Shops on the hopRetailers have beencaught out by therapid increase inmobile ecommerce

Inside »

The Sun sets onheadline punsNewspapers mustadapt to demandsof digital audience

Watch this spaceMobility within acompany buildingis becominga new priority

Why wearablesare in fashionMore innovationand fresh ideas willhelp market grow

Data protectionrises up agendaUS revelations andEU lawmakerspile on pressure

FT SPECIAL REPORT

The Connected BusinessMonday February 24 2014 www.ft.com/reports | @ftreports

The traditional telephony busi-ness that had long been theraison d’être of the vastMobile World Congress inBarcelona has now become a

sideshow.The week-long event, which begins

today, now majors on connected tech-nology in all its guises. Any mentionof traditional voice calls and texts willbe an afterthought – as it is in theservices of many of the larger groupsin the sector.

Instead, the telecoms industryhopes to make the next step into aconnected world that will transformhow people live, work and play, withthe 75,000 people attending set to seethe next generation of services anddevices that are designed for an“always on” internet world.

As always, there will also beadvances shown at the event that willhelp make networks increasinglyubiquitous – and so practically invisi-ble with seamless access to mobiledata – but these will, most impor-tantly, further underpin the shift inconnecting everyday life.

Many of these innovations will fea-ture in the Connected City exhibition,which will bring together practicalapplications in cars, homes andoffices, as well as improvements inhealth, education and city manage-ment. A basketball team will even bewearing connected T-shirts that willmonitor their health and fitness.

Rapid data networks, and the serv-ices that will run over them, will alsofacilitate the latest innovations in thelarge number of smartphones thatwill be displayed, including Sam-sung’s latest Galaxy S5 but also thefinal range to be shipped by Nokiabefore the sale of its devices businessto Microsoft.

Anne Bouverot, director-general ofthe GSMA, which organises the con-gress, says this year’s emphasis willbe on positioning the mobile industryas the platform for innovation.

“This is about partnerships,” shesays, pointing to the attendanceof large internet groups such asFacebook and WhatsApp, the chat app

company which last week agreed to a$19bn purchase by the social mediagiant. In the past, such groups havebeen regarded by many telecoms exec-utives as competitors that ride fornothing over their costly networks.

Ms Bouverot says these companieshave a similar aim in trying to con-

nect the unconnected – a major talk-ing point at the event. “People rightlypoint to the almost 7bn Sims [sub-scriber identity modules] in the worldbut forget that most people have two.That means there will be 3.4bn peoplewithout a mobile phone today.”

While this clearly represents a largemarket for mobile operators, she says,it is equally exciting for the compa-nies that can access these customers,such as banks and retailers, andsocial media groups such as Face-book.

This means greater levels of part-nership, she says, pointing to a recentdeal between Spain’s Telefónica,Mozilla, which has created a mobile

operating system, and Line, the Japa-nese instant messaging service.

With the focus on access to custom-ers, and the greater depth of relation-ship with those customers by makingphones central to paying for goods,monitoring health or educating chil-dren, the darker side of the debatewill be around privacy and use ofdata.

“Digital identity is a big concern[for consumers],” says Ms Bouverot.

One solution at the show will be aservice that allows mobile operatorsto use part of the Sim card in eachphone as storage for secure informa-tion, which can be used to access web-sites for banking and social media.

However, telecoms groups havelong been trying, and most often fail-ing, to redefine themselves as high-growth technology groups – and posi-tion themselves as part of the digital“ecosystem” – rather than sluggishinfrastructure businesses.

Even with innovative products andthe underlying sense of a rebranding,there is still a feeling of unease – theworld’s telecoms executives willdescend on their biggest and loudestindustry conference ever at a time ofuncertainty.

As the market moves from offeringtelephony to TV and broadband con-nections, it is likely that content andinternet services will be central to thefuture of the industry, although com-panies are shifting themselves onlygradually to address this new market.

How telecoms groups will develop isstill a question that will only partlybe answered by this year’s MobileWorld Congress.

It is also not clear if they can reallybuild new businesses in the internetage themselves, or whether partner-ing with already successful internetgroups that have made the leap upfrom basic services to much-lovedconsumer brands will be the key.

Shaping up for ‘always on’ worldTelecoms groups mayneed help to make themost of opportunities.Daniel Thomaspreviews Barcelona

The telecoms sector haslong been trying to positionitself as part of thedigital ‘ecosystem’

When Apple launched theiPad in April 2010, it waspositioned as a consumerdevice. There was little orno expectation amongApple’s senior executives,including the late SteveJobs, that it would proveto be a big hit withcorporate executives andsenior managers.

As a result, the iPadinitially lacked many ofthe features andproductivity tools thatbusiness users mightreasonably expect,including file management,access to Microsoft’s near-ubiquitous Office suite andelectronic pen input.

Since then, however,Apple and third party appdevelopers have filled inmany of the missingpieces.

For example, I use anapp called Documents byReaddle, which includesa file manager, mediaplayer, photo album anddocument viewer and isarguably the best free filemanager available for theiPad.

The app features a cleanicon-based user-interfacethat allows you to navigatethrough its varioussections, and includes aPDF reader that enablesusers to annotate andhighlight text.

It connects easily to themost popular cloud-basedstorage services includingDropbox, Google Drive,SugarSync, Box, Office 365,and Microsoft’s OneDrive(formerly SkyDrive) andsupports a variety of filetypes.

Users can uploaddocuments to any of thesupported cloud servicesand manage them fromwithin the app, and syncdocuments via Apple’siCloud.

I am also a big fan ofParallels Access ($49 ayear), designed to enable

iPad users to run the fulldesktop versions of Office(Word, Excel, PowerPointand Outlook), Intuit’sQuicken moneymanagement software,Adobe’s Photoshop andApple’s own iTunes.

Access is not the first oronly app to provide remoteaccess to desktops: thereare a few others, somefree, that are mostly usedby IT support staff andtechies. But it is mucheasier to set up and usethan any of thealternatives I have triedand, unlike other apps, itlets you run Mac andWindows applications as ifthey were made for youriPad.

The software also allowsiPad users to harness themuch greater processingpower and storage capacityof most desktops ratherthan rely on the iPad’srelatively limitedhardware.

This is important if, forexample, you need to workon a complex Excelspreadsheet or manipulatelarge content files.

To start using Access,you need to download itfrom Apple’s App Store, setup an online account withParallels and install thesmall client app on anydesktop machines you planto access.

The client app runs onMacs running OS X 10.8 orlater, and any Windows-based machine runningWindows 7 or later.

Provided you have areasonably fast Ethernet orwireless connection, andthe remote desktops areonline, the Accesshomepage displays a list ofyour remote PCs.

Once you choose thedesktop that you want toaccess, the softwareestablishes an encryptedconnection and displays aniPad-style page of iconsdenoting the softwareinstalled on the desktop.

Click on one of the iconsand the desktop softwarefires up almost instantly.

