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Beacon Technology Sheds New Light on Mobile Shopping

Brick-and-mortar retailers are struggling with declining traffic, intensified competition and an increasingly savvy, demanding consumer. But what if they could suddenly provide every shopper coming into their stores a personalized greeting, customized product and service offering, and a call to action that would almost certainly result in conversion? Thanks to beacon technology, they can. And more are doing so.

A beacon is a small, Bluetooth-smart wireless device located in-store that constantly broadcasts radio signals to nearby smartphones and tablets, in the same way a lighthouse emits light in regular intervals. Mobile apps can “listen” for the signal and, when they receive it, deliver location-based information like targeted coupons, store maps and hands-free payments. For example, a shopper can be made aware of what departments are nearby and can access special offers on those products or information on new products. The shopper can even be alerted about how many loyalty points he or she has to redeem toward a purchase.

In 2013, Apple introduced its iBeacon technology, which provides location-based services to iPhones, tablets and other iOS devices. It isn’t the only game in town, however. Datzing is a beacon service for Android, which was founded in 2011 and developed by a former Nokia phone designer. Other similar services include Qualcomm’s Gimbal, MPact by Morotola and the Swarm Portal. Undoubtedly, however, Apple’s iBeacon has enjoyed the most success. Its first major retail implementation occurred in late 2013 through the popular shopping app ShopKick and its shopBeacon transmitter.

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It is important to note that iBeacon refers to the technology used in various Bluetooth-smart transmitters, not to the transmitter itself. The transmitters, or beacons, come from third-party manufacturers, and the technology will only function if a relevant app is installed on the device.

A recent report by Forrester Research, Inc. noted, “Core to beacon technology is the need for a customer to download and enable a mobile application to interface with beacons.” The report continues, “Those customers who are interacting with beacons have opted in to the capability and have chosen to have a direct relationship with their retailers and brands of choice.”

Retailers are also starting to use beacon technology to facilitate in-store payment. In 2013, PayPal introduced Paypal Beacon, a new add-on hardware device for merchants that leverages Bluetooth technology to enable consumers to pay at stores completely hands-free. Last month, Apple introduced Apple Pay, which lets users make one-tap purchases without actual credit card numbers being sent over the air (a method known as “tokenization”).

In February, Alex & Ani, a jewelry and gift retailer founded in 2004, began using iBeacon technology to facilitate in-store engagement with its shoppers. The company is trying to tackle a challenge faced by many brands today: getting new customers to visit their stores instead of those of their larger, established wholesale customers. Alex & Ani has installed transmitters across its 40 stores and, in pilot tests in Boston and New York City last summer, found that more than 75 percent of shoppers viewed the company’s content and 20%-off offer. Of those shoppers, 50 percent redeemed the offer.

Ryan Bonifacino, vice president of digital strategy for Alex & Ani, explained that the company used the data from the pilot tests to “support a strategy that incorporates proximity into experience with a focus on content and personalization.” Such a strategy will include the incorporation of a to-be-released Alex & Ani app. Bonifacino offers a “real world” example where a customer is in front of a display case in an Alex & Ani store and, on his or her device, views inspirational messaging sourced from the community, such as Instagram photos or shared commentary from others who have purchased a product from the same display case.

American Eagle Outfitters recently installed Shopkick’s shopBeacon technology at over 100 locations. During the initial test, some American Eagle customers received a shopBeacon message when they entered the store which offered a small incentive for visiting the fitting rooms. Resulting data showed that, of the Shopkick users who received the message, twice as many took the incentive as those who opted out.

In September, Macy’s expanded its iBeacon messaging capabilities from its flagship locations in San Francisco and New York to stores across the country. The company has undertaken a rollout of more than 4,000 Shopkick-powered devices, and the expansion will mark the largest beacon deployment in retail to date. Jim Sluzewski, Macy’s SVP of corporate communications and external affairs, said the installation is “generally complete” and the company is “learning as we go” with respect to the implementation of beacon technology in its stores.

According to Sluzewski, “The Shopkick app is for the shopping enthusiast who wants offers and wants to know what’s new. It’s great for that segment of the population. The key is that a customer will provide access as long as they feel that they get value, and we want to provide that value.” He adds that the use of in-store beacons is viewed by Macy’s as part of a “mix of technology” to increase customer engagement.

The technology holds intriguing potential for apparel retailers: imagine an environment in which a customer who has opted in, and for whom the brand knows what she’s bought in the past, can suggest a blouse to go with the plaid skirt in her closet.

Even with all the recent developments on the retail side, beacon technology is still relatively new and much ground still remains to be covered. Roughly 3 percent of retailers have customer recognition technology in place today, but that number is expected to skyrocket to 72 percent within five years, especially among large retailers. The success of the technology, however, depends on more than just its delivery.

Matt Alcone, founder and CEO of Alcone Marketing Group, provided the following analogy: “The effectiveness of Super Bowl commercials has nothing to do with the technology or manufacturer of the TV. It comes down to the creative content.” He added, “Beacons are new and shiny at the moment, but they simply represent a new media channel.”

Alcone asserted that what will matter in the future is the “analytical engine that drives the shopper profile and the messaging that is delivered.” And more messaging is not necessarily better.

According to Falcone, beacon technology provides an opportunity for brands and retailers to work together to enhance the shopping experience and drive business. He described a “nightmare” scenario where a shopper is bombarded by different brands while in a retail store. And according to Alcone, “This isn’t good for the shopper, the brand or the retailer.”