Retailers and shoppers still resist Apple's iBeacon signals

Apple magic has yet to overcome concerns that knowing too much about shoppers will alienate them

When Apple gets into a new business, there’s a good chance that business will be disrupted — which is why the retail industry is still waiting for iBeacon to take off.

Two years after Apple announced the product, iBeacon has failed to live up to the kind of sky-high expectations Apple's involvement evokes. This coming holiday season doesn’t look like it will be a breakthrough for the technology, but many still think it will open up a new platform for retailers to talk to shoppers in store and, of course, upsell them.  

What is iBeacon? It’s a software protocol that lets Apple’s mobile devices receive Bluetooth Low Energy signals from hockey puck-size devices called beacons. One of the most obvious applications is for retail. With iBeacon, you could visit a store and tap in to an in-store map that tells you where everything on your shopping list is. Or a retailer can alert you to a particularly good deal in the next aisle.

There are lots of other uses as well. On its developer’s page, Apple proposes iBeacons could be used to greet people as they arrive at a sporting event and let them know about a nearby museum exhibit. Retailers can also use data generated from such interactions to see where shoppers traveled in store and which items caught their attention.

Though many agree the technology shows promise, no one has yet definitively cracked the code on how to use it in a way that can offer value for shoppers without creeping them out or annoying them with too many notifications. Proponents say the technology has the potential to transform shopping and add a new dimension to the brick-and-mortar experience.

Though you don’t hear much about in-store programs – last year Gartner estimated that fewer than 1% of US retailers were using iBeacon – there’s lots of experimentation. Adam Silverman, an analyst with Forrester Research, says 70% of organizations "with a mature mobile strategy" are piloting beacons. (iBeacon is just one version of the technology, but since Apple is behind it, it gets the most attention.)

"There’s an untapped universe of data around physical locations that retailers haven’t fully realized yet," says Silverman, who dubs this data "location context."

"How their customers are behaving in physical locations, where they go, what products they interact with all adds to a new data sort." Silverman says the promise of using data location context for creating greater engagement is "massive."

However for retailers, there’s one big marketing problem: To get consumers to use iBeacon, you have to somehow persuade them to download your app or a third-party version. Macy’s, the biggest retail proponent of iBeacon, employs one such app — Shopkick — to send shoppers iBeacon messages. The retailer began using iBeacon in late 2013 in pilot and then installed them company-wide during the last holiday season.

Shopkick CEO Cyriac Roeding tells Campaign that there are now 20,000 beacons currently used in stores. Macy’s is Shopkick’s biggest partner to go on the record about its distribution, but Roeding says there are many other retailers as well. Roeding says that such technologies help brick-and-mortar stores better compete with their online rivals. Roeding says iBeacon fits an overall trend in retail: to make the in-store experience more personalized, interactive and entertaining.

How? President Kent Anderson told Time that a shopper using the Shopkick app could receive a video message touting the quality of a KitchenAid mixer. Anderson said the company planned to also hit shoppers with customized messages based on their browsing history.

Given the creepiness factor, Macy’s was proceeding cautiously with that idea. It’s not the only one. Silverman says that while the idea of beaming discount messages to shoppers in store is enticing, "the reality is that even after a few notifications in aisle, customers tend to tune out the notification messages." One, possibly more promising use of the technology is to let shoppers flag a sales associate when they need help, he says.

While the use cases for beacons are still being sorted out, there are indications that implementation might get easier — although not necessarily via Apple. In July, Google introduced Eddystone, the company’s response to iBeacon. The open-source Eddystone could conceivably work on both iOS and Android. That’s a big improvement over the iOS-only iBeacon, which shuts out as much as 80% of the smartphone market.

Unlike iBeacon, you also wouldn’t need to download an app to get notifications. Instead, as Ars Technica noted, the silent notifications would be integrated into Google Now, so for instance, restaurant menus could pop up when you enter that establishment. For Android users, at least, the experience would be fairly seamless. However, it’s not clear how consumers would take to having such messages beamed to them without their consent. (Google could not be reached for comment.) "You don’t want to access this in ways that’s against the consumer’s will," Roeding says.

As the industry waits for Eddystone to take root, some have experimented with workarounds. Piper, a San Diego startup, created an app that acts as a browser for iBeacon signals. Piper faced a chicken-and-egg problem, though: Consumers didn’t want to download an app with no iBeacon signals and retailers didn’t want to join Piper with no consumer support. To address that issue, the company piloted Piper in Columbus, Ga. Among the company’s partners is McDonald’s, which has expanded its Piper support to 290 locations in the Atlanta market. The company is now experimenting with hitting McDonald’s consumers with localized video content and tweets.

Piper CEO Robert Hanczor says that tying iBeacon messaging with Apple Pay – Apple’s mobile-based payment system – is a potent marketing tool to reach customers who are already at the bottom of the purchase funnel: "The marriage of promotion tied to proximity with the potential for using Apple Pay to complete the transaction nearly closes the loop."

Despite such promise, this doesn’t look like a breakthrough holiday season for iBeacon. There have been few new announcements of iBeacon adoption, except for Target, which said in August that it is testing iBeacon in 50 of its stores with a possible bigger rollout coming later this year.

For his part, Hanczor said beacons will probably be much bigger in 2016 than today. "My feeling is that we’re still probably a year out until this becomes a commonplace experience for consumers."

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