I mainly use ParallelsAccess with my iPad toaccess Office documents onmy home PC while

travelling and have foundit to be pretty reliable –provided I remember toleave my PCs powered upand online.

My last recommendationis to pair the iPad with a$150 Livescribe 3 smartpen.The Livescribe 3, whichwas launched late lastyear, instantly turnshandwritten notes,drawings and doodlesdrawn on special paperinto their digitalequivalents.

These are displayed onan iPad screen via aBluetooth LE (low energy)wireless connection.

That means I can sit in ameeting and use myLivescribe notebook tomake notes, a virtual copyof which is stored in myiPad using the freeLivescribe 3+ app.

This has other features,including optical characterrecognition, which turnshandwritten notes intodigital text files.

Sensibly, Livescribe hasalso decided to providethird party app developerswith a softwaredevelopment kit (SDK), sothey can add natural penand paper note-taking totheir own apps.

The first apps toimplement the SDK arefrom Gorillized – Outline(free for up to 30documents) and Outline+,costing $15. These workwith Microsoft OneNote tostore, organise, edit andannotate notes and werelaunched this month.

Outline users can createnotes with pen and paperalongside content createdusing Outline’s iPad-basedtools, while Outline+ addsthe ability to use MicrosoftOneDrive, MicrosoftSharePoint Server, Box andDropbox.

Interestingly, the Macversion of Outline is theonly app that currentlysupports OneNotenotebooks on Mac OS X.

This allows users to synctheir notebooks from iPadto Mac and to OneNote ona Windows PC.

This is the first in a new,regular column by the FT’sUS business technology andtelecoms correspondent.

Developers fill gaps to enhanceiPad’s appeal for business users

Paul Taylor

Only connect: visitors at last year’s Mobile World Congress in Barcelona Lluis Gene/AFP/Getty Images

On FT.com »

MOBILITY Pages 2­3

PRIVACY Page 4

Expiry for XPBusiness usersface dilemmaas support ends

After 12 years,support for theWindows XPoperating systemwill end this April.

Paul Taylor asksMichael Silver (left)and SteveKleynhans,Windows and

Office experts atGartner, what thepotential risks arefor companies thatstay with XP.See ft.com/xp

The Livescribe 3 smartpen

2 ★ FINANCIAL TIMES MONDAY FEBRUARY 24 2014

The Sun loves punningheadlines such as MadMüller – when an Islamicextremist went shopping foryoghurt – and Celebrity BigBlubber – when a whalewashed up on the banks ofthe Thames.

But as the UK tabloidnewspaper shifts to digital,there is a problem. It seemsreaders of its smartphoneapp do not have time forpuns: they want to knowwhat a story is aboutinstantly.

“There’s a bit of a learn-ing process about whatworks on smartphones andwhat doesn’t,” says DerekBrown, the newspaper’shead of strategy. “I wishthe headlines did work, butthey don’t always.”

Along with other mediaorganisations, The Sun –owned by Rupert Murdoch’sNews Corp – is trying tocatch up with its audience,which has shifted to mobiledevices faster than manymedia executives thoughtprobable.

“That mobile tippingpoint has definitely beenreached,” says Robin Pem-brooke, head of product atBBC News Online, one ofthe UK’s most popular newssites.

January was the firstmonth when at least halfthe BBC website’s uniquevisitors came from tabletsand mobile devices. “Inplaces such as Nigeria,more than 90 per cent ofour traffic comes frommobile devices,” says MrPembrooke.

The first step for manymedia organisations hasbeen to try to shift users toapps. Downloading an appmakes users likely to readmore articles and watchmore videos.

App users made up justone in 10 unique browsersto the BBC News mobilesite in January, butaccounted for nearly 40 percent of the content viewed.

This means competing tosome extent with servicessuch as Twitter and Flip-board, which allow readersto view news contentwithin their own apps.

Last month, Facebooklaunched Paper, an app thatpackages stories from newsoutlets with social mediaposts. “How each story istold is as important as thestory itself,” said the pro-motional video.

Some publishers arguethat stories can be told onmobile and desktop inbroadly the same way. “Thedifferences are not as strik-ing as one might imagine,”says the BBC’s Mr Pem-brooke.

So-called responsivedesign means that websitesand web apps can adjust tothe device on which theyare being viewed.

Some companies aretherefore working towards“omnipresence”, wherebyconsumers have a similarexperience on desktop,mobile and tablets, saysPaul Armstrong of DigitalOrange Consulting.

Others, however, areengaged in a larger rethink.

On The Sun’s mobile app,stories are ranked by timesince publication, ratherthan by importance, so visi-tors to the app are con-stantly confronted by newinformation. The newspapermeasures success by howoften readers return to itssite throughout the day.

Along with more straight-forward headlines, the Sunalso tries to deliver bite-sized content, including vid-eos that are just 20-secondslong.

“When everyone sets outto make a news video, theythink three minutes,” saysMr Brown. “But, if you’restanding in a queue, you’regoing to be at the front ofthe queue in 30 seconds.”

On mobile, the linebetween newspapers andtelevision channels quicklybecomes blurred: The Sunalso offers readers footballvideos through its Goalsapp. The Times, anotherNews Corp publication, isoffering subscribers a freepremium subscription toSpotify, the music stream-ing service.

For advertisers, the tran-sition to mobile is alsothrowing up new questions– along with opportunitiesto know more about theirtarget audience.

Even knowing a user’sdevice can be revealing.Apple users tend to be morewilling to pay than those

using Android devices,which helps explain whyThe Guardian newspapercharges for its iPhone app,but not for its Androidequivalent.

But brands can also gomuch further. “The HolyGrail for advertisers is loca-tion,” says Chris Dobson,chairman of the ExchangeLab, a programmatic adver-tising company.

If advertisers can knowwhen a consumer is near ashop or restaurant, theycan send an offer relating tothat outlet.

However, accessing loca-tion data raises privacy con-cerns, and bombardingusers with offers couldbecome intrusive.

“Publishers, marketersand consumers care aboutuser experience,” says MrDobson. “We don’t want toget to a point where we’rebeing annoying.”

For now, the shift tomobile is at the forefront ofmany media companies’strategies.

But some are alreadypointing to a fresh wave ofgadgets, including GoogleGlass and other wearabledevices. Such innovationsmay mean media organisa-tions need to use an evensmaller screen to keep theaudience’s attention.

“It could all changeagain,” says Mr Armstrongat Digital Orange.

In January, in a possiblesign of things to come, CNNlaunched an app for Sam-sung’s Galaxy Gear Smart-watch, which displays upto 10 headlines and linksvia Bluetooth to a mobilephone.

Puns are writeout when usersswitch to appsMedia and advertising

Newspapers need toadapt to demands ofdigital audiences,writes Henry Mance

‘In places such asNigeria, more than90 per cent of ourtraffic comes frommobile devices’

Mobile devices such assmartphones and tabletsoffer unprecedented free-dom and flexibility. Whileconsumers can access per-sonal data and keep intouch on the move, compa-nies and organisations havecome to rely on mobileworking.

