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iBeacons to Shoppers: Have I Got a Sale for You

BY CSA STAFF

By Brett Conradt, [email protected]

“I have a shirt I know you’re going to love.” Those who may be skeptical when hearing this from a retail salesperson may soon find their phones to be more reliable shopping guides. New technology makes it possible to remotely tap into your own shopping preferences, and it may be coming soon to a retailer near you. As Big Brother-like as this may sound, our research shows that shoppers may be more open to this concept than you might think.

It’s the equivalent of walking into your favorite tavern and the barkeep inquiring whether you want “the usual.” The technology capable of doing the same within a store for types of merchandise you’ve bought in the past is not far off. Tend to buy a particular brand of pants in a select few colors? You could get an alert on your phone when you walk by a new style of shirt from your favored brand, in your size, and in one of the colors you like.

This is the logical next step in retailers’ quest to understand buyer behavior and influence their purchases. It’s a quest that has taken many forms, from cameras to follow customers’ most common route through the store or whether or not they change course in response to particular types of displays; to tracking which are the most and least returned items (and who the perennial returners are); and sensors to monitor store traffic in response to various types of promotions. Newer, more sophisticated offerings like ShopperTrak and Nomi can even track customers’ mobile devices to monitor individual movements — although not their identities — rather than crowd behavior.

You’re in the Right Place
The catalyst for the next step may turn out to be iBeacons, a feature quietly added to Apple’s latest operating system, iOS 7. In its raw form, iBeacon technology was meant to help a device track its position relative to stationery beacons, which can be more precise than monitoring movements from a satellite that is more than 12,000 miles up and itself moving. Each beacon is coded with a unique ID so that a sensor on a phone can tell them apart.

Couple this with retailers’ customer loyalty cards, which are increasingly moving from physical objects in wallets to electronic files on phones, and suddenly the beacons can tap a lot of information about buying patterns within a particular store. As a shopper walks by the men’s department, for example, its beacon could be programmed to see if he or she has made purchases there and what they’ve bought, and then send a notification of new styles or sale items in line with the customer’s historical profile. The system can even interact with existing technology to direct them to a combination mirror/computer monitor that can superimpose an outfit being promoted onto their image (along with the brand names, styles, and shelf locations) to show how it would look on them. Existing near-field communication (NFC) systems in stores are primarily useful only for mobile payment systems. The iBeacons’ technology can do that, too, but so much more.

This increased communication could be invaluable to retailers, from the point of view of tracking shoppers’ behavior, influencing them to buy more, and/or steering them toward higher-margin items. But how will it play with customers? Would security concerns about granting access to their phones outweigh the convenience of tailored offers in shoppers’ minds? Actually, no. Stax recently conducted an online survey of approximately 1,000 smartphone owners and found surprising receptivity. Sixty-eight percent are already actively allowing apps and functions on their smart phones to track their location. Eighty-two percent said they would be at least somewhat interested in receiving offers on their phones while shopping, with 25% expressing “extreme interest.” In addition, roughly half of the respondents said they would be willing to grant retailers access to data on their phone to accomplish this, while another 27% who answered “don’t know” represent potential converts.

Next Steps
Although this degree of interactivity is not up and running today full scale, it conceivably could be within the next year. It’s something that retailers (and those who sell to them) should be thinking about. Stores can start by segmenting their customers to identify which groups are likely and which are unlikely to use the technology. You can confirm these initial assessments through more targeted and quantifiable consumer research. You want to understand whether the segments that would be interested are sizable enough to warrant moving forward. Then, as early prototypes of the technology become available, chains can do preliminary “test and learn” field trials in a small number of representative outlets (as Macy’s is starting to do in two locations), monitoring such metrics as year-over-year changes in store traffic or average customer ticket size to see if the program is building sales or driving them away. And whether it’s a small-scale test or, ultimately, a broader rollout, it would be prudent to try it during lower-sales times of the year — not in peak holiday shopping seasons.

Other companies in areas such as technology and marketing services that deal with retailers should also take note. If they incorporate it effectively, this technology would allow those whose business it is monitor customer behavior to get closer to the customer than ever before. If they don’t, they risk being quickly left behind.

Although our research indicates that broad acceptance of this technology looks promising, individual retailers and suppliers have an opportunity to use the lead time before broad deployment to get a strong sense of whether and how best to use it with their own customers, and to quantify the potential “lift” it’s likely to generate.

Brett Conradt is a director in the Chicago office of Stax Inc., a global strategy consulting firm, where he leads relationships for private equity and corporate clients. He has expertise in consumer and retail markets and financial services (particularly in payments). He can be reached at [email protected].


