Meet iBeacon: Location tracking to help you shop

IBeacon technology uses Bluetooth and location-based services to ping nearby smart phones with advertisements, coupons, or messages. Will location-based mobile shopping applications help consumers save money or just threaten their privacy?

Imagine walking through a grocery store and feeling a buzz in your pocket. You pull out your smart phone, which automatically displays the grocery list you made earlier. As you make your way up and down the aisles, your phone alerts you to discounts, as well as when you pass by an item on your list. And one day you might be able to skip the checkout line by scanning and paying for your items with your phone.

Interested? Meet iBeacon technology – tiny transmitters outfitted with a location-tracking system created by Apple. Beacons are placed in and around retail establishments and use Bluetooth technology and location-based services to ping nearby smart phones with advertisements, coupons, or messages.

Advocates say this new technology makes shopping even more efficient, but privacy experts caution that the beacons could encourage retailers to gather more information about customers than ever before.

Apple first released iBeacon to developers in June of last year. Since then, pilot programs have been launched in stores such as Macy's, American Eagle Outfitters, and Safeway. Major League Baseball announced it would be testing iBeacon at several ballparks during the 2014 season, and the National Football League used beacons during the Super Bowl to ping iOS-using attendees.

Mobile gains

Mobile-assisted shopping is gaining popularity. A recent survey of smart-phone users by the Google Shopper Marketing Agency found that 79 percent define themselves as "smart-phone shoppers" and 84 percent of those use a mobile device while browsing stores.

Todd Dipaola says he didn't need numbers to convince him shoppers were using their mobile devices while shopping: He just walked into a local grocery store.

"You can see people bumping their shopping cart into the wall because they are looking at their phone," he says.

Mr. Dipaola is chief executive officer of inMarket, the first platform to use iBeacon technology in grocery stores. It supports two iBeacon apps: List Ease, a shopping list app, and CheckPoints, a points-based app that rewards shoppers for examining items. Using mobile technology is also beneficial to retailers, says Dipaola. Early inMarket app case studies have shown a mobile push can double the likelihood of a customer purchasing an item.

"We're ultimately talking to consumers when it matters most – the advertisers can be timely and appropriate for [shoppers]," says Dipaola, equating the transmitters with digital "shelf-mounted coupons."

Services like these require users to share their locations with their smart phones, a concept with which users are becoming increasingly comfortable. According to a 2013 Pew Research poll, 74 percent of people used location-based services on their phones. But that doesn't mean privacy isn't an issue: A 2012 Pew study found 54 percent of app users have decided against installing certain apps when they discovered how much personal information it required.

Detractors worry that iBeacon technology could force consumers to choose between privacy and scoring a bargain.

"I think that iBeacon is part of a dangerous trend," says Ryan Calo, assistant professor at the University of Washington School of Law in Seattle. "Consumers believe in the short run that this is good for them, in the sense they'll be seeing deals, but it may be bad for consumers overall."

A deal or your privacy?

Mr. Calo points out that offering discounts for using an iBeacon-enabled shopping app creates a financial penalty if customers choose not to opt in because of privacy concerns. He also says location-based apps can snare customers when they are not necessarily in "consumer" mode, which gives retailers an unfair advantage.

App developers say they are taking these concerns seriously. Apple, which has iBeacon in all of its US stores, says customers must have the Apple Store app, enable Bluetooth, and then agree to receive notifications. A spokesperson for Shopkick, a shopping rewards app that is testing a version of its app called shopBeacon at certain Macy's and American Eagle stores, says the opt-in function is key to keeping the app customer-first.

Early reviews of iBeacon apps have been mixed – early adopters complain of technical bugs. Some say they received welcome messages but nothing else, and others weren't able to receive any communication, even when standing near a beacon for several minutes.

Dipaola says working out kinks is key: "You always have to make sure you are providing a good service to consumers, or else people will delete the app."