Apple’s iBeacon: Pushing the Retail Envelope

Navigator Edition: January 2014
By: Matt Zalubowski

In the summer of 2013, Tim Cook, Apple’s CEO, introduced iOS 7, the company’s new mobile operating system during Apple’s Worldwide Developer Conference keynote address. His speech highlighted both major and minor updates to the operating system; one of the smaller additions announced was iBeacon, an application programming interface (or “API”) that would leverage Bluetooth low energy (“BLE”) for micro-location.  At the time of the conference little was made of this announcement. Apple later updated its developer website: “iBeacon, a new class of low-powered, low-cost transmitters that can notify nearby iOS 7 devices of their presence, provides apps a whole new level of location awareness, such as trail markers in a park, exhibits in a museum or product displays in stores.”1

The innocuous update shed light on how Apple once again was taking steps to disrupt the retail landscape by offering a new twist on geo-fencing. Rather than relying on the global positioning system (“GPS”) and cell towers to define and trigger entry into a defined geographic territory, Apple’s iBeacon will rely on BLE, which is integrated into ~200 million existing iOS devices2, to deliver or “push” location-based messages and offers.

On December 6, 2013 Apple announced it was rolling out iBeacon in all of its retail stores.3  A customer carrying a qualifying iOS device can enter an Apple store, receive a welcome message on his or her device (see Figure 1), receive notice that an app-based purchase is ready for pick-up, as well as a variety of other location-specific notifications. To receive these notifications a customer must have the Apple Store application installed on his or her phone and location-based notifications enabled.4

Figure 1: iBeacon Store Welcome Messaging


Source: First Annapolis Consulting research and analysis.

At launch it appears Apple is taking a measured approach to introducing iBeacon, utilizing the technology to create awareness of the service and make offers to aid adoption. Upon entering a store, a customer with an eligible device, with Bluetooth enabled, receives a message offering instructions as to how to receive iBeacon notifications. Upon completing the setup process customers are made aware of in-store workshops and during the month of December, were provided an opportunity to download a free holiday iTunes playlist. The workshop notifications and holiday music offer allowed Apple to measure adoption and identify opportunities to improve initial customer interaction (see Figure 2).

Figure 2: iBeacon Store Instructions and Offers


Source: First Annapolis Consulting research and analysis.

On the surface one could incorrectly categorize iBeacon as a digital couponing hybrid. While we anticipate Apple and other retailers will make discount-based offers via iBeacon, the means to utilize the technology are vast. Retailers will be able to use iBeacon to provide customers additional information including demonstration videos, customer reviews and accessory recommendations. Leveraging technology to supplement the service provided by store associates has the potential to change the manner in which retailers approach merchandising. Macy’s, working with the shopping app ShopKick, is testing iBeacon in its New York City Herald Square and San Francisco Union Square locations. ShopKick will prompt users to deploy the application, award ShopKick loyalty points for shopping, provide shoppers with reminders of items that they have “liked” previously and offer department-based recommendations.5 Another added benefit that Apple announced along with the introduction of iBeacon in its stores was that any BLE equipped iOS device can act as an iBeacon. For retailers like Nordstrom, REI or Kate Spade that utilize iPads in-store, either for accepting payment, processing credit card applications or as interactive signage, existing devices can be deployed as a means to deliver iBeacon notifications. Retailers are not limited to using Apple devices as iBeacons, as several third parties are offering low cost alternatives.

In addition to sharing information with customers, iBeacon will also allow retailers to gather store traffic data to assess the effectiveness of the notifications sent. For example, a retailer, on an end-of-day basis, will be in a position to measure whether displays and the accompanying offers made via iBeacon resulted in an increase in sales. Having the means to quickly determine what information to include and which offers to make to customers will aid in managing margins and inventory turnover. Additionally, a retailer can utilize iBeacon to provide store directory information and accompanying directions to find a particular product. Major League Baseball has announced that it will utilize iBeacon to help fans locate assigned seats, restrooms and exits as well as make vending offers.6 The Consumer Electronics Association deployed iBeacon to facilitate an attendee scavenger hunt at the firm’s recent 2014 International CES technology expo.7

While iBeacon appears to be promising and possibly game-changing, it is unproven. It remains unclear whether it will be well adopted by retailers or capable of influencing customer behavior. Retailers will have to overcome customer opt-in and privacy concerns. And the competition, including PayPal and Qualcomm, is in the process of developing and rolling out competitive offerings.8 This said, iBeacon demonstrates that technology is ever improving and beginning to converge in areas that could offer greater one-to-one retailer-to-customer engagement. While not in place today, one can easily envision how iBeacon could be married with some of Apple’s other assets (i.e., iTunes, AirDrop, Touch ID) to offer a true mobile payment solution that could facilitate check-out without having to make a stop at the cash wrap.

2… – devices include iPhone 4S and later, iPad3 and later, iPod touch 5, iPad mini and later
4 Location-based notifications can be turned on and off by the phone’s owner via the phone’s settings.
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For more information, please contact Matt Zalubowski, Manager, specializing in Credit Card Issuing,

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