Little wonder that world-wide shipments of mobilephones and tablets areexpected to reach almost2.2bn units this year,

according to Gartner, theresearch group.

Yet a big concern for allusers of computer technol-ogy remains security, andIT managers face specialchallenges when employeesuse their own devices forwork.

Forty per cent of organi-sations with pro-BYOD(bring your-own device) pol-icies report increasedemployee productivity,according to Samsung.

A survey carried out inEurope last year for theelectronics group foundthat BYOD polices weresaving 17 per cent on theaverage annual communica-tions bill.

However, the survey alsohighlighted the securityrisks from mobile devices.

In the past two years, athird of organisations re-

ported lost customer databecause of securitybreaches resulting from theuse of personal mobiledevices for work. Only 8 percent said they had not hada security scare related toemployees’ use of their owndevices.

There are also signs thatmalware – already thescourge of PC users – isincreasingly threateningmobile devices. Mobile mal-ware infections rose 20 percent in 2013, according toAlcatel-Lucent, the Frenchtelecoms group.

Gary Newe, technicaldirector for UK, Ireland andsub-Saharan Africa at F5Networks, the computernetworking group, says:“Whether the data are heldon the device or on centralservers, security presents adifficult challenge for com-

panies. In assessing the riskit is important to look atthe information itself –what employees are doingwith it and where they areaccessing it.”

Whereas mobile workingwas once often limited toaccessing emails and read-ing simple documents,organisations are now ask-ing employees to carry outincreasingly complex taskson mobile devices, usingbespoke applications andhandling sensitive data.

One approach to securityhas been mobile devicemanagement (MDM). Thesesystems allow an organisa-tion full control over thedevice, which can betracked and, if need be,wiped remotely.

But the BYOD trendbrings complications. Themobile device may not be

directly controlled by theemployer and the owner’spersonal data need to bekept private and separate.

“MDM is good in theory,but a very blunt instru-ment,” says Dave Spence, adirector in the cyber secu-rity practice of Deloitte, theconsultancy.

He adds: “There are prob-lems around privacy andcontrol of the device. Whathappens, for example, whenemployees leave? Wouldthey be happy for the wholedevice to be wiped, takingtheir personal data with it?”

Many organisations seethe answer in mobile appli-cation management (MAM).This allows an applicationto be installed on anemployee’s device to act asa secure container, separatefrom personal applications.

Phil Barnett, vice-

president of global accountsat Good Technology, amobile device servicesgroup, says: “In the past, alot of players have workedon securing the mobiledevice, but now there is

increasing emphasis on pro-tecting the data themselvesusing a secure container. Ifthe device is lost or stolen,the information can bewiped remotely. And thedata are encrypted just incase they fall into thewrong hands.”

Such systems need to beflexible enough to work onthe wide range of devicesthat employees are likely touse. “Many people prefertheir own devices, but youhave to remember that notall devices are createdequal,” says Mr Barnett.

Part of the security solu-tion, however, is not somuch technical as proce-dural. IT departments canstruggle to persuadeemployees to stick to secu-rity procedures.

“Mobile devices such astablets have become a boon

to people,” says Mr Spence.“But if IT departmentsthink people are using onlywhat they are told they canuse, they are wrong.”

He adds: “IT departmentsneed to be proactive. Manyorganisations have beenslow about doing anythingformally, but they need tobe prepared to make astand and block access fornon-approved devices.”

Mr Newe at F5 Networkssays IT departments are ina difficult position. “On theone hand, they are beingasked to allow people to usetheir own devices to savecosts. But they are alsobeing asked to provide moresecurity.

“Organisations are con-stantly looking for innova-tive ways to solve the prob-lem, but there is no silverbullet.”

MDM or MAM? Businesses seek answers in new world of BYOD

Deloitte’s Dave Spence:MDM is ‘a blunt instrument’

With mobile commercegrowing so quickly, banksknow it is vital to enablecustomers to pay for goodswith their smartphones.

Many technology andtelecoms groups are hopingto help banks with theirdigital strategy.

Meanwhile retailers, too,are having to adapt to theblurring of online and highstreet as shoppers use theirphones to find and pur-chase goods.

“This is a shift to a worldbeyond plastic where thesmartphone becomes theplatform,” says MarionKing, president for UK andIreland at MasterCard. “Theinfrastructure is differentaround the world, [but] peo-ple just want convenience.”

However, the rapidity ofgrowth of mobile payments

has also caused the marketto fragment, as the variousgroups that own differentparts of the technology,banking or retail elementshave looked to grab a shareof the market.

“It's a mess, isn’t it,” saysDavid Sear, managing direc-tor of Weve, a company setup to develop mobile com-merce and advertising initi-atives on behalf of Voda-fone, O2 and EE in the UK.

“It is confusing for peopleand for banks, as well asbeing costly all round,” heobserves. “Payment is theutility bit – you need scaleto make it work. It’s ques-tionable right now if it addsrevenues for banks, butthey will need to make itwork in the future.”

For many mature mar-kets, cards and cash are sowell embedded with con-sumers that digital walletsare seeing only gradualacceptance.

However, the rollout ofcontactless payment pads inshops shows that the infra-structure is becoming estab-lished.

Emerging markets are

sometimes more open tomobile payments, in partbecause there are placeswhere banking is at a basiclevel and where mobile pay-ments can be used as asecure way to trade. Voda-fone’s M-Pesa paymentscheme in Africa is a nota-ble success.

Jean Lassignardie, atCapgemini Global FinancialServices, has identified 12success factors, all of whichare needed for a successfulmobile payments platform.

“And, to date, no leadingsuccessful solution hascome to the forefront exceptin the emerging countriesin Africa with M-Pesa,where no alternativesbesides cash are available,”he says.

The options for mobilepayments are “many andfragmented”, according toAlistair Newton, researchvice-president for bankingand investment services atGartner.

He blames differences inapproach based on technol-ogy, local supplier and oper-ator structures and the reg-ulatory environment.

A number of servicesallow the phone to act as ameans of payment usingcontactless NFC (near fieldcommunication) technol-ogy, although again themarket is fragmented.

Most require separate dig-ital wallets, and not neces-sarily linked to a bankaccount. In the UK, EE andMasterCard, for example,

offer a service where cus-tomers can load up cash onto their phones.

But MasterCard has alsostruck a deal with Weve inthe UK that offers banksthe means to launch mobilecontactless payment serv-ices in an effort to build amore unified platform.

Groups such as Google,Amazon and PayPal already

offer payment schemesonline, and are now makinga push into the real worldwith services such asGoogle’s Wallet that putscash on a phone.

Technology experts pre-dict that Apple could alsobecome active in thismarket given the popularityof its iPhones, extensivedata, fingerprint scannersand other technology thatcould support a paymentssystem.

Eden Zoller, analyst atOvum, expects furthermobile payments develop-ments from Amazon, Face-book, Google, and Apple.

