As hand-held technology has become more commonplace, businesses are facing a new challenge of determining how to engage with their mobile users in a meaningful way. Retailers are beginning to address this task through the use of beacon technology. In this sense, a beacon is a small sensor placed in-store that emits a wireless Bluetooth signal which is picked up by smartphones whose users have downloaded the specific app linked to the beacon. The smartphone then sends users a targeted message, based on factors such as the customer’s placement in the store. For example, beacons could detect a pattern of a new father frequenting the baby department of a retail store. The retailer, through their app, could then send coupons and promotions for baby clothing and other similar infant-related items. See the image below for a visual depiction of this process.
Benefits of Beacon Technology
The advantages of beacon technology are evident for both the customer and the retailer. Customers benefit from receiving timely promotions and rewards for their frequency and loyalty. Rewarding customers on a frequency basis also builds brand loyalty, motivating customers to return. While retailers are able to gain valuable insights regarding foot traffic patterns and the in-store interactions that customers are having with their brands, such as which store displays received the greatest attention.
First Adopters in Retail
A prominent user of in-store beacons is Macy’s, who announced that it will roll out the technology to its nearly 800 stores nationwide. Macy’s will use it to track customer movements, inform customers of appropriate discounts, and push product recommendations. Macy’s has partnered with deals platform Shopkick to deliver its coupons to customers.
Other retailers, such as American Eagle and Aerie launched similar programs with Shopkick in over 100 U.S. stores. But, Shopkick has been working on a more aggressive approach, trying to get its branded beacons into retail stores so that it can automatically notify shoppers of deals and product suggestions when they walk in the door. It would be a huge improvement for Shopkick, which currently relies on users opening up the app when they're in a store to view deals.
New York City-based pharmacy chain Duane Reade, now owned by Walgreens, provides an interesting example of the capabilities of beacons within the pharmacy retail channel. With the integration of beacons in 10 select locations, app users receive pill reminders, the capability to schedule appointments, and even the option to order photo prints from Instagram.
First Adopters in Grocery
While retail has been the leading industry regarding the integration of beacons, the technology has made its way into the grocery industry as well. Most notably, over 200 Safeway and Giant Eagle locations were equipped with beacons in early 2014, with more locations forthcoming. The goal, as with other industries, is to reach shoppers as they walk into or near a store to maximize ping notification effectiveness. While the results are still pending, grocers are watching to see how this will pan out in their industry. They are all grappling with how to use this technology in a meaningful way and actively problem-solving the barriers to implementation.
What’s Next?
It is clear that beacon technology is in its beginning stages, with the potential to completely redefine the customer experience. However, it faces challenges before it can become universally accepted Consumers have to willingly download store apps to receive the offers, and while they may be eager to download apps for their favorite brands, they might not want to download an app for all the various retailers they frequent.
Despite the challenge of consumer adoption, the use of beacons in retail stores and other outlets is expected to take off in the next couple years. Beacons are predicted to influence $4 billion of retail sales this year, but that number is projected to jump to $44 billion in 2016. Whether the influence of beacons continues to skyrocket or plateaus, largely depends on retailers’ and marketers’ ability to convince consumers that the proposition of beacon technology is beneficial to them.
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