How beacon technology helps retailers connect with tech-savvy consumers

A woman reads a notification sent to her smartphone using bluetooth in store beacon technology

Data collected and used inside stores can personalize the shopping experience.

Brick-and-mortar stores continue to play an important – and somewhat unexpected – role in retail. Think of shoppers walking down a store aisle with their smartphone in hand, comparing prices or looking up more information on a product. This is what the new hunt for deals looks like.

"There is so much data on customer behavior that retailers are missing out on or don't think about collecting."  – Jonathon Spooner

Recognizing such trends, retailers are becoming aware that in-store technology can help them win sales.

One important new mobile technology relies on digital transmitters called "beacons," which are mounted to the ceiling overhead. Beacons can send text messages via Bluetooth to a customer's smartphone based on the department, aisle or display the customer is approaching.

Dozens of retailers, including Macy's, Target and CVS, are using beacons to electronically tap shoppers on the shoulder, with push notifications about special offers or even to ask if they'd like help from a sales associate. 

Tiny market set to explode

Although beacons are not in widespread use right now, larger retailers are bullish on the concept: 38 percent plan to add the functionality over the next three years, up from 3 percent using in-store beacons in 2015, according to a report from Boston Retail Partners. Business Insider estimates that beacons drove $4 billion in sales in 2015, and predicts a tenfold increase in 2016. 

"The geolocation piece has broader applicability than some retailers have thought about," says retail strategist Jonathan Spooner at Intersection, a design and technology company focused on customer experience. 

Wi-Fi covers a few hundred feet; Bluetooth devices have a range of 33 feet (most common) to 330 feet. Using Wi-Fi lets a business know someone has walked into the store, but strategically placed beacons with Bluetooth will indicate if someone has walked into the jewelry department, or even which shelves the person is browsing – all in real time. "That means you can be very granular in your offerings, and that level of accuracy is a huge opportunity that mobile gives the retailer," Spooner says.  

Beacons deliver customer insights, too

Increased sales from micro-targeted push notifications are only part of the story, Spooner says. "There is so much data on customer behavior that retailers are missing out on or don't think about collecting."  

How many people entered the store and when? How long were they there? What engaged them? Where did they browse the most? The geolocation capabilities of beacons allow businesses to capture data about their physical store that's similar to the data that has become commonplace for e-commerce businesses. "You have to start digitizing and collecting the same data points to compete with online and improve your customer experience." 

Insights feed into marketing strategies 

Capturing data on in-store behavior can affect overall mobile and e-commerce marketing strategies. If a business knows customers spend more time in one store versus another – or buy certain product groupings more often – the store might tailor its smartphone app to account for those preferences. 

There is also the potential for crossover sales between store and website. When customers log on to a retailer's e-commerce store, the site might remind them of products they looked at in the physical store but didn't buy, or try upselling or cross-selling to them.

What a business learns about its customers by means of strategically located beacons can help tailor the in-store experience based on previous behavior, number of transactions and purchases. Reward programs can be built around the number of times a customer comes to a store, unlocking "badges" or awards within its smartphone app.

A positive in-store shopping experience is important even among online shoppers, according to the 2016 UPS Pulse of the Online Shopper™ study, which surveyed more than 5,300 online shoppers about their preferences and behaviors. The survey found that beacons were gaining awareness and market acceptance. Results included the following:

31 percent of survey respondents said they were aware of beacons (35 percent among both urban and "power" shoppers, or individuals who have made nine or more digital purchases in a three-month period).

Millennials, the generation born roughly between 1980 and 1997, are even more aware of beacons, at 36 percent overall. 

Receptivity to push notifications, though, is slightly lower for millennials, at 26 percent, compared with 37 percent among general urban shoppers. 

Thinking outside the store 

Some people aim to make cities "smart" by using public beacons, Wi-Fi and other wireless technologies. "As beacon technology spreads, more retailers will interact with customers who might be right outside or blocks away," says Laetitia Gazel Anthoine, founder and CEO of Connecthings, a U.S.-European-based software and technology company that focuses on the creation of smart cities and public areas. Imagine external beacons placed in shopping centers, airports or throughout entire cities to collect data on people's behavior and alert them to deals and important information. 

Some European countries are further ahead than the United States when it comes to public-space beacons. Barcelona, Spain, has some 8,000 Connecthings "interactive points," creating a mobile information system enabling people to receive messages at bus stops telling them, for example, that their bus will be 10 minutes late and that they can head to a nearby coffee shop offering hot coffee and free Wi-Fi.

Beacons and small retailers

How can smaller retailers with fewer resources take advantage of beacons? 

At the least, a small retailer would need to build and market a solid smartphone app. Consumers would then need to download the app with their smartphones and be comfortable using Bluetooth. What's more, those customers would need to opt in to receive push notices via beacons in your store. And as the Pulse survey suggests, push-notice overload can be a factor mitigating your results, which presents other challenges for all retailers.

The bottom line, Anthoine says, is that beacon technology is here to stay and good for business owners looking to connect. "At that point, smaller retailers can hop in and take advantage of this technology to grow their customer base." 

For more details on the way tech-savvy shoppers are transforming the retail landscape, download the complete UPS Pulse of the Online Shopper study as an e-book.

Read more about the other ways app-centric shoppers are rocking retail.


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