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How iBeacon and Similar Technology Will Change Retail



David Edelman
Partner and Global Co-Leader, Digital Marketing and Sales Practice
McKinsey & Company

David Edelman, a partner and global co-leader of digital marketing and sales practice at management consulting firm McKinsey & Company, spoke with eMarketer’s Yory Wurmser about how mobile tracking technology, particularly iBeacon, will alter shopping for consumers and retailers.

eMarketer: We know digital and mobile technology is having an effect on foot traffic in stores. Do you think retailers can reverse that, or is the downward trend in foot traffic unstoppable?

David Edelman: Foot traffic may be down, but sales are flat or up slightly. People are better prepared when they’re in stores now, and there’s less looking around, because they’re doing more research in advance with digital tools. Still, there’s a large percentage of activity that will always take place in the store. That’s especially true in the apparel category—immediate gratification and last-minute browsing are very real. With more commodity-oriented hard goods though, it’s harder for consumers to justify going to a store for a lot of purchases.

eMarketer: Should retailers care if online sales are increasing while in-store sales are decreasing? Should they try to keep foot traffic high, or perhaps that money should just be shifted to ecommerce sales?

Edelman: In general, they shouldn’t care, and a retailer’s channels shouldn’t be fighting each other. A sale is a sale. Plus, customers who buy through multiple channels are the best ones—they’ll buy in-store, then follow up and buy more online.

“We’re seeing dramatic increases in conversion when people can talk right through the computer to a person, cobrowse and get questions answered.”

The challenge for the retailer is to make sure there’s some kind of connection with the brand. When a consumer goes into a store, they are surrounded by that store’s brand, but online that might not be the case, depending on the design of the site and experience [it provides].

I think more of the brand experience will be brought online in very visceral ways. I also think we’re going to see the notion of online and offline blurring even further, especially with the availability of chatting through the computer interface so that a sale can be assisted by a human being.

eMarketer: Do you know if consumers are open to online chatting? Are they happy with the experience so far?

Edelman: In the financial services sector, we’re actually seeing two to three times the conversion rate with human interaction through a computer interface. This is not necessarily the case with canned chat through typing. I think consumers get annoyed by the formality of that sometimes. But we’re seeing dramatic increases in conversion when people can talk right through the computer to a person, cobrowse and get questions answered.

eMarketer: What’s your view of proximity marketing technologies, such as iBeacon? Do you think they have the potential to fundamentally change the in-store experience?

Edelman: In terms of getting content, yes. It gives consumers the immediate experience in the store that is controlled by the retailer within the retailer’s environment. It’s a service that’s provided to the customer, and it’s instantaneous.

eMarketer: Do you think the added personalization that can come from proximity media is more often welcomed by consumers in stores, or might it be considered creepy?

Edelman: I think we’re all learning the best way to send messages. Simply providing discounts or incentives should be well received. Offering up accessories or complementary products to a previous purchase could be crossing the line if it’s not expected. If the retailer app is positioned as a fashion advisor that holds on to past purchases, that would work.

Consumers essentially have to know this is going on, so marketers need to be explicit because it could backfire. Everybody likes getting a discount, but if a shopper is being bombarded with irrelevant discounts, it’s not going to work.

“I also think we’re going to see the notion of online and offline blurring even further, especially with the availability of chatting through the computer interface so that a sale can be assisted by a human being.”

eMarketer: What is your opinion about retailers’ ability to manage proximity marketing preparing for the necessary technology?

Edelman: It’s overwhelmingly complex for a retailer. There are the various technologies, but also the complexity of creating programs, content and the rules to target, and the scale is still small in terms of customers who are actually registered for this. Right now, it’s still in a very experimental stage. For example, if there isn’t a digitized store planogram, it’s impossible to do an iBeacon-type rollout. Retailers first have to know where everything is on the shelf, in every one of their stores.

eMarketer: What’s your prediction for iBeacons in 2014?

Edelman: I see a lot of experimentation of iBeacon from more advanced retailers, especially the ones that have been more data direct marketing-oriented in the past, because those are the retailers that have a better handle on their own data. Companies that do their own direct marketing and are very data savvy have a lot of the capabilities in place already.

So I believe 2014 is going to be a year of testing and learning. I think everybody’s trying to figure out how to make it work and all the different elements that have to be in place, but there’s a lot to learn before investing and doing this at scale.

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