A Look at Location: Tomorrow's Technologies for Retail Today

Jessica Binns
Senior Editor
Though the next-tech buzz these days may be all about Apple's Bluetooth-powered iBeacon, the location-based industry includes a proliferating plethora of technologies and platforms jockeying to power tomorrow's hypertargeted marketing strategies, according to the Place 2014 conference in New York City, organized by Opus Research.

Mobile devices and especially smartphones, which play an increasingly critical role in the path to purchase, are nearly ubiquitous in the United States; 90 percent of the population is expected to have a smartphone by 2016, up from 70 percent this year, based on research from Nielsen and Opus Research, which focuses on customer care in commerce. What's more, consumers spend 89 percent of their mobile time using applications — outpacing altogether the amount of time consumers spend online on their personal computers. U.S. mobile advertising dollars are following accordingly, expected to reach as much as $15 billion this year.

Between 70 percent and 89 percent of shoppers bring their smartphones into the brick-and-mortar retail experience, mostly to conduct price comparisons, search for coupons and offers, or check out product reviews and ratings while in store. Retailers are eager to ensure that consumers are fully engaged and interacting with their brands during every phase of the purchase process, meaning that indoor analytics and indoor marketing could well become a $10-plus billion industry, according to Greg Sterling, senior analyst for Opus Research's Internet2Go program.

But the big challenge today is that shoppers aren't terribly keen on the notion of having their personal mobile devices tracked by retailers and other businesses; just more than a quarter (28 percent) of Retale survey respondents said they wouldn't mind retailers having such sensitive information about their smartphones. However, the value proposition is key to persuading smartphone-carrying shoppers to give up their location data; 77 percent of smartphone users would exchange this information as long as they receive something worthwhile in return. What that "something" is can vary tremendously, although 66 percent of consumers would download a retail app that pushed valuable, relevant in-store offers.

Right now retailers have been slow to adopt in-store analytics programs. Opus Research's June 2014 survey found that 62 percent aren't using any such analytics at all because they don't know which of the current platforms is best (32 percent) or aren't quite sold on the ROI (32 percent). While most retailers (57 percent) are interested in proximity-based marketing but haven't yet reached the testing phase, just 16 percent have implemented geotargeted strategies in-store. It's clear that many retailers are taking the wait-and-see approach as this nascent industry develops.

Banana Republic's Facebook success
As omnichannel becomes the new normal in retail, marketers are beginning to get the message that advertising spend cannot accurately be viewed by individual media channels, says Facebook product marketing director Doug Stotland. Retailers want to be able to measure shopper engagement and activity to make smart marketing decisions by looking across all channels, which isn't easy to do right now, he says, adding, "There's no such thing as an in-store purchase. Omnichannel is becoming a behavior."

Stotland points to Banana Republic as one retailer that launched a successful custom marketing campaign for holiday 2014 on Facebook. The brand created a database built on anonymous data (such as zip codes) about its best customers, then expanded to include "lookalike" consumers with similar characteristics, and the resulting targeted ad campaign performed four times better (including online and offline conversion) than other marketing methods, he explains.

While small to mid-size businesses are especially concerned about investing their marketing dollars wisely, many make the same simple mistake on Facebook, according to Stotland. SMBs create an ad, post it on their Facebook page, and obsess over how many likes and comments they generate — and begin to optimize toward those tangible measurements of engagement. However, influencing shoppers to visit a store has more to do with reach, of course. So when a small business markets to a target audience based on gender and age, for example, within a certain radius of its physical location, it may not garner "as many clicks and that doesn't feel as satisfying," says Stotland, "but the good news is that people are coming [into stores] and buying, and that's the feedback we get."

An explosion of in-store technology providers
For retailers interested in leveraging shoppers' smartphones in-store, there's never been a better time to explore place-based analytics and related technologies.

aisle411 offers indoor mapping and search, organizing a retailer's data so that shoppers can interact with it in a relevant context. Walgreens has been an early mover in this space, partnering with Google's Project Tango augmented reality experience that navigates smartphone app users through the store, offering tailored promotions on store shelves along the way. The emphasis here is that convenience is key; consumers are more likely to pick up a product that they've just received a promotion for if it's only a few feet away rather than having to travel across the store, says Nathan Pettyjohn, aisle411 CEO, so if the retailer knows you're in aisle B, they'll push an offer for aisle B.

