As the rise of e-commerce continues to transform the retail space, brands are increasingly turning to technology to strengthen the appeal of in-store shopping.
One way they’re doing this is through geofencing, which allows companies to target consumers with special deals or advertisements within designated virtual boundaries. The technology can benefit store associates, as well, sending them alerts and relevant shopper information every time a new person enters the store.
“The idea of geofencing is to assist the customer during their shopping journey and enhance their experience, making it easier and more convenient to shop,” said Michael Levine, the vice president of marketing at Photon, an omni-channel digital experience provider.
The technology is still in its infancy in the fashion and beauty space, despite brands like American Eagle, Sephora and Kiehl’s experimenting with it. “How many stores use location-based services?” said Stephan Schambach, the founder of mobile retail platform NewStore. “The answer is simple: not enough.”
But retail experts expect that to change rapidly in the next few years, with the global geofencing market size estimated to exceed $500 million by 2023. Here’s a look at how brands have used geofencing thus far and where the technology is headed.
Wait, so what exactly is geofencing? And how does it work?
Geofencing is a blanket term that refers to any technology used to create a virtual perimeter around a specific place or geographic area, be it an entire store, a mall, the area surrounding a store or simply an aisle. Those perimeters are used by brands to trigger targeted advertising and content to customers that will, ideally, drive them into certain stores and toward a final purchase. These range from special coupons to information regarding new products.
Although geofencing once relied mainly on the use of GPS or RFID technologies, it has since evolved to work via bluetooth and WiFi technology, as well. In the case of bluetooth, devices known as beacons are placed in or near stores to detect nearby smartphones and message them accordingly. The WiFi router is used similarly to direct message consumers or trigger special deals.
Geofencing can also provide sales associates with a shopper’s preferences, gleaned from their purchase and search history. Those same preferences are often paired with demographic information (available through app sign-ups on shoppers’ phones) that’s then collected into a larger shopper database. “Increasing sales and loyalty are crucial to staying in the retail game, and with geofencing technology, retailers can get a much richer shopper behavior profile than ever before,” said Ashlyn Booth, the director of retail property marketing at JLL, a professional services provider specializing in real estate. “Brands can tailor their store merchandise and promotions to exactly what the consumers want.”
For brands, it sounds too good to be true. What’s the catch?
Indeed, it’s not that simple. For geofencing to effectively be driven by beacons or GPS, consumers must download a brand’s app and permit it to send them notifications. Given the plethora of apps on offer today, and the cell phone data and storage they require, this can be a tough sell.
Even if consumers do download the necessary app willingly, the onslaught of ads and other messaging they receive when in proximity to the store may prove bothersome. “I call that geo-spam,” said Jason Goldberg, the senior vice president of content and commerce at digital agency SapientRazorfish. “It doesn’t work very well. You could just be driving by the store or taking a train that passes nearby.”
“There is a shortage of how often you can message a user before they get annoyed,” agreed Lars Djuvik, the associate vice president of retail sales at Shopkick, a rewards-based shopping app. “Most shoppers do not want to receive more than one to two messages per trip, otherwise [the messages] lose their importance — or worse, the shopper gets annoyed and deletes the app.” Striking a balance with a few select messages is key.
With WiFi-driven geofencing, the usual network connectivity issues can create problems, as well: In order for it to work, consumers must have their WiFi turned on (not a given while shopping), plus they need to be well within range of a router — which can be especially difficult in larger stores or shopping malls.
Got it. So, have any brands had success with geofencing?
Yes. The most ubiquitous example is Snapchat’s geofilter feature, which brands from Sephora to Tiffany & Co. have used to encourage the posting of branded social media content by consumers while in store.
American Eagle had lots of success working with the model in 2015, when it teamed with Shopkick to alert shoppers when they were near one of its stores. Using special offers to incentivize shoppers to enter not just the store, but its dressings rooms, the campaign reportedly increased sales in participating locations threefold.
A few big-box retailers, including Macy’s and Target, have also utilized the technology to track shoppers’ locations throughout stores. A consumer-facing map helps shoppers navigate the large stores, while specific deals are dished out based on shoppers’ whereabouts (i.e. alerting them to a sneaker discount if they’re near the footwear section).
According to Levine, some of Photon’s luxury brand clients are also experimenting with geofencing on the service level. If a customer who has downloaded a brand’s app enters the store, a nearby sales associate is immediately alerted to their shopping history and any available demographic information to help improve the “white-glove, high-touch service” that is then applied.
And geofencing is far from reaching its peak. “Retailers will eventually be much more savvy about who their consumer is, and tailor merchandise and services to the most productive customers based on that customer’s digital footprint,” said Booth.