Brick-and-mortar retailers have been hard at work trying to lure online shoppers, who often visit physical stores to see and touch products, and then make purchases online. I previously addressed this practice, at “Showrooming Challenges Brick-and-Mortar Retailers.”
Retailers now have a new resource in their arsenal — beacons — that allows the retailers to provide a level of personalization that competes with online merchants.
How Beacons Work
Beacons are small, relatively inexpensive (about $25 per unit) hardware devices that retailers install on walls or countertops to communicate with a shopper’s smartphone or tablet in the hopes of improving the in-store shopping experience. Using BLE technology (Bluetooth low energy), a beacon communicates with a mobile device via a low frequency chip. The chip communicates with multiple beacon devices to form a network. With the customer’s permission, beacons detect nearby smartphones and send them ads, coupons, alerts, or product reviews.
Among the major providers of beacons are GP Shopper, Swirl, and Estimote, which produced this promotional video.
Beacons can also access items in a wish list or preferences based on Pinterest pins. Customers have to turn on Bluetooth on a mobile device, accept location services on a beacon-enabled application, and give permission to receive in-store notifications.
Using the retailer’s analytics software, beacons can call up a customers’ buying histories. A retailer can then target customers’ shopping proclivities as they walk through the store. Beacons can determine the customer’s exact location, determine how long the person stays in that location, and relay information that reflects their shopping tastes.
Beacons can provide in-store navigation, much like a GPS, so customers can easily locate products. Customer information, as well as location in the store, can be delivered to a sales associate who then arrives at a customer’s aisle location armed with the individual’s product preferences.
Using customers’ purchase histories, a retail store can create an on-the-spot product discount for a person as he browses the aisles. This tactic, known as “proximity marketing,” can increase impulse purchases and provide an entertaining aisle-by-aisle shopping experience for consumers. For instance, if a woman has previously purchased several pairs of sneakers in the store, a discount coupon can be sent to her mobile device as she walks down the sneaker aisle. Beacon technology works within 230 feet of a beacon device.
Beacons are especially useful to multi-channel merchants that can seamlessly combine their online and in-store marketing and data collection efforts. Customer shopping preferences collected online can easily transfer to in-store shopping experiences.
Beacons Catch on at Major Chains
Macy’s has installed beacons in all of its 840 department stores. Kohl’s and other national chains are testing beacons in several stores. American Eagle, which has almost 1,000 retail stores, also has a substantial rollout, as does Urban Outfitters.
Business Insider’s BI Intelligence predicts that the base of installed beacons will grow from 50,000 in 2014 will to 4.3 million in 2018.
The Beacon Value Chain
Besides beacon hardware manufacturers, application software companies, and advertising platform providers are also integral to the success of the technology. Apple has taken a proprietary approach, offering iBeacon, a version of BLE software that was released with IOS version 7. It requires the use of third-party applications to alert an iPhone or iPad when the device is in a location near a beacon. Apple’s retail stores are all iBeacon-enabled.
PayPal introduced a BLE USB module, PayPal Beacon. It allows customers to purchase a product in a store using a mobile device, without having to go through a checkout counter. If a customer enables it, the PayPal Beacon detects the PayPal app on the mobile device, which accesses the customer’s photo on the store’s POS system for verification. If the shopper also enables automatic check-in, the payment is made without any further customer action.
Beacons are a less expensive alternative to NFC (near field communications), which allows a user to wave a smartphone over a NFC compatible device to receive product information in a store. NFC technology, which works on electromagnetic radio fields, never gained wide acceptance because it requires a tag for each product at a cost of 10 cents each, and works only when a mobile device is within four inches of the product.
Boosting Customer Loyalty
Beacons can enhance store or brand loyalty. Most retail stores send periodic emails with discounts, coupons, or bonus point offers for loyalty cardholders. These offers can be activated as soon as a customer enters a store.
Between July and September 2014, 30 percent of shoppers who received a push ad from an in-store beacon used that offer to buy something, according to a survey by Swirl, which has worked with retailers and brands such as Lord & Taylor, Hudson’s Bay, Urban Outfitters, Kenneth Cole and Timberland to deploy beacons. Sixty percent of shoppers opened beacon-sent messages, and over half of those surveyed said they would do more shopping at stores with beacons. The survey determined that shoppers viewed an average of 2.5 pages of content per shopping trip.
Beacons allow brick-and-mortar retailers to replicate the personalized online shopping experience. While the use of mobile devices in a retail store used to result in lost sales for the retailer, beacon technology levels the playing field, allowing stores to match online pricing and promotions. Most large national chains will have a full rollout by 2016 and retailers will doubtless find new uses for beacons. Ecommerce merchants should be prepared for increased competition from physical stores.