Evan Schuman's StorefrontBacktalk

No system is perfect, and the accuracy Achilles heel in the Euclid mobile system is being unable to factor in the unknowable. The Euclid system has no idea how many people are in the store without a phone, or without the right type of phone or without Wi-Fi activated, which means it doesn’t really know how many shoppers are in the store.

Smith said Euclid tries to factor that in by periodically having people literally count customers in the stores, to match against the results of the mobile system. Tara Darrow, a spokesperson for Nordstrom, said her chain also watches customers in other ways, to keep the Euclid system honest. “We also have some anecdotal data, based on years of staffing,” Darrow said.

Among the largest chains, Nordstrom is often touted as the quintessential customer service giant, along with Trader Joe’s and Whole Foods (NASDAQ:WFM). For that reason, a key Nordstrom concern was making sure the move didn’t make any Nordstrom customers feel uncomfortable. Indeed, “this is our first attempt at looking at where the customers are in the store,” Darrow said.

The reality is that, as the program is currently being used, the stores aren’t being told anything about what a specific shopper is doing, so there truly are no privacy issues—yet.

Still, signage announcing the program at the test stores caused some confusion among shoppers, who feared that they were being tracked in an identifiable way and that the store was being told about what they looked at and didn’t buy. This prompted the store to change the wording on its signage, to stress to customers that shutting off the phone or Wi-Fi connection would end the issue. “This is something we want our customers to be aware of,” Darrow said. “At the end of the day, we don’t want our customers to be confused.”

Frustratingly, alerting customers to the program is likely to generate more confusion, as references to aggregated and hashed data may not communicate that much to distracted shoppers. They may merely glance and conclude that, somehow, their favorite store is tracking their phone and that that feels invasive in a way other customer-counting systems might not.

This is solely psychological fear, but it’s real nonetheless. Mobile phones are with the customer always, and those devices contain some of the most private information possible (personal photos, bank account access, E-mail and text content, etc.). Even if it’s simply counting pings from the phone—something that cell towers have done for decades—it can set off (potentially unwarranted) privacy concerns.

The problem with those shopper concerns is that, like the worries expressed by Lowe’s and WaWa, the lack of privacy intrusions is a very much “for now” situation. Once mobile tracking becomes commonplace, will consumers be able to stop it? Will retailers? Will vendors be able to resist forever the dollars to be made selling that data?

There is another obligation here. The fact that Nordstrom is regarded so highly by its customers—given the proverbial white-glove treatment the chain pushes—is the reason it has much more to lose with this mobile gambit. If Walmart (NYSE:WMT), Target (NYSE:TGT) or 7-Eleven tried this program, few customers would likely get upset, because they don’t expect those chains to aggressively protect shopper privacy. That’s the plus side of treating shoppers like walking wallets. It’s much harder to lose their respect.

That obligation is to protect your shoppers. Nordstrom not getting—for the moment—any customer-specific data is fine, but the chain is putting in place a system that allows their shoppers’ data to be in play. It puts it in the hands of a profit-driven vendor, which is already known to be taking money from many other rival chains.

If that data—even two to three years from now—starts turning up in unexpected places, Nordstrom shoppers will be angry and will feel unprotected (dare we say betrayed?). The idea that Nordstrom itself didn’t benefit or have access to customer-specific data won’t reduce that anger any. In other words, Nordstrom’s self-restraint is admirable, but it may not be sufficient.

Euclid’s Smith said the company currently pledges to retailers that it won’t share identifiable shopper data, nor will any data travel from one retailer to another. “That’s the way our contracts have been written,” Smith said. “It’s a fundamental product direction.”

But what about the future? Smith said he does not expect that to change, because retailers will likely understand the long-term customer alienation risks associated with giving into a desire for more location-based mobile CRM data. Referring to mobile vendors and major retail chains, he said: “Our interests are fairly well aligned. To the extent that I upset retailers,” that’s bad for business.

That’s true. But in the historic battle of short-term greed and desire versus long-term best interests, betting that marketshare-desperate retailers will continue to make the wisest moves is hardly a sure thing. Even worse, this could slip into a digital domino situation, where a few mobile vendors—backed by just a handful of retailers—start to track customers more aggressively. Then their rivals will feel extreme pressure to either do the same or suffer a competitive disadvantage.

For this to stay pure, not only do the top chains need to hold firm to strict “don’t show me more than I need to see” mobile policies, but their rivals must, as well. Yep, maybe shoppers have good reason for those signs to make them nervous.