, and Wi-Fi to monitor shoppers without clear disclosure.

• Privacy Fatigue: Some experts, like Mark Lunt of JOS, describe “privacy fatigue,” where consumers accept tracking as inevitable for convenience. However, this can lead to a lack of informed consent. Cosmose claims it respects privacy by anonymizing data, but critics argue that such assurances may not fully address consumer concerns.
• Data Security: The vast amount of data collected through apps must be securely managed to comply with regulations like GDPR and CCPA. Retailers use encryption and edge computing to protect data, but breaches remain a risk.
• Ethical Questions: A Forbes article highlighted ethical concerns about AI-driven manipulation in retail, noting that the lack of transparency in dynamic pricing and targeted advertising could erode consumer trust. Shoppers may feel misled if they discover they paid more than others for the same product or were nudged into purchases through hyper-targeted ads.

To mitigate privacy concerns, retailers like Macy’s emphasize that users can control permissions through app settings or device privacy options. For example, iPhone users can disable location tracking for specific apps, while Android users can adjust permissions like access to location or microphones.

Benefits for Consumers and Retailers?

Despite the concerns, smartphone apps do offer significant benefits to those open to sharing their data:

• For Consumers: Apps provide convenience, such as in-store navigation, real-time inventory updates, and exclusive discounts. Amazon’s app, for instance, offers one-click purchasing and personalized recommendations, while Target’s app helps customers find items and access deals.
• For Retailers: Apps enable data-driven decisions, from optimizing inventory to crafting effective marketing campaigns. According to Abasto, real-time data from apps helps retailers adjust pricing, tailor promotions, and predict customer needs, ultimately boosting sales and loyalty.

How to Protect Your Privacy

If you’re concerned about being tracked, here are steps to limit data sharing:

• Review App Permissions: On iOS, go to Settings > Privacy > Location Services to choose “Never” or “While Using the App” for specific apps. On Android, navigate to Settings > Apps > Permissions to manage location, microphone, and other access.
• Disable Bluetooth and Wi-Fi: Turn off Bluetooth and Wi-Fi when not needed to prevent beacons and other sensors from tracking your device.
• Read Privacy Policies: Before installing a retail app, review its privacy policy to understand what data is collected and how it’s used.
• Opt Out of Push Notifications: Disable push notifications in the app or device settings to reduce targeted ads.

Conclusion

Smartphone apps have transformed the retail experience, enabling retailers to track customer movements, deliver targeted advertising, and implement dynamic pricing with unprecedented precision. Technologies like GPS, beacons, and AI allow retailers to personalize offers and optimize operations, benefiting both shoppers and businesses.

However, these practices raise valid concerns about privacy, transparency, and fairness. By understanding how these apps work and taking steps to manage data sharing, consumers can enjoy the convenience of retail apps while maintaining control over their personal information. As retailers continue to innovate, striking a balance between personalization and privacy will be key to maintaining consumer trust.

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