In a world overflowing with data, it’s ironic that the last bastion of opacity — the place about which businesses know the least — is also the place where we spend the majority of our money: the physical store. But that’s set to change as the ongoing push to bring our offline lives online seems poised to move indoors.
What’s driving this change is a mix of new technologies and a quickly warming market for the products. From a technology perspective, a host of companies have developed clever ways to convert data from sensors already in mobile devices to help us position ourselves inside buildings where GPS, and other traditional, sensors cannot reach.
A Finnish company called Indoor Atlas, for instance, has built a system that uses the unique magnetic “footprint” of a building to determine a user’s location within a few feet — all without a GPS or wifi connection. At the Place 2014 conference in New York Tuesday, I walked with Wibe Wagemans, president of Indoor Atlas, across a busy networking area as he used the company’s application on a Samsung smartphone to map the magnetic makeup of the room. Within a few minutes, a blue dot, no different than the one we use to find our way home, popped up show us next to the door — exactly where we were.
The company is pitched in quiet battle against some of the more well-known technologies in the small world of indoor positioning. Wagemans says that magnetic mapping far exceeds the accuracy of beacon and wifi-driven technologies, and is substantially more cost effective than light-based systems developed by companies like the Boston-based ByteLight.
Yes, a big market — but is there a problem to solve?
The market for indoor location appears to have come together — and it’s a big one. Greg Sterling, a senior analyst at Opus research, which hosted the event, told a crowd Tuesday morning that he believed the market could reach $25-50 billion annually. That number reflects a portion of the nearly half-trillion dollars, which consumers spend on groceries, personal care items and the bevy of other sundries which require little to no premeditated product research.
But as we’ve seen with mobile payments, a potential market does not necessarily translate into a real one. There needs to be a level of urgency from the stakeholders to adopt the new services that spans beyond simple network effects or consumer demand. That’s starting to develop for indoor location.
For the brick-and-mortar retail community, which would need to implement and promote the new systems, the growth of ecommerce has started to create meaningful pressure on their physical stores. As ecommerce accounts for larger portions of these retailers’ revenues, they will need to break down the wall between these two channels in order to justify the massive cost of storefront sales to investors in light of a comparatively more profitable ecommerce segment.
Alex and Ani, a jewelry retailer that has built a quarter billion-dollar a year business selling mostly charm bracelets, has been one of the most adamant early adopters of in-store technology. Earlier this year, the company rolled a pilot with Swirl, one of a handful of in-store marketing companies to launch in the past few years, to outfit its stores with beacons that let the company message users of its mobile app as they shopped.
Ryan Bonifacino, the vice president of digital strategy for Alex and Ani, says the company has used the sensors to serve content about its products, which often are set against a larger narrative, to consumers as they waited in line or browsed the relevant section. In a conversation with Sterling Tuesday, Bonifacino says the company plans to pilot a new program later this year which will pass along images of the products from social media to customers as they pass by the display case.
Will the path to adoption run through marketers?
Among retailers, Alex and Ani is more of an exception than the rule. The advantages of in-store messaging and navigation tools remain a supplementary advantage of forward-thinking retailers, than a necessity across the industry. But in coming years the pressure to adopt these tools could come from a different stakeholder altogether: marketers.
As brands invest more meaningful portions of marketing budgets into digital, the large swath of television, print and other dollars that has been used to drive offline spending for a century will now be accountable to the transparency of a digital marketplace. Brands will expect agencies to provide the same conversion metrics, of which they’ve become accustomed with ecommerce, on a huge portion of spending in which customers buy in stores, and offline.
“One of the things that’s becoming more important is that you have a lot of marketers that are in silos, with an online team only evaluated by ecommerce spending and an offline team only evaluated by in-store spending,” Doug Stotland, product marketing director at Facebook, told Sterling during a separate interview later in the day. “But there’s no such thing as an ‘in-store purchaser’ and ‘online purchaser.’ It all mixes together and [the silos] lead to imperfect decision-making.”
Stotland said Facebook is moving advertisers away from clicks and more basic measures of engagement towards more direct indicators of success. The social giant has teamed with data firms like payment data aggregators like Datalogix as well as retailers’ own datasets to more objectively measure lift in-store spending for a number of the company’s larger advertisers.
Facebook has not done much in terms of integrating with some of the more innovative store level software. The company has rolled out a small wifi sign-in product, which allows users to sign in for wifi at merchants using their Facebook log-in, but Stotland says it’s still relatively small and remains far from serving as a meaningful tool to measure conversions.
For indoor location companies, the importance of marketers as stakeholders also goes down to balance sheet. If brands pay for indoor mapping as just an IT investment, it’s much harder to justify the cost, Keith O’Neil, chief executive at L4 Mobile, a brand dev shop based in Seattle, told me. Marketing departments, on the other hand, have much deeper pockets.
Steven Jacobs is Street Fight’s deputy editor.