Shopkick, iBeacon and the Future of In-Store Tech

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storeLast week, Shopkick made a splash with the limited release of ShopBeacon, a hand-sized device that can passively alert users of its mobile app when they walk into a store or go past a aisle. The product is one of a number of next-generation in-store technologies released recently that solve some long-standing technological problems that have held back innovation in brick-and-mortar stores.

In many ways, in-store tech is entering a new phase in its maturity, following a growth trajectory that’s common among emerging industry. In the first phase, the infrastructure period, a large firm or group of startups build and scale a core technological platform that will eventually become the industry standard. Then, in the use-case phase, where companies develop the applications on top of the existing technology to make it useful to the market. Finally, there’s the adoption period, in which the market starts to put the applications to use.

Thanks to a number of new location technologies — namely, Bluetooth LE and Apple’s iBeacon protocol — this sector now seems to be moving from the infrastructure phase and is starting to build out the uses for the technology. A new phase means new challenges. Here’s how we got there and what to expect:

Building a front door
Shopkick’s beacon, which costs a little over $40, uses a combination of ultrasonic audio waves and Bluetooth Low Energy to transmit a persistent signal across a room. When a device which has installed the Shopkick app comes within range, the signal effectively “wakes up” the application and passes along a unique identifier. The application can decode this identifier, and complete an corresponding action — say, add loyalty points to the person’s account or send a notification — without the user ever having to pull the phone out of her pocket.

A lot has been written about iBeacon, the new protocol that Apple introduced in June as part of its iOS 7 roll out. But the protocol is actually a companion for a much more important technology: Bluetooth Low Energy.

Bluetooth low energy, or BLE, which is one component of Bluetooth’s 4.0 protocol, has been installed in most Android and Apple devices for the past two years and has emerged as more viable alternative to near field communication, a similar technology that has struggled to gain traction. The technology provides the local network through which devices can communicate with one another nearby. It’s a radical departure from the Bluetooth most of us use know — unlike other protocols, Bluetooth Low Energy is primarily built to send small bits of data, packets, with little to no drain on battery.

However, if there’s no system to manage the reception of these packets, the user is forced to accept or decline every packet that’s passed on, making the value of a technology, built to send a bunch of bits of very small bits information, muted.

That’s where iBeacon comes in: the protocol sits on top of the Bluetooth LE infrastructure to allow the iOS device to passively process that signal and complete a corresponding action. It enables applications like Shopkick, installed on an iOS device, to receive, analyze, and then act on packets of information sent over Bluetooth without being opened. Think of iBeacon as a front door for Bluetooth LE, allowing developers to send information to a device.

Developing a use case
There are still a number of wrinkles in the technology to iron out — first and foremost, making it work across devices — but the new generation of beacons solve many of the issues that have traditionally limited in-store tech. When I spoke with Cyriac Roeding, Shopkick’s chief executive last week, he said the company has shifted focus from building the core technology to developing valuable use cases for both consumers and brands.

“This technology has just made all of what has been talked about for years finally possible. It’s really the solution I’ve dreamt of when we started the company,” said Roeding. “We just solved the problem of [how to communicate with consumer in-store.] So now it’s about creating the use case on top of that.”

Today, the company uses the technology to “wake up” a user’s device when they enter a store or walk by a specific department, prompting them to open its mobile shopping app or remind them of product they flagged earlier. But Roeding says the beacons can be used to build a number of other features, from managing payment to navigating a user from the door to a specific product in-store. PayPal, for instance, uses a similar technology in its beacon product to allow consumers to seamlessly pay at participating merchants without ever taking their phone out of their pocket.

However, brands remains cautiously optimistic. Brett Leary, group director of mobile at Digitas, the digital wing of marketing conglomerate Publicis, told me they’re actively prototyping the beacon technology but that brands still remain weary.

“At least from our client’s perspective, this is still very nascent,” said Leary, speaking about Shopkick and its competitors. “We’re still trying to figure out what its can or cannot do; what the impact is for our brands, and most importantly, how consumers will react to this new way of interacting with the brand directly.”

The brand problem
Today, the bulk of the prototypes which Digitas has created using the beacons, have centered on integrating the technology into a brand’s’ existing assets like a loyalty application or CRM system. Brands have invested heavily in these branded applications, and usually want to use the service to bolster their existing investments.

In many ways, that’s Shopkick’s biggest challenge moving forward. Given the amount that retailers have already invested in branded applications, there may be some reluctance in introducing a consumer-facing application like Shopkick into their shopping experience. As brands become increasingly quantitative in making business decision, the data generated from CRM, loyalty, and in-store shopping becomes an increasingly core asset, and one they do not want to feed through a branded third-party.

“On one hand using a third party solution may enable the retailer to quickly and cost effectively get into the market to test with consumers,” said Leary. “On the other hand they may cede control over their consumer data and their desired branded consumer experiences.”

Steven Jacobs is Street Fight’s deputy editor.