“Facebook in particularneeds to revise its lacklus-tre mobile payments strat-egy, which stands in starkcontrast with its successfulmobile advertising play.”

In the US, Square, thecompany set up by Twitterco-founder Jack Dorsey,provides technology at theother end, with a devicethat allows a mobile phoneto take payments.

However, shops usingSquare can also take pay-ments directly from the app

on a phone. PayPal andiZettle also allow shops touse a phone to take creditcard payments through achip and pin reader.

Pierre Combelles, mobilecommerce business lead forthe GSMA, which repre-sents the mobile industry,says the priority is greaterintegration.

Mobile operators, retail-ers, banks, commercialorganisations and industryassociations need to worktogether to define a “con-sistent transactional jour-ney”, he says, where cus-tomers do not have to adaptto multiple processes.

Gartner’s Mr Newton saysthat the power lies with theuser, “not the operator,banks or brands”.

Ultimately, he says, thelatter need to make mobilepayments easier or safer, oroffer incentives such as loy-alty rewards, to persuadeconsumers to change theirhabits.

“Way too many payment‘innovations’ ignore thesevery basic principles, andas a result are doomed tofailure.”

Rapid growth fuels rash of competing solutionsPayment systems

No winner has yetemerged in a highlyfragmented market,says Daniel Thomas

Smartphones and othermobile devices such as tab-lets are changing the wayspeople shop, and purchasesmade from these devices are

growing fast.In the run-up to Christmas 2013,

shopping via mobile devices jumped140 per cent in the UK, according toIMRG, the industry association foronline retailers.

This trend is set to continue. ShopDirect, the group behind Littlewoodsand very.co.uk, says that from nextyear all its transactions will involve amobile device – with customers eitherresearching an item or making theentire purchase on the device.

“We have been taken by surprise athow fast this is growing,” says AlexBaldock, chief executive of ShopDirect. “We are investing heavily inoptimising our site for mobile devices.

M-commerce – people shopping onmobile devices such as smartphonesand tablets – could be revolutionaryfor retailers.

Online shopping allowed customersto buy any time they liked, so long asthey were near a computer. Withshopping hours still heavily control-led in many countries, not least as aresult of Sunday trading restrictions,this was a huge change.

But mobile goes beyond this, givingretailers access to shoppers 24 hours aday, wherever they are.

Retailers need to act quickly if theyare to benefit from the rise of mobileecommerce. In the UK, sales via tab-lets will quadruple over the next fouryears, reaching £17.9bn in 2017,according to eMarketer, the researchgroup.

In emerging markets, mobile hasproven even more vital. Smartphoneusage is growing rapidly in countriessuch as China, enabling consumers toleapfrog straight into mobile-only

ecommerce. Mobile users overtookthose using PCs in China in 2012 –and that gap is growing.

Alibaba, China’s largest ecommercecompany, has scrambled to get moreof a foothold in the mobile market.

“Mobile has a lot of power,” saysPenny Gillespie, an analyst atGartner, the research group. “For thefirst time, customers carry around adevice constantly.”

But this proximity brings problems.Shoppers have much higher expecta-tions from mobile services than froma standard website. There is a built-inbelief on the part of consumers thatmobile will be more efficient, says MsGillespie.

A slow-loading app or a clunkyinterface will kill sales more quicklythan a sloppy experience on a desk-top. Customers often find it tricky tobuy from a mobile. Tablet computers– with their large screens – lend them-selves well to shopping. Smartphones,however, with their smaller screens,make doing things such as inputtingcredit card numbers fiddly. Accord-ingly, tablets account for four-fifths ofUK mobile sales.

Companies such as Mopowered, aBritish start-up, help retailers includ-ing Next optimise their websites forsmaller devices. By using a phone’sGPS, Mopowered can assist in findingout a customer’s address, withoutthem having to punch it in on a tinyscreen.

Mobile wallets will go some way toturning smartphone browsers intobuyers. The rise of the mobile wallet

has been forecast regularly, but hasso far failed to catch on in developedmarkets (see article above).

“Customers say they are really notinterested; they have enough paymentmethods,” says Ms Gillespie atGartner. “If you want to changebehaviour, you have to give people areason to change.”

The incentives to sign up for mobilewallets have not been there so far, butwill be soon, she suggests. “What willdrive mobile payments and walletswill be the corresponding rewardschemes.”

In total, however, mobile devicesaccount for only about a quarter ofonline sales, according to IMRG. Thebulk of ecommerce sales is still doneon websites via computers. But thiswill not last. IMRG also notes that theproportion of sales coming frommobile devices in the UK doubledyear-on-year over Christmas 2013.

For retailers, it should not matterwhether customers prefer to completetransactions on their mobiles or theirlaptops – or even in store, says JacobAqraou, eBay’s European head.

If customers are using their phonesto browse – or, as retailers like to say,“snack” – on items throughout the

day, before actually buying them on adesktop computer, that is fine. “Thedevices are meant for differentthings,” says Mr Aqraou. “Combined,you will get a better sale.”

Retailers have to stop separatingonline, mobile and the high street, hesays. “The discussion is more aboutmultichannel – of being online andmobile and thinking of the two ascomplementary,” he adds.

Nearly half of UK shoppers haveused their smartphone in store tocheck whether they can get an itemcheaper online, according to researchby IMRG. Typically, they photographan item or its barcode and then dofurther research later, maybe on alaptop or desktop PC.

“Consumers increasingly want to,and expect to be able to, use theirmobile when out shopping, and notjust to purchase from competitors,”says Derek Eccleston, commercialdirector at eDigitalResearch, aresearch group.

Shoppers are not only comparingprice, but reading reviews and com-paring warranties. The future ofecommerce could be in store. “Thelines between online and offline [are]blurring,” says Mr Aqraou.

Stores caughtby surprise asshoppers taketheir tabletsMobile commerce Retailers need to act fast– and get their apps right – to benefit from amultichannel world, writes Duncan Robinson

‘It's a mess, isn’t it?It is confusing forpeople and banks,as well as beingcostly all around’

Champagnemoment:a shopper at aMetro store inGermany scansthe price of abottle of bubblyinto her mobilephone Alamy

The Connected Business

Security

Staff like to use theirown devices at workbut employers mustnot ignore the risks,writes Paul Solman

A slow app or clunkyinterface will kill salesquicker than a sloppyexperience on a desktop

FINANCIAL TIMES MONDAY FEBRUARY 24 2014 ★ † 3

From health monitors thatraise the alert when yourcholesterol level gets toohigh, to glasses that super-impose a map on yourvision, wearable computersare billed as the next bigthing.

Their potential lies inusing data about where peo-ple are and what they aredoing, and keeping themdigitally connected via theinternet.

“Wearables are going tomake the world of comput-ing bigger than ever,” saysGenevieve Bell, director ofIntel’s interaction and expe-rience research. “We’re atan early stage, mostly pro-ducing enhanced versionsof existing devices, such aswatches, glasses and pedo-meters.”

