cracking the code-deciphering retail location-based ... · in brp’s 2016 pos/customer engagement...

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Cracking the Code: Deciphering Retail Location-Based

Services Technology

Boston Retail Partners February 2016

Cracking the Code: Deciphering Retail Location-Based Services Technology

Location-based services Within the last few years, a plethora of new location-based services (LBS) have been created for retail applications. The potential opportunities available through the installation of LBS are playing a key role in the industry transformation as the customer experience takes center stage. A key use of LBS is to identify customers as they enter the store, affording retailers the best opportunity of personalizing the customer’s shopping experience through clienteling and guided selling. In Boston Retail Partners’ 2015 CRM/Unified Commerce Benchmark Survey, 53% of retailers plan to have the ability to identify customers when they walk in the store via their smartphones within five years. That’s an 883% increase over the 6% who indicated they could already identify their customer in this way. LBS are the key to this identification and are a necessary technology for the future store. With this burgeoning technology comes a complicated path for selecting the optimal system. Coupled with the ever-increasing capabilities of LBS, even the savviest ‘techies’ have been left wrestling with the challenges of deciphering this complex technology. This paper provides an overview of the nuances of the various LBS options and the pros and cons of the respective retail applications.

What are LBS technologies, and why are they important? Within the spectrum of applied retail technologies, location-based services are relatively new – having only been commercially viable since the early 2000s. Their popularization came after the release of Apple’s 3G iPhone and Google’s LBS-enabled Android OS.1 Location-based services act as a means to determine where the user is, and in the broadest sense, they accomplish this by three means: pushing, pulling or monitoring data (like Wi-Fi and GPS). Techopedia gives us a succinct definition of push and pull services; “In a push type of service, the user receives information from the service provider without requesting it at that instant, although the user may have originally subscribed to the service at an earlier time. In a pull type, the user has to actively request for information.”2 It is important to note, whether push or pull, the user must give authorization (opt-in) to attach the service. For a monitoring service, the subscriber has to enable Wi-Fi or location services on their device.

1 Rouse, Margaret. "What Is Location-based Service (LBS)? - Definition from WhatIs.com." SearchNetworking. WhatIs.com, n.d. Web. 20 Dec. 2015. 2 "What Are Location Based Services (LBS)? - Definition from Techopedia."Techopedia.com. N.p., n.d. Web. 2 Jan. 2016. <https://www.techopedia.com/definition/12888/location-based-services-lbs>.

883%

more retailers plan to identify customers when they walk in

the store via their smartphones – requiring retailers to

implement location-based services to work in conjunction

with the customer’s smartphone for identification

and personalization

Exhibit 1


The importance of pushing and pulling information is unique to each retailer based upon their goals. In later sections we’ll paint a picture of how and why certain LBS solutions are applied. In addition to customer identification, other uses include, but are not limited to: automatic notification of information, outdoor tracking and navigation, inventory management, traffic counting, monitoring customer flow through a location, and payment facilitation. In BRP’s 2016 POS/Customer Engagement Survey we revealed interest from retailers in leveraging customer-facing technology to bolster every phase of the customer’s shopping experience. Moreover, due to the success of those burgeoning programs, many additional retailers plan to implement customer-facing solutions within the next three years (Exhibit 1). This growth is spurred by the staggering influence of mobile devices on customers’ in-store purchasing decisions. To date, 75% report using smartphones in browsing, shopping, or finding product information when out shopping.3 These devices (smartphones, watches, or glasses) facilitate the information search and evaluation sweet spots in the buying process; Location-based services simply work in tandem, leveraging this technology one step further. LBS enable additional control of the customer’s overall experience, and nets invaluable individualized behavioral insights. Why is LBS important in 2016? Because early adopters of LBS (whether used in transactional, directional, or informational decisions) have already set the bar for the future retail experience. Parlayed with the proliferation of smart technology and the obvious value add of location-based services, clearing that bar within the next three years will unquestionably serve as a competitive advantage for those retailers that plan to invest in these capabilities. Retailers have discovered that the cost of piloting many of the available LBS solutions is very low when compared to most other new technologies. This allows retailers to experiment and learn in small pilots with limited risk. The results from these pilots will give retailers the foundation to build the channel-agnostic personalized customer experience that is mandatory to survive in this new real-time retail world.

