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Michael Baker
Smarter Writer

Michael Baker is a retail consultant and vice-chair of the ICSC's Asia-Pacific Research Council

Michael Baker
Smarter Writer

Michael Baker is a retail consultant and vice-chair of the ICSC's Asia-Pacific Research Council

Beacons, small bluetooth gadgets that can communicate with smartphones, are one of the hottest technologies on trial in the Retail industry.

Man and woman shopping with tablet

How does location marketing work?

Beacons are small bluetooth devices that can be installed in a retail store or any building. They can communicate with a person’s smartphone to fix the location of that person in relation to his physical surroundings. Put a lot of beacons in the building at strategic locations and you can track the person as he moves around inside.

This has a number of important applications, with two in particular generating a lot of excitement. One is that – theoretically at least – it can give the phone owner turn-by-turn navigation through the store, shopping centre, museum or wherever he happens to be, much like an outdoor GPS system. 

Shopper frustration minimised

One of the Achilles heels of shopping, particularly in large stores or shopping centres, is simply finding the item you want. The rule of thumb in retail is that about 20 per cent of sales are lost because people are just not able to find stuff. Beacon navigation can solve that problem if it works properly.

The second application flows naturally from the first: That by knowing where the person is in a store, the retailer can pump out 'location-relevant' marketing offers.

This is a big deal, since location-relevance is a useful way of personalising marketing offers. A growing pile of consumer research, including a study conducted by PricewaterhouseCoopers among consumers in four countries, suggests that location-relevance, personal interests and purchase history are the three most popular ways of customising mobile ads.

Will consumers go for it – or switch it off?

Few new technologies have promised so much, been trialled by so many, and attracted so much skepticism from retail analysts.

Here is a quick synopsis of the technology’s status – without the hype:

  • There is a lack of clear evidence about the effectiveness of beacon-driven marketing messages in generating actual sales – which of course for retailers is the whole point. Certainly, there is evidence that such messages raise consumer engagement and brand awareness. But quantifying the link from engagement and awareness to sales has not yet been done in any comprehensive manner.
  • From the consumer perspective it adds 'wow' to the shopping experience but it has the potential to be a nuisance. This is particularly the case if the customer gets a couple of offers that are of no interest or receives too many of them. Remember this is an ‘opt-in/opt-out’ technology. If the retailer gets too zealous or its offers are too mismatched to the specific shopper, the game is up.
  • Beacons can now pinpoint a person’s location within a few metres, but is that accurate enough to deliver the kind of experience the retailer and the consumer want? This may depend on the kind of store.

Location-based technologies are already delivering some gentler solutions to customers’ in-store navigation issues. For example, Walmart has a tool called “Search My Store” that enables the customer to enter a product name or keyword into the store app and bring up a list of products with their associated prices, aisle number and location in the aisle. That’s good enough for a lot of people.

This application could be great for non-retail environments too, such as transport hubs or museums, where people can obtain location-relevant information without attracting a blizzard of marketing collateral.

But don’t count out retailers just yet – this is a really juicy one and we will know a lot more about how this technology is working out for them by the end of the year.

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