Apple's iBeacon Expands Retail Opportunities for Location-Based Services

Imagine walking into one of your favorite stores and being greeted with a special offer on your mobile device because you are a returning shopper. Or receiving targeted messaging based on what aisle you're in, or how long you've lingered in the store. Thanks to Apple's latest iOS7 mobile operating system, which features the iBeacon technology, these capabilities are right around the corner.

Apple's iBeacon offers retailers a low-cost, low-maintenance way to provide customers with geotargeted product information, coupons, and maps—all features that can deliver the most relevant customer information at various stages of the retail shopping experience.

Right now, stores "don't know you're a loyal customer until you're at the till. At that point, it's almost too late," explains Joel Blackmore, senior innovations manager at mobile consultancy Somo, whose team of mobile app developers is exploring iBeacon's capabilities for retailers. "Apple is very serious about merging the physical and digital experiences, and doing it the best it can," he says.

The technology employs Bluetooth Low Energy technology, which enables retailers to set up inexpensive beacons. Three beacons sell for $99, with batteries that last for years. When customers enter a store with their app open, the beacon pinpoints their location and guides their experiences using the mobile devices. The technology is more precise than Wi-Fi, and doesn't require the close range of current near field communications technology. It has a range of between 30 and 130 feet.

"The beacon can tell when you're approaching," Blackmore says, suggesting that it could create new opportunities for retailers to target messaging based on whether a customer is coming or going.

Newer versions of Android phones (4.3 and higher) will also be equipped with Bluetooth Low Energy.

But just because the technology is widely available doesn't mean consumers will use it, experts warn. Adoption will hinge not only on companies creating compelling experiences using iBeacon, but also on customers' receptiveness. "Customers have to opt in and decide to use it," says Jeff Kagan, a mobile technology industry analyst. "It's an unfamiliar technology, and it's going to take time to catch on."

Kagan and Blackmore agree that if iBeacon is the technology that brings location-based mobile experiences to the mainstream, early adopters will have a first-mover advantage. "It's heavily PR-able," Blackmore says. "[With] the first couple of brands that do a cool iBeacon implementation, everyone will hear about it."

Somo is in talks with some customers to do early tests using iBeacon, and the first could be seen in the United Kingdom during the holiday season.

When the baseball season starts up again, the New York Mets' mobile app will use iBeacon to help guide people to their seats and offer them discounts when they pass the hot dogs being sold at Nathan's or the retail store at Citi Field. The app will also know if they're a new or returning fan, further customizing the messages they can send.

Blackmore says the major cost won't be development, but creating those targeted marketing messages. "We've hacked together demos in one day, so it's not months of development time. It's cheap to implement, cheap to develop, and cheap to demo," he explains.

Blackmore admits that he's biased toward trying new ideas, but feels that small investments in the iBeacon space can yield big rewards. "The only costs are in delivering the experience and the redemption method," he says.

Eventually, iBeacon will be part of an end-to-end retail experience, facilitating offers as customers walk into the store, as well as mobile payments, creating a "seamless purchase journey," Blackmore says.

But there are still kinks to work out. Blackmore describes the mobile payment arena as a "hostile space." In a field that could prove to be extremely lucrative, there's "a very uncooperative set of companies all trying to deliver a different consumer experience. It's taking longer than it technically has to," he adds.

The iPhone 5S has a fingerprint scanner that could be used for mobile payment. With iBeacon, a transaction could involve a merchant verifying authenticity on his own device, with the payment and receipt taking place on the customer's phone.

Currently, most people using mobile phones in retail stores aren't interacting with a store's devices. They're showrooming. IBeacon would help draw customers away from that behavior, instead allowing the retailer "to interact with customers and provide them personalized offers and information that will help drive them through the purchase funnel," Blackmore offers.

Kagan also maintains that iBeacon will be part of a brick-and-mortar retailer transformation. "The retail space we see today has been the same for the past hundred years—there's just been different carpet," he says. "Five to ten years from now, the retail space will look completely different from the one today."

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