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Beacons_SweetIQ

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Table of ContentsExecutive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Baseline for beacons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Beacon Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

The Who, What, and How of Beacons . . . . . . . . . . . . . . . . . . . . . . . 6

Shining a Light on Beacons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Rethink the Shopping Experience . . . . . . . . . . . . . . . . . . . . . 10

Beacons and Big Brother . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Beacons of Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Lord & Taylor/Hudson’s Bay Company . . . . . . . . . . . . . . . . . . . . .13

Macy’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

American Eagle Outfitters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Other Retailers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Light Em Up (or The Future of Beacons) . . . . . . . . . . . . . . . 17

O2O Attribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

And in the End . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

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As the CEO of SweetIQ, I talk a lot with our brand clients and their agencies about the future of retail - specifically, how they can get the most out of their O2O (Online to Offline) funnel. We plan strategies to maximize their locations’ findability, capture shoppers’ expressions of intent, and ultimately drive consumer behaviour to increase their in-store foot-traffic. The goal is always the same: get more shoppers for our clients.

Helping our clients plan their O2O funnel means looking ahead to understand the future of retail. Technology, in the shape of Bluetooth Low Energy beacons, offers retailers a new way to engage with their customers and increase the effectiveness of that O2O funnel. With each new technological and creative advance, retail brick-and-mortar brands get closer to e-commerce levels of intelligent data. Beacons put that data into the hands, and the stores, of brick-and-mortar retailers. Beacon technology, and the creative application design that beacons will spark, represents a great opportunity for brands to start implementing the future of retail, today.

As a company, we are obsessed by the future retail, and excited by the opportunities beacons can create to engage with shoppers. Beacons present a legitimate chance to learn more about how, and why, shoppers wind up at your sales counter. We wrote this white paper primarily because while scouring the internet for great content I couldn’t find a comprehensive paper on beacons that successfully tied the technology to real, disruptive opportunities for retailers. I hope this paper fills that gap.

Key Takeaways v Beacons aren’t coming, they’re here - by the end of

2016, as many as 85 % of Top 100 U.S. retailers will roll out beacons

v 80% of smartphone owners want more mobile-optimized product information while they’re shopping in-store

v 1 in 3 shoppers would rather find information using their smartphone than ask a store employee, and for electronics and appliances that number is closer to 1 in 2.

v Over 40% of shoppers look for offers on their mobile devices while they’re in store

Executive summary

Mohannad El-Barachi, CEOSweetIQ Analytics Corp .

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Baseline for beacons

Beacons are the latest buzzword in retail marketing – but what exactly are they and why should you care? Beacons are small battery powered devices that can communicate by Bluetooth (Bluetooth Low Energy, to be exact) with smartphones and other mobile devices. They can also pinpoint the location of a person, carrying a Bluetooth enabled mobile device, indoors.

How does all this translate into retail and marketing? The simple answer is that beacons have the potential to bring the power of big data (literally) to the front doors of brick-and-mortar retailers. Retailers can use beacons to create customized in-store experiences and send personalized messages to shoppers in real-time. Beacons have the potential to transform brick-and-mortar retailers into the store of the future. In fact, the future may be closer than it seems - BI Intelligence research predicts that as many as 85 % of the Top 100 U.S. retailers will roll out beacons by the end of 2016. (Smith, 2014)

8% by 2014 32% by 2015

Percent of Top 100 US Retailers’ Locations With Beacons

85% by 2016

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Beacon technology

The Who, What, and How of BeaconsBeacons are often commonly referred to as iBeacons, as Apple was the first to equip their devices with beaconing technology. All iPhones, from the iPhone 4S, are fitted with Bluetooth Low Energy, or BLE, radios. Android phones soon followed suit, and now most smartphones, and other mobile devices including tablets, are able to receive messaging through BLE communication.

Beacons are the latest development in location-based technology. But as opposed to geo-fencing, which relies on GPS that lacks accuracy indoors, and near field communications (NFC), which has a limited range, beacons can accurately pinpoint the location, within centimeters, of a smartphone-equipped customer inside a store. Not only can beacons pinpoint location, but they can also communicate with customers through push messages delivered directly to customers’ smartphones (Gast, 2015).