3 “Reality of Retail,” InReality, March 31, 2015, http://www.inreality.com/resources/report/20150331/

Exhibit 2


Overview of LBS technology options The primary location-based technologies used today, whether separately or combined together to create a synergized solution, include: GPS, Wi-Fi, RFID, NFC and Bluetooth. Based on the 2016 POS/Customer Engagement Survey, retailers are already beginning to utilize location-based technologies with plans for major implementations in the next three years (Exhibit 2). GPS Of all the location technologies, global positioning system (GPS) is the oldest and the only one based on a ubiquitous satellite infrastructure. As almost all smart devices include GPS functionality, GPS can be accessed outside with a high degree of performance, barring any sky blockage or atmospheric effects. Where GPS accuracy breaks down is indoors, due to line-of-sight issues. Using GPS indoors for location and positioning capabilities requires it be done in combination with another technology (most commonly Wi-Fi) that provides reference points. The other major benefit of GPS technology is that it’s effectively free to tap into – GPS is primarily funded by the Department of Defense.

GPS PROS GPS CONS • All smart devices are receivers • Best outdoor location technology available • Adaptable with other LBS • Low cost

• Accuracy impeded by line of sight and signal reception

• Needs other technologies for indoor use • Constant satellite search is a huge battery drain

on mobile devices • Location accuracy is not as precise as other

technology (3.5-meter accuracy) Retail Example: North Face With its 3.5-meter horizontal accuracy (if not used in tandem with supplementary service) GPS is best used, as it was originally intended, for outdoor navigation. GPS’s effectiveness for outdoor location identification makes it a good choice for geo-fencing. Imagine geo-fencing as a virtual border encircling a predetermined distance from a location (in this case varying from one mile to a half mile from a North Face retail outlet). After a customer opts into the North Face location services, passing through the defined barrier triggers a tailored marketing response. The net results – “79% of North Face customers say they have increased their visits to the store once they started receiving reminders, and 65% made a purchase as a result of the reminder.”4

4 Agius, Aaron. "7 Unbelievable Mobile Marketing Success Stories." Louder Online 7 Unbelievable Mobile Marketing Success Stories Comments. N.p., 26 Feb. 2014. Web. 10 Jan. 2016.

Figure 1"7 Blogs De Mobile Marketing De Nuestros Alumnos." 3 Increibles Historias De Exito De Marketing Movil : The Trend Mobile Issue. N.p., 23 Oct. 2014. Web. 11 Jan. 2016.


Wi-Fi Wireless fidelity (Wi-Fi) is a common standard, as most consumers have Wi-Fi-enabled smart devices and the technology is already installed in many businesses. Wi-Fi doesn’t require a user to sign into a Wi-Fi network or opt-in to location services so it works well for tracking purposes. However, while tracking location doesn’t require an app, moving beyond tracking to the ability to communicate does require a communication interface and opt-in, like a mobile app. Since Wi-Fi uses fixed access points that come with a relatively high cost to install, there is limited flexibility in altering the network, thereby making it difficult to achieve the same level of precision provided by RFID or Bluetooth.

WI-FI PROS WI-FI CONS • Standard feature across all smart devices • Pre-existing infrastructure in many retail facilities • Does not require a user to sign into the network or

‘opt-in’ to location services for tracking purposes

• Power hungry • Accuracy impeded by line-of-sight and signal

reception • Moving beyond tracking requires a communication

interface and opt-in • Many users in the US have Wi-Fi disabled when

they are away from work or home Retail Example: Target

Understanding the value of mobile technology in retail sales, Target (and likeminded retailers such as: JCPenney, Saks Fifth Avenue, Sam’s Club, and Nordstrom) has embraced the change in technological environment and adapted accordingly.5 Target’s plan is to not only invest in Wi-Fi for customers, but also heavily promote the service and provide it for free. While the exact numbers of users are unpublished, the quid pro quo for the service leans heavily in the retailer’s favor. “Free” connectivity comes at the cost of utilization data, session data, type of device, browser data, store data, use of Target services, device data, websites and pages visited, and the ability to share said information with Target subsidiaries and affiliates, service providers, other companies and third parties.6 In addition to the aforementioned passive benefits, it enables Target to populate banner ads and mobile coupons on the user’s device. Target is also working on an iPhone-based beacon strategy, which emphasizes the aggressive layered approach Target is taking with regard to LBS.