But in five to 10 years’time, wearable devices willbe very different, she says,just as mobiles no longerresemble the first models ofthe 1980s. “Smartphones areused more for checkingweather reports, train time-tables and maps than forvoice conversations.”

Accenture, the manage-ment consultancy, forecaststhe wearable tech-nology market,currently worth$1bn-$3bn ayear, will rise to$18bn by 2018. Themain products atpresent are wrist-bands from companies

such as Fitbit and Nike, and“smart” watches, such asthe Galaxy Gear from Sam-sung, which incorporates acamera and can link with amobile phone to show textmessages and incomingcalls.

Andy Griffiths, presidentof Samsung UK and Ireland,says 2014 will be a big yearfor wearables “as theybecome more mainstream”.

But Ms Bell says that tomaximise the potential,companies will need tocome up with fresh ideas.

One such is the Mimobaby onesie from Boston-based Rest Devices, whichhas washable interwovensensors that monitor ababy’s breathing, skin tem-perature, body position andactivity level.

Sensors are also incorpo-rated in a jacket developedby Motorola Solutions toprovide “situational aware-ness”, for use by securitystaff and the police.

For fitness enthusiasts,Intel has developed earbudsthat as well as playingmusic tracks heart rate andpulse. They can select tunesfrom your playlist thatencourage running faster orslower.

Meanwhile Google isinviting consumers in theUS to experiment with its$1,500 Glass headset, whichincorporates a tiny camera,microphone, display andinternet access.

But wearable technologyis likely to be used increas-

ingly in a business environ-ment, Mr Griffiths says.Curt Croley, managingdirector of innovation anddesign at Motorola Solu-tions, agrees, citing effi-ciency gains in specialistmarkets such as the mili-tary and field service engi-neering.

Motorola Solutions pro-duces a wearable computerfor use in warehouses anddistribution centres thathelps companies streamlineoperations, reducing inven-tory and “shrinkage” in thesupply chain.

It responds to voice com-mands, leaving the user’shands free, and has a bar-code scanner worn as a ringthat identifies items as theyare being handled.

The company is takinghands-free operation fur-ther, Mr Croley says, withits HC1 headset, designedfor harsh environments orremote locations whereaccess to complex graphicaldata or text is needed andusing a laptop or handhelddevice is impractical. It hasa display at the bottom ofthe user’s vision, and canbe controlled by a gesturesuch as a tilt of the head.

Using headsets to videowhat the user is looking atand stream it via the inter-net allows relatively inexpe-rienced field workers to beguided by a remote expert.

Accenture and Philips,meanwhile, have collabo-rated on a Google Glassheadset that lets surgeonsmonitor vital signs withouthaving to turn away.

For wearable technologyto take off, wireless net-works need to be faster andmore reliable, says Mr Cro-ley. Batteries also need toimprove. At present theyare heavy, get hot and donot last long enough.

There are also aestheticconsiderations. Once apiece of technology isstrapped to the body itbecomes part of thewearer’s self image, says MrCroley. “I’ve seen burlywarehouse workers gostraight to the mirror tocheck they don’t lookgoofy.”

Creating wearable tech-nology for the workplace ismore demanding than forconsumers, because it mayneed to be worn all day. Ifthe device is going to beshared between workers,which seems likely withheadsets priced at $1,500-$5,400, there are alsohygiene issues.

And there are safety con-cerns. Headsets currentlydisplay information on ascreen at the periphery ofvision. Reading them is likeglancing at a dashboard orwatch. But in future,images will be superim-posed on lenses worn likespectacles, so the imageswill appear to float beforethe eye, which could bemore distracting.

Another concern is secu-rity, says Eric Baize, seniordirector at EMC’s productsecurity office. Cameras onheadsets or smartphonesare easily seen, but they areless visible when worn onan armband under a sleeve,increasing the risk of data

theft.

Business warms to wearablesbut fresh ideas are neededSmart devices

Security staff andbabies are amongtarget markets,reports Jane Bird

Daniel ThomasTelecoms correspondent

Andrea FelstedSenior retail correspondent

Henry ManceMedia correspondent

Duncan RobinsonCompanies reporter

Emily SteelUS media and marketingcorrespondent

Jane Bird, Paul Solman,

Stephen Pritchard,Jessica TwentymanFreelance IT writers

Andrew BaxterCommissioning editorAndy MearsPicture editor

Steven BirdDesigner

For advertising details,contact: James Aylott, tel+44 (0)20 7873 3392, emailjames.aylott@ft.com or yourusual FT representative.

Contributors »

The Connected Business

Stephen Brobst, chieftechnology officer atTeradata, the datawarehousing company,spends almost his whole lifeon the move.

In an average year, heclocks up some 500,000miles, visiting customers allover the world and thecompany’s research anddevelopment labs in NorthAmerica, India and China.

He has never owned ahome, nor does he rent one.The last bed he slept in formore than five consecutivenights, he reckons, was inhis student dormitory at theMassachusetts Institute ofTechnology, some 20 yearsago.

His passions are musicand books, which he keepson his laptop. Hecommunicates withcolleagues and customers byemail, or face­to­face.

“When you’re not tied toa permanent residence,every day is a travel day,”he says. “As long as I haveclothes for a week and cando laundry at the weekend,I’m happy.”

Few employees wouldwillingly embrace a lifestylelike Mr Brobst’s, but mostare more mobile than everbeen before. Almost half the26,000­plus businessexecutives polled in a globalsurvey last year by Regus,the office space provider,said they worked remotelyfor at least half the workingweek.

While the benefits oftechnology­enabled mobileworking are welldocumented, the downsidesreceive less attention.

Disconnected from theworkplace, mobile employeescan feel isolated. If the bossplagues them for updates,they may feel that they arenot trusted, but if that doesnot happen, employees canfeel abandoned. Either way,opportunities for sharinginsights and ideas can getlost in the endless shuttlebetween hotels, airports andconference centres.

These are areas of riskwhere managers need to bevigilant, says Prithvi Shergill,

chief human resourcesofficer at HCL Technologies,an Indian IT servicecompany.

His company’s businessmodel, he says, relies onconsultants working at clientsites to deliver projects, “butit’s vital to us that we getemployees together, face­to­face, on a regular basis forboth work­related and socialoccasions”.

When this is not possible,HCL’s answer is to giveemployees the same kind ofonline social networkingopportunities that they getfrom using Facebook, forexample, to keep up withremote friends and family.

In HCL’s case, theplatform is Meme, wherecolleagues can submit ideasand client leads, accesshuman resources and IThelp desk services, or simplycome together to sharenews, views and information.

Launched in April 2011,Meme attracted 60,000users within HCL during itsfirst year of life and today isused by 75,000 employees.

“We see employees fromdifferent age groups,nationalities, functions andlocations really connect andbond with each other onMeme,” says Mr Shergill.

Other companies take asimilar approach, often usingenterprise social networkingproducts such as Microsoft’sYammer, Salesforce.com’sChatter, Tibco’s Tibbr orVMware’s SocialCast.

