Why Apple's iBeacon Could Make or Break the Retail Industry

Apple iBeacon technology is bringing renewed hope to struggling retailers. However, if the technology is misused, it could do more harm than good.

Mar 11, 2014 at 4:06PM

Brick-and-mortar retailers have been struggling lately as more consumers choose the convenience of online shopping over trekking to physical store locations. However, a relatively new proximity-based mobile messaging technology from Apple (NASDAQ:AAPL) could help change that.

Using strategically placed iBeacon devices inside stores, retailers are now able to send targeted messages and coupons to in-store shoppers. Apple's iBeacon is also helping some retailers unlock extra revenue. Let's dig into the facts to see how this technology will affect you as a customer, as well as the broader retail industry.

Apple unlocks the future of shopping
Will location-reading applications be the future of retail? Apple thinks so. The tech giant rolled out its iBeacon short-range positioning technology at 254 U.S. Apple stores in December. Moreover, because the technology works with iOS 7, this means that nearly 200 million devices could communicate with the beacons today. iBeacon has gained significant momentum since its debut, as retailers such as  Macy's and American Eagle Outfitters continue to jump on the iBeacon bandwagon.

Here's how it works. Apple's iBeacon uses Bluetooth low-energy, or BLE, technology to talk to nearby mobile devices such as smartphones and tablets. Once iBeacon pinpoints your location, for example, it sends you a push notification with an invitation to opt in to the service. Once you agree to the terms, nearby iBeacon transmitters send you target coupons or messages. In addition to the obvious benefits for retailers, iBeacons also help enhance customer experiences in retail stores, which could help bring more shoppers back into the stores.

Macy's tested Shopkick's iPhone app using iBeacons in November. The department store chain tested shopBeacon at its New York City and San Francisco stores last year. iBeacons throughout the store would then send special promotions and product recommendations to participating iPhone devices as the customer navigated through the store.

Apple Ibeacon

This technology creates the opportunity for brick-and-mortars such as Macy's to enhance a customer's experience while they shop in the company's physical stores. One way Apple is using iBeacons to transform the shopping experience at its retail outlets is by enabling customers to make purchases on their own without ever needing the help of an Apple staff member.

In addition to retailers, sports teams are also finding creative ways to use this technology. The Miami Dolphins football team tested 22 separate ways to use iBeacon transmitters during the final games of its 2013 season, according to Fortune magazine. Using 50 iBeacons strategically placed around Sun Life Stadium, the Dolphins' marketing team was able to send fans mobile notifications about which nearby food stations had the shortest lines as well as digital coupons for snacks and other merchandise.

These iBeacons also give physical retailers a way to track and analyze customers' behaviors as they shop, much like the way online retailers such as Amazon monitor how we navigate their websites. In fact, "the more a user passes by a single beacon, the system will be aware that it's the same device and activate a notification or change the dynamics of the app to be relevant to its surroundings," says Mike Crooks from IT Pro Portal.

Creating value for the customer
iBeacon technology holds plenty of promise for the retail industry. However, for this tech to really be a game changer, retailers need to make sure these micro-location beacons actually create value for their customers. Bombarding shoppers with in-store mobile marketing gimmicks alone could end up turning users off the service. Apple's iBeacon technology has the potential to transform the retail industry. The question now is whether retailers will use this opportunity wisely.

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Tamara Rutter owns shares of Amazon.com and Apple. The Motley Fool recommends and owns shares of Amazon.com and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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