RFID Radio frequency identification (RFID) is a form of wireless communication using radio waves to identify and track objects. RFID is a popular solution in distribution, logistics, and inventory management for its ability to identify many items at once without direct line-of-sight. An RFID system is comprised of tags and readers that communicate with each other using radio waves and reader control application software. RFID is an extremely cost-effective solution for anything that needs to be tracked at a unique unit-level or where some manual authentication is desired; however, RFID represents an incremental cost to the business (for readers and tags which remain with the customer once they leave the store) where solutions like Wi-Fi and Beacons leverage consumer-owned technology. 5 Vella, Matt. "Why Stores Are Finally Turning on to WiFi." Fortune Why Stores Are Finally Turning on to WiFi Comments. N.p., 14 Dec. 2012. Web. 1 Jan. 2016. 6 "Target Wireless Service Privacy Notice." Target Guest Wi-Fi. N.p., n.d. Web. 19 Dec. 2015.

Figure 2"Target Stores Now Offering FREE Wi-Fi - All Things Target." All Things Target. N.p., 01 Oct. 2012. Web. 1 Jan. 2016.


To date, major smartphone manufacturers have decided that the cost and complexity of building RFID reader capabilities directly into their devices isn’t justified by the potential customer value. However, where we do see RFID and consumer-owned infrastructure capabilities seamlessly coming together into a single solution, is with NFC (near field communication). RFID remains very cost effective in the logistics/WMS/Transportation areas and with retailers who have high ticket and serialized items that benefit in customer service or experience by product registration and enhanced cycle inventory processes.

RFID PROS RFID CONS • Doesn’t require direct line-of-sight • High degree of accuracy at the unique item or

serial number level and the fixture/shelf level

• Turning a mobile device into a reader is not realistic

• Customer value doesn’t generally justify the cost/complexity of building it into RFID

Retail Example: Burberry Since 2012, Burberry has slowly rolled out RFID technology to some of its flagships stores. Whereas many retailers fully leverage the hardware they are implementing, Burberry has provided a good example of a staggered launch. This path has been relatively noninvasive, focusing on “stock and quality control, and enabling customers to view bespoke multimedia content specific to different products and ranges on in-store display screens.”7 Specifically, changing room mirrors are activated by an article’s RFID tag; and this organic customer interaction cues a video depicting the making of the garment and its time on the runway.8 This tactic is a noted departure from how organizations such as Target have tried to maximize the extraction of data from consumers to help develop long and short-term strategies. Though restrained, cautious use of RFID does resonate with the cultural tenets Burberry espouses as a core differentiator. Burberry gives us an excellent example of thinking progressively and strategically – assuring technology supports its long-term core competencies, and not vice versa. NFC As the name implies, NFC is a ‘near field’ communication system, meaning its range is limited to 10cm or less. Other uses like location analytics, indoor navigation, or proximity-based communication require supplemental location-based technologies. NFC is best for secure one-to-one transactions between a consumer and other entity, or exchanging data between two devices. Examples include Apple Pay, Google Wallet and Samsung Pay. Within the past five years, NFC has become such a staple of the telecommunications industry; even Apple eventually acquiesced and adopted the system. In 2016 the list of smart phones without NFC technology is quite limited.

7 "RFID." Burberry. N.p., n.d., https://us.burberry.com/legal-cookies/privacy-policy/rfid/, Web. 2 Jan. 2016. 8 Davis, Ben. "Five Retailers Using NFC and RFID to Enhance Shopping: But Do They Work?" Econsultancy. N.p., 13 Aug. 2014. Web. 3 Jan. 2016.

Figure 3Arthur, Rachel. "Burberry Personalizing New Collection With Embedded Digital Content." Mashable, 17 Feb. 2013. Web. 1 Jan. 2016.


