As you might already know, Macy's (M +1.86%) has been a technological leader in retail thanks to focusing on an omnichannel approach, coordinating in-store, online, and mobile customers with similar promotional campaigns and allowing consumers the opportunity to shop when, how, where they want well before its peers. Macy's is now looking to gain another lead in regards to technological advancement, and this technological advancement is likely to impact you and your shopping experiences if you visit Macy's physical stores.
If you don't shop at Macy's, then it's possible that you, one of your kids, or someone else you know, shops at American Eagle Outfitters (AEO +1.45%). This is relevant because American Eagle is implementing the same technology. Actually, in this case, American Eagle was ahead of Macy's. These aren't direct competitors, but it's worth pointing out considering American Eagle has been in the news more for bad reasons than good reasons over the past year. This negative coverage has primarily been related to waning demand and declining sales for teen retailers. The reason: teens are spending discretionary money on technology than apparel.
Macy's and American Eagle are both relying on Shopkick's iBeacon to enhance the in-store experience for customers. This improved experience should then drive sales. The Apple (AAPL 0.32%) iBeacon is a location-based, Bluetooth 4-enabled device. But what will it do for customers, and what does it mean for investors?
iBeacon capabilities
This is how the iBeacon works. When you first walk through the doors of a retail store, the iBeacon will know you're there. It will send location-specific deals, discounts, and rewards to your mobile phone. An earlier version required an app; the app is no longer needed but still available.
Regardless of whether or not you're using an app, the iBeacon's messages to your phone will also remind you of the products you tagged or liked earlier. Additionally, the iBeacon will deliver department-specific offers. In the near future, the iBeacon will be capable of delivering deals, discounts, and rewards based on what department or area of the store you're currently standing in, though this function isn't yet available.
Below is a quick video showing how the iBeacon will work at Macy's stores:
Now the question is: which retailer is likely to benefit from this technology more, Macy's or American Eagle?
Betting on the leader
Back in 2009, American Eagle used its first Shopkick iBeacon in Times Square. The beacon would trigger an app when a shopper walked through the door. Today, the iBeacon at American Eagle stores doesn't require an app, and the iBeacon offers more location-specific awards, deals, and discounts.
American Eagle is installing Shopkick iBeacons in 100 stores across the United States. This also includes Aerie stores. Macy's only recently completed a pilot of the Shopkick iBeacon, but it's very likely that Macy's will implement this technology in many of its stores. The technology is currently being used at the Macy's stores in Union Square in San Francisco and Herald Square in New York City.
As far as choosing between Macy's and American Eagle, this technology is more likely to benefit Macy's. Macy's has much larger stores, and shoppers will have more of a need for the iBeacon because it will help them find what they're looking for. American Eagle is a smaller format store, and most shoppers already have an idea what they're looking for. This isn't to say the iBeacon won't benefit American Eagle. It likely will benefit American Eagle given that it's a teen retailer and younger-generation shoppers have a deep connection with technology.
However, if you look at the one-year revenue comparisons for these two retailers, it's clear that Macy's management is doing a better job at navigating its company through a difficult consumer landscape than American Eagle's management:
AEO Revenue (TTM) data by YCharts
It's often said on Wall Street that the winners keep winning. With that principle in mind, you might want to consider looking at Macy's before to American Eagle. For Macy's, this is an added benefit. For American Eagle, it's a positive, but it likely won't be enough to turn the ship around.
It should also be noted that Shopkick believes other retailers might implement the iBeacon technology in the near future, including Best Buy, J.C. Penney, and Old Navy (owned by The Gap.) If you're going to consider an investment in any of these retailers, then you might want to begin with Gap.
The bottom line
Macy's has a knack for staying ahead of its peers in regards to technology. In this case, it's implementing iBeacons prior to its peers. As far as American Eagle is concerned, implementing iBeacons could lead to market-share gains over Abercrombie & Fitch and Aeropostale, but it's not likely going to be enough to turn this struggling retailer around. American Eagle is capable of a turnaround, but if this comes to fruition, the iBeacon isn't likely to be the primary catalyst. Please conduct your own research prior to making any investment decisions.
