Proximity marketing — why you should use IoT in your brick-and-mortar store?

IoT & Telematics

According to experts from the retail industry, the era of brick-and-mortar stores is coming to an end. Online shopping, on the other hand, is bound to succeed in almost all consumer age groups and sales segments. These forecasts turn out right to a large extent. On average, the e-commerce sector is growing three times faster than traditional sales, and 51% of Americans confirm that they prefer to make purchases online.

However, this is only partially true for retail, the largest sector of the global economy. As it turns out, the future of traditional sales may never have seemed brighter thanks to new technologies.

Will beacons help maintain traditional sales?

Although it may seem hard to believe, a device with a typical diameter of no more than 5 cm can greatly help traditional sellers achieve a competitive edge over their online competitors. When located in strategic places across a physical store, a beacon, the device in question, can provide sellers with even more valuable information than any e-commerce representative can obtain.

Beacons use a form of wireless connection designed specifically for short-range communication. Their operation resembles Wi-Fi principles in the sense that beacon technology enables communication between devices. Unlike a wireless network, however, it prioritizes battery life over data transfer speed.

The transfer of Bluetooth Low Energy (BLE) data is basically unidirectional. Beacons communicate with smartphones in close proximity by sending BLE data packages at regular intervals. These data packages are detected by applications installed on smartphones located nearby. To save energy and ensure a higher data transfer speed, the entire BLE structure provides 40 channels at frequencies separated by 2 MHz. Three of these channels are the main channels, while the other thirty-seven are called secondary or data channels. This data transmission system allows us to accurately determine the location of a smartphone, and thus its user.

But why exactly would the retail industry track its customers?

Advertisement adjusted to a customer’s current location

Beacons are an extremely effective way of ensuring consistent customer experience both online and in stores. By tracking customer movement inside traditional shopping venues, we can provide personalized information about the products which a given customer finds the most attractive. In turn, this increases conversion rates — customers will be more likely to take advantage of discounted products when they are nearby.

The Macy’s chain of stores is an example of practical beacon usage. The technology has been used by the company since 2014.  When a customer opens the Macy’s application in a physical store, the application recognizes the part of the store where the customer is standing. For instance, when the customer passes makeup products, the application will remind them about a makeup brand that they previously bought or searched for online. This kind of targeted information can obviously help convince the customer to purchase a specific product.

Beacons help find products in a store

Most customers find big department stores overwhelming. Many people give up the purchase of a product after spending some time on aimless searching. The use of beacons can help solve such problems by offering an internal map which can help find the right items from a shopping list.

For example, the Target chain of stores uses beacons to create a “GPS system for shopping baskets”. Customers can use the Target application to create shopping lists and then check where the items are located in the store or how far these items are from the user. Customer location in the app changes in real time when they move and the application indicates whether they approach the desired items.

How to encourage customers to visit a store?

61% of US consumers who have never used beacons before claim that they could consider the technology if they were offered discounts and personalized offers. Walgreens takes advantage of this phenomenon in its marketing activities. It is an American pharmaceutical company which sends mobile coupons and discounts to customers located near their stores. Since the introduction of the system, the conversion and acquisition rates increased several times.

Beacons in loyalty packages

A survey carried out by Retail Drive reveals that about two-thirds of people under 35 use their smartphones to check the opinions on selected products before making the final purchase. One clothing company took advantage of this habit and created a popular ambassador network for its brand. The company is, naturally, Urban Outfitters — a streetwear brand which combines beacons and the habit of finding product information to build its mobile loyalty program. How does it work? When a customer enters an Urban Outfitters store, they are encouraged to unlock a personalized offer by logging in to social media. When a customer decides to check a given clothing set, they can browse all the content related to the products generated by other users. What is more, buyers are also encouraged to take a selfie with the #UOonYou hashtag used on the Urban Outfitters site. Thanks to this system, the customer gets access to opinions written by other people about a potential item while becoming a member of the brand’s community. The customers receive points for all such activities and can later exchange them for various discounts and prizes, just like in traditional loyalty systems.

By combining beacons with social media, Urban Outfitters can interact with customers online even when they are inside a physical store of the brand. Their strategy helps turn real buyers into genuine brand ambassadors and make the customer experience more enjoyable.

The marketing strategies based on detecting customer location with beacons are expected to cover more and more industries in the coming years. To maintain a competitive advantage, representatives of the retail market should invest in infrastructure based on beacons which will enable them to improve customer experience, maintain existing buyers and win new ones.