NFC PROS NFC CONS

• Highly efficient and accurate • Does not need power to function • Consumer controls timing and engagement • Supported by most mobile devices • Low cost of deployment

• Coverage is generally measured in millimeters • No ability to triangulate position • Not supported by Apple products prior to iPhone 6

Retail Example: Argos Argos is an interesting case study of near field communication integration. Instead of being utilized in its typical form as a means of contactless mobile payment, the catalogue retailer is using strategically placed NFC chips to communicate data to NFC-enabled devices. For the 40 stores Argos launched, over 88,000 such chips (called tap points) were employed, underpinned by Proxama’s Mobile-In-Retail solution and TapPoint platform.9 With an NFC-enabled smartphone, consumers simply hold their device next to the tap point. For the customer, this system presents the easiest way to download the Argos app, gain quick access to product information, and receive special offers and promotions. For the British retailer, the return is twofold. “By using NFC, we hope to encourage app downloads, increase mobile sales and improve our multichannel customer experience,” said Dominic Pemberton, head of publications and new media at Argos. “This pilot is also part of our initiative to reduce the printing and distribution costs associated with our catalogue.”10 Bluetooth11 And that brings us to Bluetooth-enabled beacons, the ‘new kid on the block.’ Beacons are small wireless devices using Bluetooth Low Energy (BLE) technology, which allows for proximity sensing and alerting. Nearby smart devices (iOS, Android, Windows, and Blackberry) act as receivers, listen for the BLE signal, and then trigger actions and/or record analytics via mobile apps on the device. It’s important to note that consumers must turn on Bluetooth, download the relevant app, and accept location services on it as well as ‘opting in’ to receive the notifications/information. Since beacons come in different formats, they are an extremely agile and portable solution. Beacons are flexible enough to support various distinct types of actions: they can send a customer a welcome message, product information, a discount/offer, a product availability alert, or any other relevant information.

9 Murphy, David. "Argos Rolls Out NFC - Mobile Marketing." Mobile Marketing Argos Rolls Out NFC Comments. N.p., 29 Jan. 2014. Web. 20 Dec. 2016. 10 Murphy, David. "Argos Rolls Out NFC - Mobile Marketing." Mobile Marketing Argos Rolls Out NFC Comments. N.p., 29 Jan. 2014. Web. 20 Dec. 2016. 11 Patrick Carne, “Indoor location technologies compared,” Lighthouse.io Blog, June 22, 2015, http://lighthouse.io/indoor-location-technologies-compared/conclusion/

Figure 4 "Argos Pilots NFC Marketing in Stores." Argos Pilots NFC Marketing in Stores Comments. Retail Innovation, n.d. Web. 02 Jan. 2016.


BLUETOOTH PROS BLUETOOTH CONS

• Beacon sensors are battery powered, stick easily to most surfaces and are easily configurable

• Mobile devices are primary receiver for push notifications

• Uses only 2-3% of a phone’s battery • Users are able to turn Bluetooth and location

services on or off (enabling privacy) • Supports highly accurate position tracking • Can support multiple types of solutions (e.g.,

promotions, payment and tracking events)

• Installation of beacons are required and maintenance may be needed

• Range is dependent upon ‘broadcasting signal power'

• User adoption requires download of an app and turning on Bluetooth and location services

• Hacking is possible if beacon network doesn’t provide UUID (universally unique identifier) scrambling

Retail Example: Macy’s Macy’s CEO Terry Lundgren describes his company as “a multi-faceted retailer with stores, technology, Internet capability and mobile access that come together for our customers.”12 Part of his strategy to accomplish this synergy was to implement shopBeacon built upon the iBeacon protocol, using BLE. This system allows Macy’s to give the customer the real-time personalized shopping experience they expect. Shopkick CEO Cyriac Roeding described the evolution as, “going from ‘our store’ to ‘your store.’13 A reminder signals the user to open the app when entering the store. Once the app is engaged and Bluetooth is activated, the user is rewarded with redeemable “kicks” (through activities like walking in, scanning or purchasing), as the store is able to push customized marketing to the customer and net behavioral data. The program operates on the assumption that push notifications are akin to a shopping assistant, although the line between helpful and invasive is a thin one. Additionally, the beacon strategy does (to a fault) center on assuming the smart device is constantly front and center for users, and that the battery drain of running Bluetooth is worth the personalized retail experience. 12 Gagliordi, Natalie. "Macy's Rolls out Retail's Largest Beacon Installation | ZDNet." ZDNet. N.p., 15 Sept. 2014. Web. 1 Jan. 2016. 13 LERNER, MASON. "Macy’s Expands Shopkick Beacons to Stores Across the Country." Street Fight. N.p., n.d. Web. 10 Jan. 2016.

Figure 5Lunden, Ingrid. "Apple’s iBeacon Comes to Retailers Via Shopkick's ShopBeacon” – TechCrunch. Nov 20, 2013.


