When discussing Apple (AAPL) successes, the conversation is usually dominated with talk of the iPhone and iPad, the iTunes store and maybe its top-selling PCs like the MacBook Air. One of the company’s other big wins gets a little less attention: Apple Stores.
Since defying conventional wisdom by launching its own branded retail locations in 2001, Apple has opened more than 400 Apple Store locations. Along the way, the Apple Store has influenced store design, spawned copycats and become the most profitable U.S. retailer per square foot. Now the company is going to leverage that influence by deploying its iBeacon location and proximity sensing technology in stores. Expect other retailers to watch, learn and follow.
When Apple announced it was not just opening its own line of retail stores, but targeting upscale locations, the reaction was swift and largely negative. A 2001 article from Businessweek summed up the expectations from retail analysts on how Apple’s venture would turn out: “I give them two years before they’re turning out the lights on a very painful and expensive mistake.”
Despite the skepticism, the Apple Store has been a resounding success that has rewritten many of the rules of retail. Minimalist design with extensive use of glass, locating Genius Bars in-store for personal service and choosing to locate in some of the most expensive markets has resulted in Apple leading the retail market in sales per square foot. In fact, the numbers are so good that Apple Stores more than double the sales per square foot of the second-place retailer, Tiffany & Co (TIF). Flagship Apple Store locations like the glass cube in New York have become iconic buildings that attract not just shoppers, but tourists and news cameras.
To launch its new Surface tablets and Windows 8 operating system last year, rival Microsoft (MSFT) took a page out of Apple’s book and began launching its own retail locations — which have more than a passing resemblance to Apple Stores. Meanwhile, reports have Google (GOOG) mulling its own plans for stores to sell its growing line of devices.
Apple has proven to be a canny retailer, and where it goes, other retailers have learned to follow.
Quietly introduced as part of the company’s new iOS 7 mobile operating system, iBeacon is a Bluetooth technology that allows retailers to pinpoint a shopper’s presence within their store (or nearby), track their movement and push notifications to their iPhone.
Deployment requires tiny broadcast devices that are inexpensive and battery-powered, and have a range of up to 160 feet. Use of iBeacons has huge potential for retailers — think capabilities like pushing a special offer to a shopper who walks past a product or passes by the storefront in a mall.
Retailers have begun to clue in on how powerful iBeacon could be. Shopkick, a privately held app maker that partners with major U.S. retailers like Best Buy (BBY) and Target (TGT), has just begun trials of its new shopBeacon iBeacon transmitter in several Macy’s (M) locations. Each $40 shopBeacon transmitter is small enough to stick on a shelf or wall, has a five-year battery life and is range adjustable from 3 feet to 100 feet.
Combined with the shopKick app (which has 6 million users), Macy’s iBeacon program will alert shoppers of offers as they approach product displays, remind them of loyalty reward points and even notify them when they’re near an item that they’ve previously “liked” online. The system also works with Android devices that support Bluetooth Low Energy (BLE).
Major League Baseball was an early iBeacon adopter, using the technology together with its smartphone app to track fans at New York Mets ball games, pushing coupons to regular visitors along with useful information like a map showing where their seats are located. It’s expected to officially launch in 2014.
With news of an upcoming iBeacon rollout in Apple Stores, expect other retailers to sit up and take notice. Apple has been ahead of the curve in retail for years and when a company outperforms everyone else by a two-to-one margin, everyone else watches closely. The use of iBeacons is expected to enhance the Apple Store’s shopping experience. Naturally, Apple is hoping that iBeacons will boost sales too, by broadcasting targeted special offers. There is also potential to incorporate iBeacon technology into wireless payment.
If the Macy’s experiment is a success, Shopkick is looking to roll out iBeacon technology nationwide and expand it to other partner retailers. That alone is going to push iBeacon adoption. But with Apple’s ability to leverage its Apple Stores to showcase the technology, iBeacon might just be the stealth iOS 7 feature that helps boost AAPL.
How? The company doesn’t charge for iBeacon licensing, but its iPhones — which offer native iBeacon support — could become even more desirable if bargain shopping consumers learn to love those coupons and special sale prices that get blasted their way. If iBeacons measurably boost sales, Apple could be in a position to start charging a small transaction fee on iBeacon-generated sales (at least those that involve an iPhone), opening up an all new revenue stream.
And if retail and consumer acceptance of iBeacon opens a door to wireless payment — competing with NFC technology — Apple could be in the position to take a cut of that too.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.