Retailers Experiment With Surveillance Tools Used by Police

Soon, a department store robot may be greeting you by name.

“It was magical, it was a moment in history,” recalls Joseph Atick of the day in 1994 when the computer he and colleagues at Rockefeller University had built was able to recognize its masters’ faces. As each of the three mathematicians introduced themselves, a metallic voice responded, “I see Joseph. … I see Paul. … I see Norman.” Atick, who now chairs an organization that promotes identification technologies, says, “We didn’t realize what we’d just done.”

Fast-forward two decades and picture a talking mannequin that greets a shopper by name as she enters a favorite store, informing her that pants that match the blouse she bought a week earlier have just been marked down. “It’s just a matter of time until we start to see this technology reach shopping malls and beyond—it’s ready right now,” says Werner Goertz, a Gartner analyst who has authored a report on the adoption of facial recognition and other surveillance tools by retailers, casinos, and theme parks.

Some of the new tech was on display at the National Retail Federation’s annual Big Show in New York and the International Consumer Electronics Show in Las Vegas, both held in January. Tokyo-based NEC boasts that its NeoFace software instantly recognizes faces, even in a crowd and on low-resolution video. Originally devised for law enforcement, the product is being adapted for use in retail, says Allen Ganz, who heads the unit at NEC America that markets biometrics to companies. “With increasing competition from online sources, retailers have to become much smarter about how they engage with consumers,” he says. “This is a new kind of data for retailers, and once this information is utilized, it’s addictive.” Ganz wouldn’t say which stores may be the first to roll out NeoFace.

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At the National Retail Federation’s show, Austin startup EyeQ demoed a system that can recognize physical traits—say, differentiating between male and female visitors—and customize messages on in-store digital displays accordingly. The company didn’t respond to interview requests. Tom Litchford, vice president of retail technology at the federation, calls one-to-one marketing the industry’s “holy grail.”

Sales of facial-recognition gear will reach $6.2 billion globally by 2020, up from last year’s $2.8 billion, according to forecasts by MarketsandMarkets. Almost 30 percent of retailers in the U.K. are already using the technology, says Computer Sciences, an IT consulting firm that works with stores.

A number of major retailers, including Walmart Stores, Giorgio Armani, and Macy’s in the U.S., Benetton Group in Europe, and Baidu and Alibaba Group in Asia, are exploring or even staging trials of facial recognition and other surveillance tools, according to analysts at Bloomberg Intelligence and other industry experts. Only Macy’s and Benetton responded to interview requests; both denied that they are currently using facial recognition. “A lot of retailers would be afraid of the backlash of being discovered,” says Bryan Roberts, a director at the retail marketing firm TCC Global in London. “You can aggregate data anonymously, but once consumers know they’re being tracked by the shopping center, they’ll be more hesitant to come back.”

While privacy advocates argue that retailers should be required to obtain customers’ consent before including them in biometric databases, the reality is that companies face few regulatory constraints, at least in the U.S. Only Illinois, Texas, and Connecticut have laws governing the use of these technologies.

The courts may help establish some parameters. Facebook is facing a class-action lawsuit that accuses the company of having “secretly amassed the world’s largest privately held database of consumer biometric data” for photo-tagging purposes. A federal judge is expected to rule soon on whether to dismiss the suit, because its claims under the Illinois biometrics law are barred by Facebook’s user agreement.

Jay Edelson, a lead plaintiff’s attorney in the suit, predicts the outcome will have far-reaching implications. “This case can change everything,” he says. Facebook spokeswoman Genevieve Grdina says, “The lawsuits are without merit, and we will defend ourselves vigorously.”

The man who helped uncork the genie would not mind seeing some restrictions put in place. Says Atick: “Consumers don’t yet understand the power of a machine that can recognize a human and what that power could do to humanity if it falls into the wrong hands.”

The bottom line: Sales of facial-recognition hardware and software are forecast to reach $6.2 billion globally by 2020.

(Removes photo of unrelated technology.)

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