Conclusion There is not one discernible “best choice” of location-based services (LBS). However, not having a plan to integrate some type of LBS into your future customer engagement strategy is clearly a “suspect choice.” There are many LBS options, which need to be aligned with your short- and long-term goals to remain competitive with, and distinguishable from, your competition. LBS technologies offer opportunities for an enhanced customer experience if the technology is dovetailed with the unique core competencies of a given organization. Conversely, looking to meet a short-term tactical or technical objective with LBS will likely fall short in realizing the true opportunity, and can even serve to undermine brand integrity. The retail landscape, most specifically the battle to provide an exceptional customer experience, has become extraordinarily competitive. With projected LBS implementations at an all-time high, and a learning curve far less steep than it was even three years ago, there has never been a better time to investigate this rapidly evolving, cutting-edge technology. Summary of location-based services technology pros and cons TECHNOLOGY PROS CONS GPS • All smart devices are receivers

• Best outdoor location technology available • Adaptable with other LBS • Low cost

• Accuracy impeded by line of sight and signal reception

• Needs other technologies for indoor use • Constant satellite search is a huge battery drain

on mobile devices • Location accuracy is not as precise as other

technology (3.5-meter accuracy) Wi-Fi • Standard feature across all smart devices

• Pre-existing infrastructure in many retail facilities

• Does not require a user to sign into the network or ‘opt-in’ to location services for tracking purposes

• Power hungry • Accuracy impeded by line-of-sight and signal

reception • Moving beyond tracking requires a

communication interface and opt-in • Many users in the US have Wi-Fi disabled when

they are away from work or home RFID • Doesn’t require direct line-of-sight

• High degree of accuracy at the unique item or serial number level and the fixture/shelf level

• Turning a mobile device into a reader is not realistic

• Customer value doesn’t generally justify the cost/complexity of building it into RFID

NFC • Highly efficient and accurate • Does not need power to function • Consumer controls timing and engagement • Supported by most mobile devices • Low cost of deployment

• Coverage is generally measured in millimeters • No ability to triangulate position • Not supported by Apple products prior to

iPhone 6

Bluetooth • Beacon sensors are battery powered, stick easily to most surfaces and are easily configurable

• Mobile devices are primary receiver for push notifications

• Uses only 2-3% of a phone’s battery • Users are able to turn Bluetooth and location

services on or off (enabling privacy) • Supports highly accurate position tracking • Can support multiple types of solutions (e.g.,

promotions, payment and tracking events)

• Installation of beacons are required and maintenance may be needed

• Range is dependent upon ‘broadcasting signal power'

• User adoption requires download of an app and turning on Bluetooth and location services

• Hacking is possible if beacon network doesn’t provide UUID (universally unique identifier) scrambling


About Boston Retail Partners Boston Retail Partners (BRP) is an innovative and independent retail management consulting firm dedicated to providing superior service and enduring value to our clients. BRP combines its consultants' deep retail business knowledge and cross-functional capabilities to deliver superior design and implementation of strategy, technology, and process solutions. The firm's unique combination of industry focus, knowledge-based approach, and rapid, end-to-end solution deployment helps clients to achieve their business potential. BRP’s consulting services include: Strategy Business Intelligence Business Process Optimization Point of Sale (POS) Mobile POS Store Systems and Operations CRM Unified Commerce Customer Experience & Engagement Order Management E-Commerce Merchandise Management Supply Chain Information Technology Private Equity For more information or assistance on any of the topics covered in this white paper, please contact: Brian Brunk, Principal (405) 590-0542 [email protected] Ken Morris, Principal (617) 880-9355 [email protected] Walter Deacon, Principal (781) 337-2060 [email protected]

David Naumann, Director of Marketing (916) 673-7757 [email protected] Carolyn Mehlman, Senior Manager (214) 906-4774 [email protected] Joe Lawlor, Consultant (207) 949-2343 [email protected]

Boston Retail Partners Headquarters Independence Wharf, 470 Atlantic Ave., 4th Floor, Boston, MA 02210 www.bostonretailpartners.com ©2016 Boston Retail Partners. All rights reserved No part of this publication may be reproduced or transmitted in any form or for any purpose without the expressed permission of Boston Retail Partners. The information contained herein may be changed without prior notice.

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