What’s so special about BLE, anyways?BLE avoids the cost of WiFi, the inaccuracy of GPS (especially indoors), and is both cost- and energy-efficient to run. BLE beacons can run on a single coin battery for months or even years. And the battery drain on a phone from nearby beacons is less than 1%. Coupled with their remarkable accuracy at pinpointing location, and it is no wonder BLE beacons are being heralded as the bellwether of location-based technology. (Pun, 2014; Aislelabs, 2014)

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Here’s how beacons use BLE to communicate with mobile devices: A beacon, powered by a small battery, emits a BLE signal that can be received and interpreted by an app on a smartphone. (Technically speaking, the beacon emits a unique code that can be interpreted and read by certain apps downloaded to a mobile device (Martin, 2014)). Beacons broadcast their signal over a defined area, typically up to about

50 meters. When a customer comes within range of a beacon, her mobile device automatically receives and interprets the signal, whether or not the targeted app is open on her phone (Aislelabs, 2014; Cox, 2014; Martin, 2014). To be able to receive the beacon’s signal a customer must only have enabled Bluetooth, and downloaded the retailer’s app to her phone (Sterling, Polonetsky & Fan, 2014).

Bluetooth Enabled

App = On or Off

20% OFF

coupon

20% OFF

coupon

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The takeaway message is that beacons enable brick-and-mortar retailers to engage with their customers in the right place, and at the right time (Buchholz, 2014). Imagine a customer walking past a store’s window display and being prompted to enter the store to check out a sale, or a customer already in the store stopping in front of a mannequin and being sent information about the clothes on display – this is the power of beacons.

“Think about it, and you realize that beaconing has been the missing piece in the whole mobile-shopping puzzle. The technology is essentially invisible and can work without the mobile consumer’s having to do anything – usually a major hurdle for any mobile shopping technology. The shopper only has to agree in advance to receive such messages as they shop.”

— Chuck Martin (2014), Harvard Business Review

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Shining a light on beacons

Companies including BlueSense, Gelo, and Kontakt are manufacturing beacons; and with the market for beacons expected to grow to 60 million units by 2019, many more companies are expected to jump into the beacon business (Groot, 2014; Buchholz, 2014). One company that has been leading the way forward for beacons is Estimote. Estimote bet early and bet big on Apple’s iBeacon technology, and has been manufacturing and delivering the devices to retailers and other businesses since mid-2013. Their first beacons were colourful plastic objects about the size of a hockey puck, but their latest

models are small stickers which can be placed not just on walls around a store, but on actual objects themselves. Not only have they worked hard to master the hardware side of beacons, Estimote is also busy making their beacon software simple for developers to work with. By making their platform easy and accessible to use, Estimote has put developers in the driver’s seat – allowing developers’ creativity and innovation to be the compelling force behind how beacons will be implemented in the real world (McFarland, 2014b; Weinberger, 2014; Vanhemert, 2014).

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Rethink the shopping experienceThe potential of beacon technology is huge for retailers; location-based marketing allows retailers to tailor messages and create customized in-store experiences. Paul Price (2014), CEO of Creative Realities, the cutting edge retail experience and technology firm, believes location-aware technology is the future of marketing and urges retailers to “[Design] your mobile experience for the purposes of activating the in-store experience.”

Nothing provides better location awareness than beaconing technology, which puts the power of big data, once reserved only for the world of e-commerce, into the hands of brick-and-mortar retailers. Merchants can customize their in-store shopping experiences, and turn customers’ mobile devices into interactive virtual personal shopping assistants, by knowing who precisely is in their store at any given time, as well as the specific section of the store the customer is located. Through beaconing technology, retailers can provide shoppers with personal recommendations, up-to-date product information, and coupons or discounts, all based on where shoppers are currently standing in a store (Laird, 2014; Gast, 2015; Krasilovsky, 2014). In this way, beacons allow brick-and-mortar retailers to personalize and customize shopping experiences in ways similar to on-line retailers (Meehta, 2014).

For retailers looking to implement beaconing technology, it is “less about installing the actual beacons and much more about

rethinking the overall shopping experience they can help shape” (Martin, 2014). Personalized in-store experiences can transform the task of shopping from confusing or stressful to something that is relevant and enjoyable for the consumer (Gupta, 2014). Personalizing, and digitizing, the shopping experience also connects with a large segment of your customers: 1 in 3 shoppers would rather find information using their smartphone than ask a store employee, and for electronics and appliances that number is closer to 1 in 2 (Google/Nielsen, 2014).

Beacons can also provide powerful analytics to stores, showing retailers in-store traffic patterns, such as where and how long customers dwell while shopping in-store. This can further help stores with merchandizing and staffing (Laird, 2014). A word of caution: With big data comes big responsibility. If retailers are going to gather and use personal shopping data collected through beacons, they must ensure that the value they are offering consumers in exchange is compelling, relevant, useful, and – hopefully, fun (Pun, 2014).

