Overview of The Beacon Market

September 1, 2014

Mobile apps from payments and loyalty programs to couponing and shopping apps can leverage beacons to create a location-based experience for users. This technology can help retailers to drive foot traffic, conversion rates, and sales volume.

Additionally beacons can help retailers attract users to their apps, retain users and increase engagement on their apps. According to a study by BI Intelligence adoption of beacons can lead to 16.5 times more app usage in-store and 6.4 times increase in app user retention.

In this article we will overview the beacon market and talk about its potential for retail.

If you are unfamiliar with a beacon technology, check Unobtrusive Salesman or The Age of Beacons blog post, it covers almost everything you need to know about beacons and Apple’s iBeacon system.

Beacon market overview

BI Intelligence estimates there will be 30,000 active beacons in the U.S. by year end 2014, and that 80% of those will occur in retail stores. That means beacons will be in just 2% of all U.S. retail locations by the end of 2014.

Analysts expect rapid growth over the next few years, comparable to what we saw for mobile credit-card-reading terminals, which reached 40% penetration among merchants in their third year of deployment.

The beacon installed base should continue to double every six months through 2016, after which growth will likely slow to about 200% annually. There will be about 4.5 million active beacons overall by year end 2018, with 3.5 million of these in use by retailers.

Half of the top 100 retailers in the U.S. are testing beacons this year, and experts at BI Intelligence expect them to have this new technology installed in one-third of their stores by the end of 2015.

Can retailers drive sales with beacons?

Beacon-powered features include indoor maps, in-store coupons and offers, enhanced loyalty programs, targeted product recommendations, and payments.

But consumers don’t usually download apps for most of the retailers they visit. So it makes sense for retailers to open up their beacons so that outside apps can use them to send alerts and notifications to their users. Retailers should allow third-party apps to hook into their in-store beacon system.

Additionally, to maximize the number of customers who interact with beacons retailers should use in-store and mobile marketing to prompt customers to download their app or partner with beacon vendors, like Shopkick, that operate beacon-powered customer rewards apps that work across many different retailers.

The most common way retailers are using beacons is to trigger an app to send the shopper a location-based discount or coupon, often targeted to the part of the store they find themselves in.

About half of consumers say they are more likely to make a purchase if they receive a mobile coupon when near a store location, according to a 2013 study by RetailMeNot. If the shopper is already in the store, than 63% of consumers said they would be more likely to make a purchase if offered a coupon than if they receive a coupon in another context.

More than 30% of American consumers said in a survey that they don’t use mobile shopping apps because they aren’t receiving any useful discounts or coupons from them, according to BI Intelligence. Beacons can solve this problem by sending relevant discounts based on which department a customer is shopping in — even offers tied to a display case.

Location-based offers could provide the greatest incentive for shoppers to opt in and begin to use beacon-powered features. Taking in account market adoption forecasts beacon very soon will become a powerful technology that will likely become significant sales driver for retailers.