Lately, there has been more than our fair share of news suggesting that the retail industry is at a tipping point. That's part of why Firebrand has been diving this topic over the last few months, culminating in our Future of Location 2018 ebook.

There really isn't any question that retail stores are experience challenging times, with a report by Credit Suisse estimating that more than 8,600 stores will close in 2017 alone. In the first four months of 2017, there had been more store closings than there were in 2008, the previous historical high. Abercrombie & Fitch, American Apparel, Gymboree, J.C. Penney, and RadioShack are among those that have closed massive amounts of stores, declared bankruptcy, or both.

But brick-and-mortar retailers shouldn't be entirely glum heading into 2018. Things might look a little bleak, but this is an opportunity to evolve. One of the things these retailers can do is learn from the strategies that have made Amazon one of the most successful companies of the last quarter century. In particular, retailers will begin to better leverage all that customer data they have gathered over the years to come up with successful strategies that connect offline and online channels.

Too many pundits are calling retail dead, but it's far from dead for many reasons. For one, people actually enjoy shopping in stores. Ecommerce is growing, sure, but its sales accounted for a mere 8.1% of total sales in 2016. While that's an increase from 7.3% of sales in 2015, we are not going to see a world in which ecommerce sales make up 50, 60, 70 percent of overall sales anytime soon. The current ecommerce percentage is small enough to suggest that the decline of traditional retail is not as bad as it seems.

While the majority of people prefer to buy things in stores, retailers such as Toys R Us and Macy's are declaring bankruptcy and closing locations en masse. Why is this still happening? And what can retailers do to stop it? There are numerous factors behind this decline, but one compelling reason is that traditional brick-and-mortar retailers haven't been that great at gathering data, and making sense of it for marketing purposes. Most retailers have preferred to rely on a combination of traditional marketing campaigns and coupons devoid of personalization to convince customers to go into stores. But this strategy is so 2005, and retailers need to find modern alternatives to increase traffic if they want to survive.

When it comes to survival, smarter retailers are investing in proximity technologies. This location-based tech involves the use of sensors and other proximity technologies to measure people's movements, whether it's within a store or as a result of an ad. Thanks to beacon technology, which can alert a retailer when a customer has entered or left a store, retailers have been able to increase operating profits 9%, with an ROI of 175%. And by using information that customers give out freely, whether it's by checking in to a certain coffeeshop on Foursquare's Swarm app or connecting to free wi-fi in a store, traditional retailers can create a data-driven model that will help increase in-store attribution.

Many stores already use location or GPS data to determine rates of attribution and broadcast ads to people close by, but using this type of data on its own is ill-suited to their needs. Think about the last time you used Google Maps or another app to calculate your location. How many times did that little blue dot on your phone move before finally "figuring out" where you were? And, when it finally did settle on a point on the screen, is that really where you were standing? In order for location information to be useful to a store, it has to be incredibly accurate. If it's not accurate, then its use cases are much more limited.

Ultimately, the goal is to create a more personalized experience for the consumer, which would encourage customer loyalty and increase spending. At this moment, 75% of the top 20 retailers in the US have already implemented proximity technologies (beacons, sensors, etc.) into their marketing strategy, including such giants as Home Depot, Lowe's, Target, Walmart, Safeway, Rite Aid, and Macy's. Proximity Directory counts 15.2 million sensors registered in its directory, 5% growth from the previous quarter. And, there's anecdotal evidence to suggest that the companies that invest in these kinds of technologies are doing better than the ones that aren't embracing the future of location-based marketing.

Most retailers haven't even scratched the surface with respect to how much proximity data can help. After all, location data can allow stores to measure:

  • When a person enters or exits a store
  • How much time they spent inside
  • What products they picked up
  • How long they held them for

This information is practically invaluable for retailers. Proximity data enables retailers to learn more about each of their customers, which can then be used to target ads accordingly, which products to discontinue, which products may need price adjustments, and so forth.

Using proximity technologies such as sensors and beacons is one significant way that traditional retailers can overcome the market forces that have conspired to force today's retail contraction. Instead of merely reacting by closing stores, brick and mortar needs to become far more proactive and take steps to ensure that they remain relevant to the the consumers of tomorrow.

Unlike GPS technologies, proximity can tell the difference between someone who is browsing in a store and someone who is standing outside smoking a cigarette. That's a valuable distinction when it comes to using ad dollars effectively. Department store mogul John Wanamaker famously once said, "Half the money I spend on advertising is wasted; the trouble is, I don't know which half." If Wanamaker was alive today and investing in proximity tech, that waste would be far, far less.

Published on: Oct 19, 2017