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IDC: Top 10 predictions for 2014

BY Marianne Wilson

Framingham, Mass. — Expect renewed investment in the transformative capabilities of PLM and sourcing, marketing and advertising, and big data and analytics according to IDC Retail Insights, which on Tuesday released its Top 10 Predictions for 2014.

Here are the IT consulting company’s top 10 predictions for 2014:

1. In 2014, fast-followers will chase the 50 global retailers already transforming store, mobile, and e-commerce channels, supply chains, merchandising, and marketing for the omni-channel customer experience

2. Business transformation will drive enterprise resource planning, core merchandising, and planning investment to a 9% compound annual growth rate through 2015.

3. By 2016, leading retailers will improve same-shopper sales with immersive commerce driving additional revenue growth of 1.5% and margin growth of an additional 3%.

4. By 2017, marketing and advertising technology investment will increase by 50%.

5. Retailers will narrow and enable big data and analytics projects in 2014 as 20%-30% of projects fell short in 2013.

6. Emerging consumer privacy concerns will force 50% of early adopters to revisit hyper-personalized promotions by 2015

7. E-commerce and store platform replacements that enable mobile, integrated and interactive experiences will support a 10% compound annual growth rate in commerce investment through 2017.

8. As product assortment refresh cycles quicken, 25% of mid-sized retailers will initiate new PLM or sourcing projects in 2014.

9. Retailers will double the rate of industry supply chain investments in 2014, as compared to 2013.

10. By 2016, 50% of national retailers, will invest in distributed order management, enterprise inventory visibility, and workforce management to enable same day fulfillment.

“In the next three years, retail will reinvent itself as omni-channel leaders reach for customer relationship, relevancy, and reciprocity. A new replacement cycle of enterprise, planning, and commerce systems will anchor complex company-wide business transformation for immersive experience and commerce. Quick-to-market leaders will improve same-shopper sales–fast becoming the most significant leading indicator of future performance," said Robert Parker, IDC Retail, energy and manufacturing VP and general manager. We expect renewed investment in the narrower but transformative capabilities of PLM and sourcing, marketing and advertising, and big data and analytics."

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R.Averbuch says:
Dec-12-2013 03:13 pm

In 2014 grocery retailers will focus on food waste reduction by utilizing the new introduced GS1 DataBar standard. The large amount of food waste is a lose-lose situation for the environment, the struggling families in today’s tough economy and for the food retailers. We should address the food waste problem in every link in our food supply chain. For example, the excess inventory of perishable food items close to their expiration on supermarket shelves causes waste. The consumer “Last In First Out” shopping behavior might be one of the weakest links of the fresh food supply chain. Why not encourage efficient consumer shopping behavior by offering him automatic and dynamic purchasing incentives for perishables approaching their expiration dates before they end up in a landfill? The new emerging GS1 DataBar standard enables automatic applications that offer dynamic incentives for perishables approaching their expiration dates. The “End Grocery Waste” application, which is based on GS1 DataBar standard, encourages efficient consumer shopping behavior that maximizes grocery retailer revenue and makes fresh food affordable for all families while effectively reducing the global carbon footprint. You can look this application up at EndGroceryWaste.com Rod, Chicago, IL

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CVS Caremark, Cardinal Health in generic drug joint venture

BY Antoinette Alexander

Woonsocket, R.I. — CVS Caremark and Cardinal Health have entered into an agreement to form the largest generic sourcing entity in the United States.

Both companies are contributing their sourcing and supply chain expertise to this 50/50 joint venture and are committing to source generic drugs through it. The companies separately announced a three-year extension through June 2019 of Cardinal Health’s existing pharmaceutical distribution agreements with CVS Caremark.

"Cardinal Health has been an outstanding strategic partner over many years, and we are excited to form this new venture with them," stated Larry Merlo, president and CEO of CVS Caremark. "This partnership will enable us to maintain our leadership role in navigating the dynamic U.S. generics market. With its combined volume and capabilities, the joint venture will develop innovative purchasing strategies with generic manufacturers and enhance supply chain efficiencies."

The U.S.-based joint venture, which is subject to customary closing conditions, is expected to be operational as soon as July 1, 2014, and will have an initial term of 10 years. Under the arrangement, the joint venture will source and negotiate generic supply contracts for both Cardinal Health and CVS Caremark. In order to reflect an equitable 50/50 joint venture, the agreement includes a quarterly payment of $25 million over the life of the agreement from Cardinal Health to CVS Caremark, the companies stated. The payments have an estimated after-tax present value of $435 million.

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