At Cathay Pacific, forexample, the airline is usingTibbr to give crew memberstravel updates and companynews.

At PSI, a non­profithealthcare organisation, staffworking in Myanmar, Indiaand Vietnam, among otherlocations, use VMware’sSocialCast for answers ontreatments for patients.

Even in an increasinglymobile world, isolation neednot be a fact of life, norshould physical distance bea barrier to colleaguesfinding, connecting andinteracting with each other.

Jessica Twentyman

Employees New ways to stay in touch

In a world where mobile and cloudtechnologies allow employees towork from almost anywhere, vastswathes of costly office spacestand empty. The employees that

once filled them are elsewhere. Theyare busy getting work done from cus-tomer sites, airport lounges, confer-ence centres, coffee bars or their ownhomes.

These remote workers stay produc-tive in the time they spend away fromthe office, because they are equippedwith an arsenal of mobile devices,often purchased at their own expense.They use these to access an ever-growing portfolio of corporate applica-tions via the internet.

According to a report written in2013 by Ted Schadler, a ForresterResearch analyst the number of “any-time, anywhere” information workers– those who use three or moredevices, work from multiple locationsand use many apps – rose from 23 percent of the global workforce in 2011 to29 per cent in 2012.

“The anytime, anywhere work trendis just getting started,” he writes.

For some employees, remote work-ing is a necessity, because their day-to-day work takes place away fromcompany premises.

An example is Coca-Cola Enter-prises (CCE), the subsidiary of the softdrinks group that manufactures, bot-tles and distributes its products inwestern Europe. Sales staff and serv-ice technicians spend most of theirtime on the road, visiting retailersthat stock the company’s products,signing up new ones, and installingand maintaining a network of 600,000display fridges in shops and super-markets.

All their work is managed andrecorded using mobile devices thataccess cloud-based customer relation-ship management (CRM) applicationsfrom Salesforce.com, says Kevin Flow-ers, CCE’s chief technology officer.

For other employees, remote work-ing is a choice – and, in some cases, itis one they make, because they do notfind the office environment conduciveto productivity, according to Jeremy

Myerson, a professor at the RoyalCollege of Art and author of the 2010book, New Demographics, New Work-space: Office Design for the ChangingWorkforce.

“While working practices havemoved into the information age, officedesign is still in the industrial age,”he says. “People used to have to go toa physical workplace, in order toaccess the tools they needed to do thejob. New technologies have unteth-ered them.”

In the process, he says, new ways ofworking have highlighted all theshortcomings of day-to-day office life,with its distractions and interrup-tions. “If you’re sitting in an open-plan office, you can’t get anythingdone. If you’re stuck in a cubicle, youmight as well be working from home,”he says.

That is forcing a rethink at organi-sations with large populations ofmobile and remote workers. Office uti-lisation rates may be shrinking, butthe costs continue to rise: a singleworkstation in a central London officecosts companies $23,500 a year, $14,050in New York, and $11,350 in Singa-pore, according to 2013 figures fromDTZ, the property consultancy.

But corporate offices still provide an

important physical anchor for organi-sational culture, says Diane Hoskins,executive director at Gensler, theinternational architecture and designfirm.

“Without a company ‘home’,employees are disconnected from thatculture. They’re cut loose from themother ship. They become more likean independent consultant to the com-pany that employs them,” she says.

That is not good for them or theiremployer, says Ms Hoskins: it resultsin low employee retention rates andmissed opportunities for career devel-opment. Moreover, face-to-face meet-ings are still a vital part of manypeoples’ work.

As a result, several of Gensler’s cli-ents are starting to look at mobileworking more broadly, to includemobility “within the four walls of acompany building”, she says.

In other words, they are looking tocreate different areas in the office thatemployees can move between, accord-ing to the type of work they areengaged on at any given time.

In addition to the mobile devicesand applications they use outside theoffice, this model also calls for arobust, on-premise wireless networkand plenty of electricity points where

employees can charge their smart-phones, tablets and laptops.

In Prof Myerson’s book, three typesof zone are suggested: areas for con-centration, collaboration, and contem-plation. An employee might use thefirst zone for getting a report finishedin the morning, the second for meet-ing with colleagues or customers inthe afternoon, and the third forunwinding after that meeting.

This thinking inspired the redesignof several European offices of the glo-bal headset manufacturer Plantronics,including its award-winning UK head-quarters at Royal Wootton Bassett,says Philip Vanhoutte, senior vice-president and managing director forEurope and Africa.

Over time, smart building technolo-gies, based on sensors that detectwhen different areas are in use, willenable companies to optimise the useof the office space they rent or own,according to Nathalie Leboucher,head of smart cities at Orange Busi-ness Services.

“Mobile employees won’t need tospend their time hunting for availablemeeting rooms or desk space on thoseoccasions when they’re in the office,because they’ll be able to identify andbook them online,” she says.

Space – the final frontier for officesWork Mobility withina company building isthe new priority, saysJessica Twentyman

‘Without acompany“home”,employeesare cut offfrom thecultureand themother ship’

Feeling lonely:swathes of costlyoffice space standempty in era ofremote working

OJO Images/Alamy

Tiny market: theMimo baby onesie

4 ★ FINANCIAL TIMES MONDAY FEBRUARY 24 2014

Keeping personal data privateis an issue that continues tovex corporations and gov-ernments alike.

In the past month alone,retailers Target in the US and UK-based Tesco have suffered databreaches, while Barclays, the UK-based bank, revealed that details ofthousands of its investor customerswere stolen and sold on.

Meanwhile Edward Snowden’s reve-lations about data collection by theUS National Security Agency andother security bodies continue to casta shadow over the whole question ofprivacy online.

But then privacy – at least when itcomes to the sharing of personal dataonline – is not a static concept. Atti-tudes to personal privacy and to datasharing vary widely around the world.

In the US and the UK, citizens areconsidered to be relatively relaxedabout data sharing, although they areperhaps less so post-Snowden.

Germans tend to take a muchstricter view on what government andbusinesses can do with personal data,a fact reflected both in Germany’sstrict data protection and its employ-ment law.

France, for its part, has a stronglegal defence of personal privacy. Butthere, as elsewhere, the legal frame-work is coming under pressure fromthe much more rapid evolution of pri-vacy online.

“Attitudes have changed,” saysRonald Koorn, a partner and data pri-vacy expert at KPMG, based in theNetherlands.

“Initially, the NSA incident was pri-marily a media event, but that discus-sion is now reaching multinationalcompanies. They realise that privacyrequires increased attention.

“It was not previously among theirtop 10 concerns. In the US, there hasbeen more strict compliance, but inEurope it has been more relaxed – ormore lax. That has changed becauseof the NSA, but also what is happen-ing in Brussels.”

As Mr Koorn points out, the EUplanned to update its data protectionframework well before Mr Snowden’srevelations put the matter on thefront pages. The existing EU data pro-tection directive – a set of legal princi-ples that are used as the basis ofnational laws – is due to be replaced

by a more binding regulation that willapply across the EU.

