Ecommerce is appealing because it’s easy and accessible. Who would choose driving to a store over getting their shopping done in just a few clicks. This ease doesn’t come from nowhere though. It’s the measurability of online commerce that made it so powerful. Data is power and when you measure every click, the data is yours, be it through recommendation algorithms, A/B testing product pages, or fine-tuning newsletter headlines. Good news brick-and-mortar: the data is coming your way. All thanks to beacons.
You’ve probably heard about the death of retail in 2015, 2014, 2013, or perhaps even earlier. It’s 2016 and we can all agree the rumours have been greatly exaggerated. Brick-and-mortar retail still is an enormous business. In total, American retail industry is on track to reach $5 trillion in sales this year. Ecommerce saw meteoric growth over the past two decades and still captures only about 7% of total retail sales in the US. So if brick-and-mortar is not dying then… why does everyone keep saying otherwise?
Legacy retailers have their problems, as I’m sure former executives of Radio Shack and Blockbuster would confirm. But as the above figures show, ecommerce eating their lunch is not their biggest concern. How about Wall Street demanding higher growth even as wages remain stagnant, leading to supply outpacing demand? That, however, is not something technology will solve. Where technology can help, however, is the knowledge gap between stores and their customers. And I’m not talking about anything like being more hip and savvy to meet millennial tastes, or whatever consulting companies recommend these days. No, it’s about understanding the customer on an individual level.
That’s where ecommerce triumphs. They know us. They know what we like, what we click, what size Buy button is most likely to convert us. If ecom retailers ask the right questions, data will give them answers about creating a better customer experience and enticing users to spend more. This is the promise of beacons for brick-and-mortar: physical world analytics. Promise so big, ABI Research expects 400 million deployed beacons by 2020.
Oh, by the way, I’m pretty sure that’s a made up number. Not because it’s too small or too big, but because it’s too early to make a projection more detailed than an order of magnitude. Working at Estimote, I see from up close the wealth of data beacons create, from dwell time, to heatmaps, to customer paths. And it’s a treasure trove. But to open the trove, you also need the key. Ecommerce has had more than 20 years to find its key, by figuring out the best questions to answer with data. Brick-and-mortar is just about to start asking them and we’re still yet to see where it takes them.
So, if beacons are so powerful, so brimming with promise, one might ask… where are they? Journalists had proclaimed beacons the biggest thing in retail since barcodes, but now call them a failed revolution. And on the first look it doesn’t seem without merit. Despite deployed beacons already numbering in millions, they still aren’t a part of consumer’s everyday shopping experience in most stores. But it’s a fallacy to think this is a shortcoming of the beacon technology itself. Beacons themselves are just a piece of a much larger, much more complex puzzle. To make the most out of them, a retailer needs a strong mobile footprint, integration with their backend, way to hook them up with existing systems, and a whole lot of planning and strategizing. Getting there requires work of several product teams, bringing in third party vendors, and a coherent vision. To successfully deploy beacons–to acquire a key to the treasure trove called omnichannel experience–you need to be technologically sophisticated. And you need time.
If you’ve been following the history of beacons in retail, you might have noticed that the first large rollouts were made on the backs of third party apps, like Shopkick at Macy’s or Lord & Taylor with SnipSnap. Doesn’t that sound odd? How do do you reap the benefits of physical world analytics, if the software is not yours? The answer is simple: most retailers don’t have the right software yet, because their apps fall short on either quality or reach. There are exceptions, like Target and their host of popular, well-executed app, but most brick-and-mortar retailers are still playing catch-up.
Take a look at the history of the barcode. Arguably the most profound invention in retail, it started seeing commercial interest in mid 60’s. It took until 1973 to introduce Universal Product Code and then another few years for barcodes to appear on over 85% of products. Beacons can be as big as barcodes one day, offering unprecedented insight into customer behavior. But it’s going to take a lot of effort to create infrastructure sophisticated enough to support this. Luckily, retailers know they need to adapt, and adapting they are, at their own pace. Beacons are not a fad: they’re the long game.
To sum it up, here’s a couple of predictions for beacons in retail:
- It’s too early to say whether the 400 million figure for beacons deployed by 2020 has much merit, but the order of magnitude is probably correct.
- The first retailers to establish best practices for leveraging data harvested through beacons will have a huge headstart and will reap the benefits.
- The most successful beacon deployments in retail will be with retailers controlling the experience (i.e. with their own apps).
- Third party apps will be of much more value for SMBs than large retailers