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The major criticism of beacons is their impact on privacy. Privacy advocates worry that beacons allow retailers to know too much about consumer’s personal information.

The good news/bad news is that beaconing is an opt-in service. Customers must download the retailer’s app and enable both location settings in the app and Bluetooth on their phones in order to receive beacon messages. Most recently, new Bluetooth privacy specifications were adopted, meaning that customers will only receive ads and promotions via Bluetooth if they specifically provide retailers with permission to do so. While providing greater peace-of-mind to consumers worried about their personal information, these new privacy specifications will mean that retailers will have to focus on creating compelling content for beacons, to entice consumers to opt-in and interact with their beacons.

(Associated Press, 2014; Evans, 2014)

Beacons and Big Brother

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Beacons of industryThe best way to understand the potential of beacons is to see how some retailers are putting them to use. Many large retailers, including the Hudson’s Bay Company, Macy’s, Kenneth Cole, Timberland, and American Eagle Outfitters have already rolled-out beacons in retail locations, and other retailers like Sephora and adidas are researching and exploring the potential of beacons. Swirl, an indoor mobile marketing company, who has worked with many of the above-listed retailers, states that beacons are raising in-store engagement and that customers are happily interacting with the content provided by beacons: 80% of smartphone owners want more mobile-optimized product information while they’re shopping in-store (Moosylvania, 2013), 73% of shoppers who have received beacon-triggered messaging said that the messages increased their likelihood to make a purchase, and 61% said they were more likely to shop at stores that delivered mobile content and offers (Sterling, 2014).

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The future of beaconsThe ways beacons are being used outside the boundaries of retail and marketing can significantly influence how brands use them in the future. Barclays, the British banking company, has implemented beacons in its branches as a way to better serve patrons with mobility issues (Boden, 2014). Both Major League Baseball and the National Football League have installed beacons in stadiums to help guide visitors to their seats and find food and other in-stadium services (Moth, 2014; Donovan, 2014). Swiss Federal Railways has proposed using beacons to help commuters and rail-travelers find the fastest route through busy railway stations in real-time (Gasser, 2014). Virgin Atlantic envisions a future where beacons will upload boarding passes to passengers’ phones automatically (Moth, 2014). Museums are looking to use beacons to create richer, more interactive exhibits (Gibbs, 2014). Brivo Labs, an Internet of Things company, used beacons to unlock a door at SXSW (Estimote, 2014). New beaconing technology is also being introduced.

The future of beacons also lies in two way communications available with mesh networks. Already on trial in Canada and France, French company Ubudu will launch mesh beacons in the U.S. in 2015. Unlike iBeacons, mesh beacons can receive a message back from a shopper’s mobile device without being paired to it. For example, a customer could send a message back to the store, over the mesh beacon network, asking for assistance from a sales clerk, or for a specific size sweater. Mesh beacons can also send out more customized messages. According to Thomas Saphir, co-founder and chief marketing officer of Ubudu, “Conventional beacons [send] the same [location] message at a regular interval. By contrast, our mesh beacons send out [various] messages to other devices, including other mesh beacons and smartphones” (Levine, 2014).

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O2O attributionBeacons offer retailers the best chance to take measurement beyond just clicks. The technology moves retailers closer to closed-loop channel attribution, where it is possible to measure the direct results of a mobile advertising or local search campaign on in-store sales, with individual shoppers (Bustos, 2104). This type of attribution may finally give marketers real insights into where their marketing dollars are being spent wisely, and where they are being wasted (Kaplan, 2014).

Mobile attribution allowed adidas, through their partnership with iProspect, to determine that each store locator click is worth $3.20, and drives an incremental ROI lift of 680% (adidas, 2013). According to Nicole Mills, Senior Digital Marketing Manager for eCommerce at adidas America, adidas wanted to a way to measure consumers using mobile devices, coming to their retail stores and then making a purchase. Beacons can eventually improve the accuracy and breadth of these numbers, by replacing estimates and guesswork with hard data from real shoppers.

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Lord & Taylor/Hudson’s Bay CompanyOne of the biggest beacon projects to date has been launched by the Hudson’s Bay Company (HBC), owner of Lord & Taylor and Saks Fifth Avenue in the United States, as well as The Bay and Home Outfitters in Canada. In July of 2014 HBC announced that it was expanding its beacon trial from ten stores to 130 stores, including both Lord & Taylor stores in the U.S. and Hudson’s Bay stores in Canada. Using beacons, HBC sends branded content and personalized in-store offers to customers (Kahn, 2014).