The timescale for implementing thenew laws has slipped several times;late 2014, or even early 2015, nowseems the earliest for a final draft ofthe new law. When it comes, the regu-lation will bring far greater consist-ency across Europe on data privacyand data protection.

But it will impose some strict newstandards, in areas such as the disclo-sure of data breaches, as well as fargreater penalties for organisationsthat transgress. One particularlycontroversial proposal will give dataprotection authorities the ability tofine companies up to 5 per cent oftheir worldwide turnover if they suf-fer a breach.

Although business leaders mightnot welcome such moves, experts sayit is a necessary response to today’svery different climate around per-sonal data.

“We are dealing with a world thathas changed so much since the early1990s, before we even get on to issuessuch as the cloud or social media,”says Vinod Bange, a partner at lawfirm Taylor Wessing.

“All [those changes] have takenplace since the current regime cameinto force. The current laws, arounddata processors and data controllers,have not worked. They may havebeen relevant to the computerbureaux of the 1990s, but no longer.”

And, Mr Bange adds, it is right forlawmakers and businesses alike todebate whether the current legal andregulatory framework is effective. “Dowe have the balance right? Thatdepends on changing attitudes,” hesays. “There are rights and obliga-tions around data, but also only tocollect data if there are lawfulgrounds.”

But what constitute those lawfulgrounds is by no means fixed. Indi-viduals have become much moreopen to sharing some personal infor-mation, through social media, but byno means all information.

There are questions, too, of legiti-macy and proportion when itcomes to collecting data.The Snowden reve-lations aside,most citi-zens willaccept a

greater level of data gathering andeven covert data surveillance by lawenforcement or security agencies thanby local government and health pro-viders. These in turn will have morelatitude than private companies.

Some protection specialists see thatawareness as a positive development,even if it may bring short-term incon-venience to companies.

“The political climate has resultedin a situation where people havebecome more aware that data are col-lected, not just by government butalso by business,” suggests HarveyLewis, analytics research director atprofessional services firm Deloitte.“The concerns are around increasingtransparency, and making sure cus-tomers are aware of the data that areheld on them.”

But if opinions about data sharingand data collection are far from static,so is the way those data are beingused by governments and companies,and how they should be protected.

The trend for organisations to usemore and more sophisticated analysisof huge amounts of data – so called“big data” – is also changing the waythey look at information.

From a privacy point of view, beingable to combine vast data sets fromdifferent sources in close to real timeraises some serious issues. Anony-mous or innocuous data sets can becombined to become both sensitiveand identifiable.

Javvad Malik, a security researcherat analysts The 451 Group, says:

“A challenge for legislation isthat it is very, very difficultto quantify and contain, or

[to judge] when legitimateuse of data becomes mali-cious. It is like chemis-try: some elements arestable, but put togetherthey become explosive.”

Regulators, he says, haveto balance ensuring pri-vacy with the need toavoid controls that prevent

the legitimate use of data bygovernments or companies.

Then there is a further chal-lenge: whether the current

generation of data pro-tection tools are ade-

quate to protectgrowing stores

of valuable

data, against an increasingly hostilecyberspace environment.

“Mobile and the cloud have turnedthe idea of a perimeter around data onits head,” says John Mancini, presi-dent and chief executive of AIIM, theinformation management trade body.“A sound perimeter is no longerenough . . . You have to look at infor-mation governance in a holistic way.You cannot just take a ‘Maginot Line’approach, as information is scatteredacross the organisation.”

Instead, Mr Mancini says organisa-tions need to be looking at the “bigpicture risk”: reputational and finan-cial damage, as well as the regulatoryconsequences of a data breach.

This could cause companies to bemore cautious about the data theycollect, and more open about the con-sent they seek for collecting it, hesays. There could be a shift fromlegalistic terms and conditions toplain language, but also more consid-eration about data disposal. Datadegrade over time, and the more dataan organisation holds, the greater therisk of damage if there is a breach.

Organisations, though, may not bedoing enough to protect their data,despite a succession of privacy-relatedheadlines.

“Companies are not doing enoughto prevent breaches. Security onlygets attention after a breach,” saysSeth Berman, managing director atrisk consultants Stroz Friedberg.“Companies should start by looking atwhere their data are and how they areprotecting them. Do they need somuch information, and is there a pol-icy regarding data destruction?”

This point is echoed by John Skip-per, a privacy expert at PA Consult-ing. “We have seen a marked increasein interest in privacy recently, par-tially triggered by the large amountsof publicity, but also because the EUregulations are on the drawingboard,” he says. And this will mean achange in management attitudes todata privacy.

“It was rarely a board level respon-sibility, but more often the responsi-bility of the chief information officeror the head of IT security,” he says.“But it [data privacy] is now recog-nised as an important part of the rela-tionship with customers. So it is morelikely to lie with the chief operatingofficer, or a business director.”

US revelations put heat on businessPrivacy The NSA leaks and new EU rules will push data protection up the agenda, says Stephen Pritchard

Brusselsplans amorebindingregulationthat willapply acrossmembers

The Connected Business

A consumer stands in apharmacy, trying to decidewhich medicine would bebest for her child’s cough.All the while, her mobilephone is sending a signal tothe store, indicating whereshe is.

The system alerts a phar-macist to assist the shopperafter noticing that she hasbeen standing in the sameplace for four minutes.

At the same time, thelocation of the phone istransmitted to a so-calleddata broker company thathas tracked, analysed andsold thousands of detailsabout her life.

By tapping into this data-base, the retailer knowsthis woman has not boughtbath soap for six weeks andsends an instant coupon toher phone, along with a spe-cial offer for the chocolatebar she typically buys onlyonce a month.

That is the vision out-lined by some of world’sleading mobile phone track-ing and analytics compa-nies. There are more than1.5bn smartphones in theworld, each possessing theGPS, WiFi or other technol-ogies that track and trans-mit a user’s precise locationas they go about their day.

Accessing then deployingthe location information isa potential boon for bricks-and-mortar retailers, tryingto compete with onlinerivals such as Amazon.

For consumers, that datacollection can translate intomore precisely targeted cou-pons and better customerservice.

But there is also thepotential for data brokers toadd location data to thevast dossiers they keep onindividuals, often withouttheir knowledge that suchinformation is beingtracked, scored and sold.

These details can includeeverything from an individ-ual’s income and religiousaffiliation to whether a per-son smokes cigarettes orsuffers from depression.

“The collection is invisi-ble, passive,” noted AshkanSoltani, an independent pri-vacy and security re-searcher, at a workshop lastweek at the US FederalTrade Commission on howretailers and other busi-nesses use mobile phonesignals to track consumers.

Seth Schoen, a seniorstaff technologist at theElectronic Frontier Founda-tion privacy watchdog,argued that consumersshould have to opt in tosuch tracking.

There are potentially direconsequences should a per-son’s location be trackedlong-term, he warned, com-paring a data trail to pollu-tion.

