Beacon1

The Mobile Shopper: Follow the beacon

Antoine Azar is one of a wave of innovators using beacon tech to reinvent in-store experience

Like a lot of technology entrepreneurs, Antoine Azar is fascinated by evolving consumer habits, marketer angst and emerging technologies. Where those three forces intersect, he sees business opportunity.

His latest revelation came the middle of last year, when he noticed a glaring hole in the marketplace. Azar’s company Mobilogie, a Montreal-based mobile app and strategy firm, kept hearing from retailers looking for mobile applications that, among things, would address loyalty and couponing. “The big questions [were] ‘How do I increase loyalty among my customer base? How do I make sure that I create a deep connection with them and brand association?’” The smartphone market was still exploding and there was a lot of hype around one-to-one tech, check-ins and location-based advertising, but the expense of developing custom applications was keeping a huge chunk of players out of the mobile loyalty space.

So in August 2013, Azar and his business partners created Thirdshelf—tagline: “Retail Made Awesome”—a branded mobile app and loyalty program for small- to medium-sized businesses. With the Thirdshelf app, a retailer can know who a customer is when she walks in the door, what she is interested in and send her a push notice about whatever items on her wish list are on sale. For years now, mobile enthusiasts and retail visionaries have talked about this kind of interactive retail experience, but in the last year that dream has become a much more practical reality thanks to the emergence of a new technology—beacons.

Antoine Azar

Antoine Azar

Beacons are low-cost, Bluetooth Low Energy technology that can send push notifications to enabled smartphones or tablets. The technology has been in development for some time, but when Apple quietly announced last summer that iBeacon would be part of the iOS7 update the game changed—now any iPhone 4 or later is beacon compatible. A few weeks later Google announced that its Android OS starting with 4.3 would be similarly enabled. The potential has sparked a great deal of excitement among retailers concerned about online shopping and that one word that sends shivers down so many retailers’ spines: showrooming.

“There is no hotter topic in retail today than beacons,” Adam Silverman, an e-business analyst with Forrester, recently wrote. “These small objects… have transformed our retail imagination, conjuring up visions of continuous offers being showered onto customers as they walk the aisles of their favourite grocery store.”

In theory, beacons take all the power of big data, which retailers could only glean through e-commerce, and apply it to the in-store shopping experience in real time. Beacons can turn mobile apps into virtual personal shopping assistants offering recommendations, up-to-date product information, couponing and discounts targeted to the shopper’s preferences based on where they are in a store.

“Retail is struggling and I think the way you fix retail is by creating experiences in a physical store environment that you can’t replicate without being in the store, and I think beacons can play a role in that,” says Asif Khan, president and co-founder of the Location Based Marketing Association (LBMA), an international industry group that educates and promotes the effective use of location-based marketing solutions. Retailers need to create unique experiences that consumers can get excited about and emotionally connect to. “You can’t buy emotion on Amazon,” he says. Rather than embrace mobile technology, too often retailers blame it (and Amazon) for creating the showroom phenomenon, where consumers find their products then use smartphones to identify a cheaper place to actually buy it.

“Shoppers aren’t out there like bottom feeders just scanning and buying from stores while they’re standing in them,” adds Doug Stephens, president of Retail Prophet Consulting. While searching for more information or product reviews, a consumer may stumble upon a better deal somewhere else, but searching for the lowest price wasn’t necessarily their intent from the outset, he says. “As consumers, we have new expectations of the amount of information we want before we make a purchase and we’re not comfortable just looking at a four-by-six index card with two features and a price,” he says. A strong in-store mobile solution can remove these barriers to purchase and help differentiate a retailer from its competitors.

Though it isn’t powered by beacon, Stephens credits Neiman Marcus for building a branded app that “transforms” the way people shop with the high-end retailer. The Neiman Marcus app allows iPhone users to text, email, call or FaceTime any sales associate right from the app.

MOBILE-SHOPPER

Those kinds of enhanced experiences become much more practical with beacons. Why? They’re relatively cheap and relatively easy to implement, compared to wifi-based solutions. (A number of companies have started selling beacons—new firms like Estimote and Swirl and established players like Qualcomm—for $20 and under.) “Also, beacons have a shorter more precise range and can be configured to collect much more information on users and may also be used as a part of a point-of-sale device,” says Khan. “Many small merchants are now taking iPads running iOS7 and using them as POS terminals in-store.”

