Bogged Down by the Backend: Why iBeacons are Unlikely to Ping in 2016?

Leading brands such as Macy’s, Mcdonald’s and Apple are slowly rolling out iBeacon technology in their branches, offering customers a personalized shopping experience by delivering information, offers and coupons directly to their smartphones as they move around a store. Since Apple launched iBeacons in 2013, many competitors such as Google, Estimote and Bluecats have released their own versions of the technology. Experts predict iBeacons will revolutionize the way that people shop, but the new technology is slow to catch on.

Many iOS developers have started learning iBeacon development, however demand are not rising as fast as it was expected.

Companies from cinemas to airlines are jumping on the iBeacon bandwagon, but, according to Umbel, less than 1% of the 3.5M retail stores in the U.S. are taking advantage of the new technology. In this article, I will briefly outline the benefits to shoppers offered by “early adopters” of iBeacons, and then offer some suggestions as to why nearly two years after Apple “turned on” its first beacons, we are still far from widespread adoption of the technology.

Early adopters paving the way to a more personalized shopping experience.

To date, adoption of iBeacon technology has been limited to big name, bigger budget companies such as Macy’s, American Eagle and Target. iBeacons offer a direct link to clients to communicate everything from information about products, in-store functions, new promotions, or offers straight to a user’s smartphone.

At the moment, the technology is in what can be viewed as its first stage of evolution. Customers are being targeted with information and deals as they enter a store and even shown specific product information based on their location in-store. Target recently announced it would be unveiling beacon technology in 50 of its branches, offering customers deals and information about products as they move through different parts of the store. In 2014, Macy’s rolled out 4,000 iBeacons in 786 of its stores with the aim of sending adverts and offers based on the exact location of shoppers within stores. The experiment was a success, and Macy’s announced its intention to launch the tech in all of their stores, but to date this hasn’t happened.

The next evolutionary stage of iBeacon technology will be personalized targeted marketing, by which customers’ shopping behavior – purchase history, items browsed on ecommerce and mobile sites, adverts viewed and coupons opened – would be saved on a network. This information would then be used to target shoppers with information, coupons and deals for products and services which they are really interested in, as they walk around different parts of a store.

If you are walking through the homeware section, and the system detects you have been browsing new microwaves…violà! You are sent offers for microwaves and similar products. If you enjoy playing sports, you are sent offers for sports and apparel when you near the relevant departments.

Even in its early stages, location-based advertising and offers seem to be working. In partnership with Shopkick in 2014, American Eagle Outfitters sent customers using the app iBeacon messages as they entered the store to offer a small incentive for visiting the fitting room. The experiment found that the percentage of Shopkick users who visited the fitting room was more than double that of the percentage of non-Shopkick users.

Why are stores being so slow to adopt the new technology?

The tech behind the iBeacon features a low-energy Bluetooth variant called Bluetooth LE or BLE, which allows two-way communication between devices that are within roughly 30 feet of each other. These iBeacons are cheap, require very little energy to function, and can run unattended for up to three years before needing to be changed. The iBeacons themselves are so easy to install that they have been compared to fire-alarms. So why are shops taking so long to adopt the technology?

The problem lies not in the beacons themselves, but in the backend systems needed to register shopping behavior information and send targeted adverts and offers based on shoppers’ locations. Without these systems, iBeacons are as useless as a fire-alarm without batteries.

If huge household-name stores like Macy’s and Target are taking their time developing backend systems, it leaves little hope for smaller retailers to get the ball rolling. These backend systems, linked online inventories and connected apps, are extremely expensive to develop and maintain.

Another problem is that to use the benefits of iBeacon technology, users need to have downloaded a connected app which allows the iBeacons to communicate with the user’s phone. For nationwide retailers, more people are likely to download their apps if the stores already have the back-end data ready to be delivered. Then they need to push the use of their mobile apps.

This raises issues for customers, as while there is a good chance they might download three or four retail apps on their phone at any one time (Bestbuy, Macy’s, Target), it’s unlikely that they are going to have ten or twenty. So if they go to a mall or visit a wide range of stores, the chances are they will not have all the apps, and as a result will be unaware of the deals and product information available.

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The way that people shop is changing. While in 2015 94% of all retail sales continues to take place in stores, e-commerce sales are expected to increase annually by 17%, reaching $414 billion by 2018.