ByteLight has developed a unique way to track smartphones in store, creating indoor location software for LED lighting. Its visible light communication is undetectable to the human eye and is accurate to within 1 meter, according to CEO Dan Ryan, but relies on line of sight for precision, so phones tucked away in pockets and purses aren't of much use.

Relative positioning systems such as Trusted Positioning's platform are designed to be layered with other indoor technologies, says CEO Chris Gooddall. The platform leverages low-cost sensors and integrates with users' smartphones to help navigate indoor locations. Estimote, on the other hand, offers low-power beacons and stickers that are compatible with Apple's iBeacon and that help smartphones interact with their real-world context. This means that a shopper with a smartphone who is standing near a display of new high heels sporting Estimote stickers can unlock additional information about that specific product.

IndoorAtlas takes yet a different approach with "magnetic positioning" developed on the concept that every square foot on Earth has a unique magnetic fingerprint. The company's platform aims to be GPS for those locations, such as retail stores, where GPS on smartphones often doesn't function properly due to the building's structural obstacles.

For the moment, indoor technologies face a number of challenges, first of which is lack of shopper awareness that such services even exist. Beyond that, however, technology standardization is a big issue in increasing adoption by businesses, with vendors weighing the trade-off between ubiquity (which solves the problem of scale) and developing proprietary technologies.

Sorting out security, privacy
Indoor location technologies bring their own security concerns. Some unauthorized third parties are now compiling databases of beacons installed around the country, says Jimmy Buchheim, CEO of StickNFind, a beacon software provider. This creates a potential risk for retailers. For example, a consumer might receive a mobile coupon or offer from a third-party app triggered by that shopper's proximity inside or close to a retail store. She might browse for jeans in that store and then receive ads for a competitor's denim, courtesy of the third-party app, when she returns home.

Cloned public beacons that are unsecured or static can also create confusion for shoppers. A cloned beacon might cause a consumer to receive a geotargeted push notification or message theoretically from a retailer — even when that shopper isn't near the retail location, possibly resulting in brand dilution, Buchheim notes.

Consider the ramifications of common area beacons that might be useful in shopping mall settings. If a retailer shuts down its mall store, it may still have access to that beacon and send irrelevant messages to shoppers in that mall.

To combat these potential scenarios, retailers should consider data encryption services either in the cloud or on the beacon itself, and rotate their beacon IDs periodically to stymie unauthorized parties.

Privacy issues in this space are top-of-mind for both consumers and retailers. While Apple's iOS 7 dropped the ball on some privacy provisions, iOS 8 has restored them, adding dynamic media access control (MAC) addresses because many Wi-Fi networks now "sniff" for these IDs. "It's the equivalent of walking into a store and the store having your work email address simply because you showed up," says GPShopper co-founder Maya Mikhailov.

The Federal Trade Commission (FTC) has been cracking down on mobile applications that aren't clear with consumers about the kinds of data they're collecting, transmitting, and sharing. For example, the FTC alleged that the Brightest Flashlight app for Android smartphones deceptively transmitted precise geolocation information, device ID, and other device data to third parties including ad networks, says Amanda Koulousias, an attorney for the commission. The app's privacy policy didn't line up with what the app was actually doing; the terms indicated that the app would collect diagnostic, technical, and related information about the device for internal purposes such as software updates and product support.

Indeed, privacy policies, a necessary evil of today's opt-in world, continue to confound businesses and users. It's the rare individual who actually takes the time to stop and read what she's actually signing up for. Who, after all, has time to read pages and pages of confusing fine print? Most users just want to download an app and move on. According to data from Opus Research's retailer survey, 42 percent of participants said they haven't yet set an opt-in/opt-out policy for tracking shopper smartphones, compared with 17 percent that would specifically require an opt-in before tracking. 

But businesses that can find a way to clearly and concisely communicate their data collection activities may stand to create loyal consumers. Says Future of Privacy Forum executive director Jules Polonetsky, "How do you say it all in a few friendly words?"

Jessica Binns is an Apparel contributing writer based in Washington, D.C.

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