In its original trial of ten stores, HBC sent out mystery coupons to Lord & Taylor shoppers when they passed within 500 meters of a Lord & Taylor store. Initial data found that the conversion rate from beacon messaging was higher than from traditional banner ads, as well as from geo-fencing technology (Walsh, 2014). Playing off this success, HBC is staking that beacons will increase in-store engagement and create a better shopping experience for its customers.

Images from: http://9to5mac.com/2014/07/28/hudsons-bay-company-deploys-ibeacon-experience-in-the-bay-and-lord-taylor-stores/

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Macy’s is looking to launch beacons to an even larger extent than HBC. After an initial trial at stores in New York and San Francisco, Macy’s announced in October 2014 that it will be adding 4000 beacons to its 796 stores throughout the U.S. Macy’s is investing heavily in beacon technology as it looks to engage better with millennial-aged customers. In its initial trial, Macy’s used beacons to send in-store offers and targeted recommendations. Macy’s plans to expand its beacon messaging, and by spring of 2015, Macy’s hopes to offer rich content to consumers based on different store departments. For example, information about Kitchen-Aid mixers while a customer is browsing through home wares, or communications about popular boots while in the shoe department. Macy’s is incorporating beacons into their larger mobile marketing initiative, as they have also developed an app that allows a customer to take a photo on her phone of an item of clothing, and then points to similar items sold by Macy’s. Macy’s believes that a strong mobile strategy will increase engagement, and ultimately sales for the department store. (Halzack, 2014; Clover, 2014)

Macy’s

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American Eagle Outfitters (AEO) is another early adopter of beacon technology. AEO partnered with the retail reward app Shopkick to use beacons to draw more customers into their fitting rooms. Clothing retailers know that a key to increasing sales is to have customers try on clothes, but getting customers into fitting rooms is sometimes a struggle. When shoppers who had the Shopkick app entered an AEO store equipped with beacons (installed at both the entryway and fitting rooms), they received a message inviting them to collect 25 kicks – the reward system used by Shopkick, if they tried an item of clothing on in the fitting rooms.

With a target demographic that is younger, and already mobile-friendly, AEO discovered that using beacons was a great way to engage with their customers. AEO found that over the two-month trial period, shoppers who received the beacon offer were more than twice as likely to try on a piece of clothing – an outcome well beyond anticipated results. AEO is now looking to expand upon its initial beacon success, and is researching ways to use beacons to connect customers with its own in-house AEO app. (McFarland, 2014a)

American Eagle Outfitters

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Other retailersBeacon technology continues to expand in the retail world. Neiman Marcus is the latest department store to announce the use of beacons, implementing the technology to help engage with customers during the holiday shopping season. Partnering with digital strategy firm BestFit Mobile, as well as the Passbook App, Neiman Marcus installed beacons in three stores to notify customers about in-store offers and events. Bret Cunningham, President of BestFit Mobile said of the project: “It makes Neiman Marcus more than a place to buy your Christmas presents, but makes it fun. It’s really a shopper-first, shopper experience-first campaign” (Drain, 2014).

Cosmetics giant Sephora believes that beacon technology is the future of retail. Julie Bornstein, chief marketing officer and chief digital officer of Sephora, cautions that beacons may not be for all retailers quite yet – as retailers need to build a strong mobile following first. (Getting customers to download and engage with a retailer’s app is not an insignificant challenge for marketers.) While still in the research stage, Sephora, with already over 4 million apps downloaded, plans on making beacons a major player in its retail locations in the near future (Lapowsky, 2014). adidas, which has already implemented innovative touch-screen and mobile in-store shopping experiences through a partnership with Creative Realities (Amato-McCoy, 2014), has recently revealed a teaser image of its new beacons app, signalling a beacons project in the near future:

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And in the endWith ever-evolving technologies, and a virtually endless array of uses that are limited only by the creativity of designers and developers, beacons are poised to become one of the dominant forces in retail marketing. Pegged as a major retail trend in 2015, it is anticipated that by the end of the year, there will be a near one complete adoption of beacons, or other indoor location-based technologies, by the top 100 retailers (Sterling, 2014). Research giant Gartner also predicts that by the end of 2015, 40% of worldwide mobile device users will opt-in to contact service providers, and allow their activities to be tracked. This translates to 720 million people worldwide – a huge customer base for retailers to target with beacon-aided campaigns (Pettey, 2011). Beacons are helping to create the store of the future, one that is interactive, engaging, personalized and very targeted towards individual consumers.

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