“You can’t necessarily seeit, and you aren’t necessar-ily harmed by it in theshort term,” he said. “Thatis much more significantover time.”

Mobile device tracking isthe latest digital privacyissue to face increased scru-tiny, particularly in the US.

Another FTC workshopthis spring will investigatehow data brokers score

consumers to predict trendsand how health-relatedinformation is being col-lected and used.

The investigations comeas lawmakers and regula-tors are trying to rein in thelargely unregulated databroker industry.

A US Senate commercecommittee hearing inDecember revealed thatdata brokers were sellingincreasingly sensitive infor-mation, including lists ofrape victims sold for 7.9cents per name, and thosewith genetic diseases.

Companies can use thosedetails to change whatoffers they make and adjustthe prices they charge.

Consumer privacy advo-cates fear the data could beused to affect whether aperson gets a job, healthinsurance or a loan, amongother things.

Senator John Rockefeller,chairman of the commercecommittee, has launched aninvestigation into six databrokers that sell productsidentifying people based ontheir financial or healthproblems.

In the US, no overarchingfederal privacy laws regu-late the tracking and sale ofpersonal information. Spe-cific regulations govern theuse of information collectedabout children or informa-tion that could be used tomake decisions regardingcredit, employment, insur-ance or housing.

Consumers, meanwhile,do not have the right toknow what information is

collected about them. Theyoften cannot opt out of thetracking or use of thosedetails.

This month, SenatorsRockefeller and EdwardMarkey, also of the com-merce committee, intro-duced the Data BrokerAccountability and Trans-parency Act, which wouldrequire data brokers to bemore transparent andaccountable for the con-sumer information thatthey track and sell.

If passed, the bill wouldalso allow consumers toview what data brokershold about them, correct itor opt out of the collection.

“This booming shadowindustry that generatedmore than $150bn in 2012and operates with very littlescrutiny and oversight, ismaking tremendous profitsoff practices that can be dis-turbing and totally unfairto consumers,” Mr Rockefel-ler says.

But industry lobbyistshave been quick to respond.

Peggy Hudson, seniorvice-president of govern-ment affairs at the NewYork-based Direct Market-ing Association, says: “Im-posing an access and cor-rection regime on market-ing data is not necessary toprotect consumer privacyand doing so would make itharder for companies tokeep data secure at a timewhen consumers are moreconcerned about identitytheft than ever before.”

Senators seeknew rules fordata brokers

Consumer issues

Privacy advocates areworried about thebooming industry,writes Emily Steel

Ever since Tesco, the UKsupermarket group, devel-oped its Clubcard customerloyalty scheme in the mid-1990s, retailers haveamassed huge amounts ofdata about shoppers.

The sort of data collectedby Tesco and Sainsbury inthe UK, and supermarketsin the US such as Kroger,help the retailers to targetpromotions, such as money-off coupons, at customerswho actually want them.

Supermarket executives

say these can be muchmore effective than genericoffers advertised in newspa-pers, for example.

But as the consumer envi-ronment has become moredifficult, and the use of bigdata more prevalent, retail-ers have taken things onestep further, buildingdetailed profiles of custom-ers.

Store groups have “col-lected a lot of data, bothoffline and online, in rela-tion to shoppers’ purchas-ing habits, which can boildown to where somebodyshopped, what was in theirbasket and how much theyspent”, says Kenny Mullen,a partner in the technologyteam at law firm Withers’London office.

“As it builds up overtime, it can give owners

and operators of shops avery good insight in rela-tion to a person’s habits.”

Mr Mullen says retailersare increasingly analysingthese data to build detailedpictures of their customers.

“The more informationyou collect, the more profileis built up of the person,”he says, adding that infor-mation is not much useunless it is not analysed.

Such detailed analysisraises issues for consumers.

Mr Mullen points out thatthe online sector is verysophisticated in analysingdata. One outcome of this isproduct recommendations,based on the customer’spurchasing history.

“[Online retailers] areanalysing what they havegathered about you in anattempt to point you in the

direction of things, tryingto encourage you toimpulse-buy,” he says.

Amazon is taking this onestep further, by planning tosend packages to shoppersbefore they have orderedthem. It will use predictivedemand analytics and hasfiled a patent for the systemin the US.

The online retailer willuse its customer databaseto predict which geographi-cal areas it thinks willorder certain products. Itwill send them to a localwarehouse before theorders are received. Duringtransit it expects to receivea specific address.

Then there is the issue ofonline privacy. The moredetailed a picture that isbuilt up, the more valuablethe data are to criminals.

“Clearly, if you are engag-ing in more sophisticatedanalysis, you are raisingthe stakes, and increasingthe attractiveness of thosedata . . . to a potential fraud-ster,” says Mr Mullen.

Concerns about the safetyof data held by retailershave been highlighted by anumber of cases.

One of the most recentinvolved Target the US dis-count retailer. In December,at the height of the holiday

shopping season, thievesstole credit card data fromup to 40m Target shoppersin a huge security breach.

Neiman Marcus, theupmarket US departmentstore, also said it may havebeen struck by hackers asfar back as July.

The Target theft was oneof the biggest breaches ofdata security in the retailsector since 2007, when TJXCompanies – a discountchain that owns TJ Maxx inthe US and TK Maxx in theUK – said it had fallen vic-tim to criminals.

Brian Dunefsky, of coun-sel in Withers’ New Yorkoffice, says the Targetbreach involved theretailer’s bricks and mortarstores, rather than its web-site.

This shows that in the era

of online shopping, physicalstores remain vulnerable.

“The Target attack wasconsidered a point of saleattack,” says Mr Dunefsky.

Online shopping, mean-while, has its own issues.One is whether retailers areusing online searches totarget special offers, or setprices, based on browsinghistory.

While Mr Dunefsky saysthis happens in the US, andwithin the scope of the law,in the UK, the Office of FairTrading has been investi-gating the practice.

The OFT says: “Pricesonline do vary, dependingon factors such as time ofpurchase, the location ofthe consumer and the routeinto the website.”

The watchdog adds thatwhere personalised pricing

did take place, it was lesslikely to be harmful if con-sumers knew it was hap-pening, understood how itworked, and could makeeffective choices.

However, says the OFT, itcould be harmful in anumber of circumstances,including where it was nottransparent to the con-sumer that price discrimi-nation was occurring.

Lawyers say the practicecould be detrimental toretailers’ relationships withtheir customers.

Quentin Archer, a con-sultant at law firm HoganLovells, says consumerswould need to be told thatpersonalised pricing wastaking place. If they arenot, it would hardly endearthe retailer to its custom-ers, he says.

Stores mine rich seam of data on shoppers – but is it kept safe?Retailing

Detailed customerprofiles are valuableto criminals, too,says Andrea Felsted

The more detaileda picture that isbuilt up, the morevaluable the dataare to criminals

Whistleblower:revelations byEdward Snowdenhave raised broaderquestions aboutonline privacy

The data could beused to affectwhether a persongets a job, healthinsurance or a loan

Oivind Hovland