The License Plate Loyalty Card

This column was written by Evan Schuman, the editor of StorefrontBacktalk.com, a site that tracks retail technology, e-commerce and security issues. Retail Realities will appear each Friday. Evan can be reached at e-mail and on Twitter.

When the driver walks into the Nordstrom location, text alerts have told associates that he's the driver of a red 2009 S600. The scanner he walked by recognized his cell phone's unique identifier number as the same one that exited the Mercedes, which had its license plate number automatically logged as well. When he purchases a dress shirt 20 minutes later with his Visa card, the system can now attach a name (and the purchase of that shirt) to that license plate and that cell phone. If that customer happens to use a loyalty card, his complete purchase history is then associated with the car and his phone.

But while there, he also drops by the Macy's at the mall and walks out empty-handed, but the store manager learns why in about two hours. His car is spotted three miles away having driven to a direct Macy's rival and made his electronics purchase there instead.

That scenario is not science fiction. It's possible today using the same license plate reading (LPR) technology that law enforcement has been using for years. The equipment is now available to the general public and market research firms working for major retail chains have already started buying the equipment and testing its limits. They haven't found many.

The license plate/mobile situation is the latest example of a retail industry, pressured by an ailing economy that is sending household name chains into bankruptcy and forcing an ever-growing list of store closings and layoffs, trying to push the cash drawer envelope more and more on privacy issues. This effort is made all the easier because of improvements in technology, the ubiquity of smartphones and the fact that many younger consumers have an attitude toward privacy that is light years more flexible than preceding generations.

Beyond license plates, how far have some tried pushing the envelope? How about having tiny video cameras on store shelves, to watch and see what consumers do with products, zooming in on what they're reading on a cereal box and what actions they take? Or examining social web site and instant messaging posts and using software to look for emotional clues and secretly using that to make sales pitches?

Earlier this month, Sears admitted to being involved in an extensive online effort that went beyond shopping cart examination and included, according to the U.S. Federal Trade Commission, review of online bank statements, drug prescription records, video rental records and library borrowing histories.

Mark Rasch is the former head of the U.S. Justice Department's high-tech crimes unit and today is an attorney specializing in retail law. He's also a Washington, D.C., who recently got a parking ticket courtesy of the police there using their license plate tracking technology. (He parked in one spot and then moved his car three blocks away, but was hit with a ticket for having parked in that overall zone for more than two hours, even though he hadn't been parked in any one spot for more than two hours.)

Rasch, who works with a lot of the largest retail firms on legal issues, said he has no doubt that retailers will quickly embrace license plate tracking and a wide range of other techniques that are certain to test the U.S. consumer's toleration for privacy aggressiveness as we approach 2010. "If retailers see it driving business, they'll absolutely do it," Rasch said. "The technology to do this is getting easier and cheaper. Yes, it will happen."

The issue is much more about consumers' evolving attitudes about privacy. Is a car parked on the street private, when anybody walking down the sidewalk or driving down the road can see it? What about in the driveway? In a covered garage? Does it make a difference if it's a covered garage, does the privacy equation change if it's owned by the city, by an apartment building landlord or by a shopping mall?

Consumers "don't see retailers as being in the information business so they won't punish them for information abuses, unless they're personally affected by the (privacy) breach," Rasch said. "And even when they feel personally affected, how does the chain react to their concerns? If that consumer feels treated fairly, (that consumer) may even reward the retailer. It's all about customer service."

But how does this license plate tracking work? The devices are small infra-red cameras, selling today for about $22,000, that can instantly photograph, digitize and look up information about license plates. What makes the retail applications practical are advances in the technology.

About ten years ago, the typical LPR camera and gear cost about $150,000, was so big that it occupied the full trunk of a police cruiser and couldn't track a license plate when the vehicle-mounted camera was moving faster than 5 miles-per-hour, said Andy Bucholz, who designed one of the earliest LPR units and received the first funding to deploy it for law enforcement, courtesy of a contract with the U.S. Department of Justice. Today, Bucholz serves on the board of directors of G2Tactics.

Today, though, that same device can be handheld, costs about $22,000 and can accurately image the license when driving as fast as 180 miles-per-hour, he said. "That means that you can be driving 70 MPH and pass a car going in the opposite direction at 70 MPH and capture it, day or night."

Police have been using the systems to log where cars are parked and driving all over the country. The idea is that the data is saved for as long as possible. Then, when a major crime is being investigated, if the detectives are lucky, that data could prove who was where when, long before anyone knew that a crime was going to happen. Murder suspects can deny they ever associated with a victim, only to be confronted with footage of them having repeatedly parked in front of their house six months earlier.

Law enforcement can select an address and look at any cars that were at or near that location during a particular time period and they can also search for a particular car and see every place it was seen. If they're trying to prove an association, they can search for two cars and ask the system if those two vehicles have ever been spotted near each other.

That's all well and good for law enforcement, but how does this play into retail? The biggest element of the law enforcement use of this equipment are a wide range of databases that feature stolen vehicles, missing kids and all kinds of arrest warrants. Whenever the system sees any plate that is wanted, it sounds an alarm.

Without those databases, the cameras are being sold to the business community for many purposes. Can those databases-which would identify the people associated with specific license plates-be obtained? Not really. States are no longer supposed to provide that information, although some still can be purchased, here and there.

But there are several viable ways that retailers can quickly identify consumer names and associate them with that car. Reading cell phone identification-as described above-is one popular method.
Another approach takes longer, but it's using the process of elimination.

First, the mall or store asks for all employees who work there to volunteer their license plate information. It could be done on the pretense of allowing employees into employee-only parking or making sure that their cars are on a do-not-tow list. Once done, they are placed in a database of license plates to be ignored.

That will eliminate a huge number of the cars that are parked regularly. As for the others, time and databases will eventually identify many of them. A blue Honda with license plate A12345, for example, has been spotted eight specific times over the last two months. POS records can look for a match, seeking any customer who made purchases during those particular days and those particular times. Of course, not every one who visits the store will buy every time, but that process of elimination will likely identify quite a few.

How valuable could this be? If a store has its own parking lot regularly scanned (pole-mounted cameras are efficient) and then sends someone to physically scan the parking lots of key competitors, how much would that be worth? What if it told you that customers were leaving your store to go immediately to a rival?

Let's push the envelope. What if you could text message those customers at that moment, offering them an extreme discount to come back?
Not sure if license plates will ever truly become the next loyalty card, but with license plate scanning and wireless devices on the body of most consumers, be prepared to have far more business intelligence options in the next two years.

By Evan Schuman
Special to CBSNews.com