Apple, Rivals Offer Beacons of Hope and Innovation for Retailers

Beacons were labeled as the next great thing in retail several years ago, but they have yet to live up to that designation. Brendan McNally examines whether the skeptics are correct or if beacons are about to shine.

When Beacons were first introduced into the mobile retail space, they were immediately hyped as “NFC Killers.” That’s because shoppers could use them to directly purchase items via their smartphones without having to bring them to a cash register for processing. That obviated the need for adding an NFC terminal at the cash desk.

Of course it hasn't quite turned out that way. Three years later, Beacons don't appear to have actually killed off any NFC terminals, although that technology has had its own share of issues gaining traction in the market. The reality is, beacons' penetration within most retail environments remains very low. It is so low, in fact, that a number of industry watchers, including a Bloomberg News technology report that pronounced them dead in the water.

This conclusion, however, is not universally accepted. Patrick Connolly, a retail location technology analyst for ABI Research, asserts that iBeacons, the most common beacon standard, are only now making their big push into retail and that 2016 will be the year they will start becoming ubiquitous in big box retail.

“The last few months have seen individual sales of beacons go from the hundreds of units to the tens of thousands,” says Connolly. “This means we're about to see wide-scale deployments in chains like IKEA, Target, Macy's, McDonalds and Pizza Hut.”

The problem, Connolly says, is that retailers have had to be cautious. “Retailers are not inclined to embrace technology, so their approach is more 'softly, softly,' than full-speed-ahead,” he says. It's a long-cycle process, and we can expect a prolonged rollout that will take five-to-ten years. But within five or six years, proximity-based technologies like beacons will be so commonplace, people won't even think about it.”

Connolly says he was disappointed at how beacons failed to make any real showing during either Black Friday or the rest of the fourth quarter 2015 retail technology reports. He says he might have reached the same conclusion as other analysts, except that he'd been following beacon adoption and deployment outside of the retail sector. A good deal of the small number of beacon purchases that took place earlier in 2015 came from hospitals, museums and other large institutions that have need for proximity-location technology.

Beacons are extremely low-powered, low-cost, tiny radio transmitters that can communicate with smartphones entering their broadcasting 'pool' using a BLE (Bluetooth Low Energy) link. Smartphones coming into the beacon's vicinity pick up the signal and relay back location data. Retailers can then use the customer's smartphone to deliver proximity-based, context aware messages.

According to digital and marketing technology strategist, Chris Tabb, “Any retailer who wants to create a premium in-store experience that drives customer action is going to need to employ a mix of technologies. Beacons don't make experiences, they make some experiences smarter and faster.”

There's a lot to suggest beacons will be successful, since at this point, a large percentage of smartphone owners consult them while shopping. Studies show that the vast majority of coupons that are actually used are redeemed within about five minutes of being offered. The idea of being able to deliver coupons or other relevant content to customers tailored to the micro-area they happen to be in is extremely enticing, since at this point, the location-targeted mobile ads delivered via GPS are often off by more than half a mile, according to recent research from Thinknear.

This is not to say that iBeacons aren't without limitations. They might be able to deliver location information about a customer, but they won't be able to offer them anything unless they already have the store's app downloaded. In other words, roughly 90 percent of a store's customer base will not be reachable by iBeacons. Even if you do get them to download through a one-off offer, the only way it will result in additional usage is if the apps truly add something to the customer's retail experience, which largely remains potential not proven at this point.

Though hard numbers are still not available, iBeacon sales probably reached the three million-mark in 2015. Regent Street, a mile-long street of high-end shops in London, possibly the most prestigious shopping venue on Earth, recently has had thousands of iBeacons installed both on the street and inside each of its more than one hundred stores.

“We want Regent Street to continue to evolve as the world's most successful shopping destination,” says David Shaw, head of The Crown Estate's Regent Street Portfolio. “This means bringing together online physical and mobile retailing and using the latest technology to create an experience which delivers across all the platforms that appeals to 21st Century shoppers.”

While Regent Street is a major feather in iBeacon's cap, it's not likely to give them much time to sit on their laurels. Suddenly they have major competition. Last summer Google launched its own beacon configuration, called Eddystone, which is much more capable, supporting multiple frame types and does equally well with either IOS or Android. At this point Eddystone has few apps to support it, but once it does, experts and media pundits predict it will become “The iBeacons Killer.”

Whether it will do the same to NFC is anybody's guess.