Providing consumers with very specific product information around the designer items LXR & Co. carries from Chanel, Cartier and Louis Vuitton was the impetus for the Canadian vintage luxury retailer to partner with Azar and Thirdshelf late last year on a branded app. “We really love giving new experiences for our customers, and that means more information in a very easy way. These pieces that we sell can be a lot of times very iconic and very well-crafted and come with so much history and we love sharing that,” says Yann Berube, creative director at LXR & Co.

The LXR & Co. app will also include that important loyalty component that inspired Azar to launch Thirdshelf.

The current loyalty model is based on post-purchase: the customer picks up a few items in-store, heads to the cash, presents their loyalty card, and the sales associate swipes it. Only when the transaction is complete does the associate have access to the customer’s purchase history, says Azar. By this time, it’s too late and the opportunity to upsell has passed. Thirdshelf is the same process, only in reverse.

“Using iBeacon in a mobile application we’re able to know that a VIP just entered the store so we’re able to provide a very personalized service for this customer; we know their past transactions, we know their wish list, we know their face, so it becomes truly a VIP experience,” he says.

Aside from enhancing the consumers’ experience in-store, beacons represent a new stream for analytics. Using beacons, retailers can track how many people are in the store, traffic flow patterns and dwell time and gives them a better idea of how to merchandize or how many sales associates should be deployed in certain areas of the store.

“Websites have been really good at measuring this kind of data for the last 20 years, but stores have not,” says Stephens. “All you’ve known vaguely maybe is how many people have come in and at the end of the day what your total receipts were and that was about it.” With this kind of technology retailers can make hourly changes to store displays based on how consumers are engaging with them, but can also negotiate higher rates with consumer packaged good companies, says Khan.

“If I know by using beacon technology that 62% of customers come in the door and go down an aisle and dwell at an end cap display that might put me in the situation…to go to a P&G and say ‘We used to offer you $20 a square foot for that space, but now we have data that says it’s the highest traffic spot in the store so now we’re charging you $40 a square foot,’” explains Khan.

Retailers are holding the keys to a very powerful marketing vehicle and a means of communicating with consumers at all times during their shopping excursion. LBMA predicts that brands will start bidding against each other, paying top dollar to see that their message hits the consumer smartphones first.

The brand-to-brand battle aside, a power struggle between retailers and CPGs is also looming, says Khan, as the beacon market matures and consumers start to feel more comfortable with the concept of location-based, real-time marketing. Though individually inexpensive, deploying beacons across a national retail chain, which can include hundreds or even thousands of stores, requires a significant financial investment. “The retailer sees the value, doesn’t have the money, but wants to control it, and the CPGs have the money and are trying to work around the retailer to have access to the consumer,” says Khan. Who owns the message if retailers and CPGs partner on new technologies? Is it Coke? Or is it Walmart? An added predicament for retailers with private labels is determining which brand messages to ping to consumers. Does Shoppers Drug Mart promote a sale on its Quo cosmetics or Revlon?

Though the buzz about beacons is loud, marketing and retail experts agree the number of impactful implementations, particularly in Canada, are few. Technology platforms are there for the taking; Canadian retailers need to reach out and grab on.

If they do, they still need to be aware of one of the major concerns about marketing in the big data era: privacy.

Privacy advocates are concerned about the amount of consumer data that’s being collected and a recent study by location-based retail app Retale found 71% of mobile app users don’t like the idea of being tracked in-store and 56% say they are not interested in push notifications while shopping.

Though most apps require users give permission before the beacon system is activated, there are concerns that some consent forms do not adequately explain the amount of data that can be culled from mobile tracking.

“Similar reactions occurred back in the ’90s when cookie tracking was first introduced, but over time consumers have accepted the practice due to the enhanced services offered, such as retaining items in a shopping cart,” said Forrester’s Silverman in “The Emergence of Beacons in Retail,” published in April.

Khan says the onus will be on retailers to get the messaging and the context right. “Just because I walk by the hot dog stand doesn’t mean I want a hot dog right now.”

“There’s a lot of data science that needs to go into the back end of what we do with these beacons and what types of messages we push and how frequently we push them. What are the messages that will resonate with you and how will we understand that by combining the loyalty data that we have? Those are the things that need to get thought about.”

There’s more! This story appears as part of Marketing’s “Rise of the Mobile Shopper” special report in the June 2014 issue. Subscribe today, or check out this issue on your iPad.

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