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The battle between online and brick-and-mortar retailers has, until now, been a lopsided fight. Internet stores enjoy the paradigm-busting advantages of the Web, like the ability to personalize deals to shoppers and offer on-the-spot price comparisons. Offline retailers, by contrast, may never know anything about a shopper who walks in, pays for a single item, and walks out the door.
Over the past year tech entrepreneurs have raced to correct this imbalance and extend digital efficiencies to the physical world. Internet services such as Foursquare, Gowalla, Booyah, and—as of Aug. 18—Facebook have enticed millions to digitally "check in" to real-world locations. These smartphone-centered services encourage anyone out on the town to open up an app when they enter a venue. By clicking a button, the phone's GPS registers a user's location and sends it out to selected friends. Along with the debatable social benefit of letting people constantly broadcast their whereabouts, the services are designed to give businesses the chance to tailor deals to patrons and forge enduring relationships with the otherwise unidentified folks who may be their best customers.
Until recently, big-box retailers and other mainstream businesses have largely sat on the sidelines as early adopters toyed with the technology. Now that Foursquare and Booyah have each signed up roughly 3 million people and Facebook's 500 million users now have access to similar, location-sensing technology, the big brands are coming around. Says Tristan Walker, vice-president of business development at Foursquare: "We see upwards of 500 to 1,000 new business inquiries a day." Many of those are from mom-and-pop stores, but Foursquare has also recently made deals with major retailers including Gap (GPS), Starbucks (SBUX), and Sephora.
For retailers, foot traffic is everything, says Cyriac Roeding, the CEO of Shopkick, a new service similar to Foursquare. In e-commerce, a small percentage of a website's visitors make a purchase. In physical retail, the proportion of people who walk into a store and actually buy something—known as the conversion rate—is much higher. Roeding says the conversion rate for fashion retailers is 20 percent; in electronics, it's 40 to 60 percent. Shopkick, which launched last week in 600 stores and 100 malls across the U.S., encourages users to visit its retail partners—including Best Buy (BBY), American Eagle (AEO), and Sports Authority—by rewarding them with gift certificates and other prizes after a certain number of check-ins.
For traditional businesses, one of the advantages of these new services is the ability to reach customers on the go. "We know that consumers are out there at four o'clock in the afternoon with no idea what they're going to have for dinner," says John Faulkner, the director of brand communications for Campbell Soup. "If we can communicate with them the way they want to be communicated with, we can get them thinking about our soup." Clay Cowan, vice-president of e-commerce and digital marketing at Sports Authority, says that these services are much more effective at targeting customers than traditional methods: "Rather than accuracy at the quarter mile, it's accuracy at the aisle."
Campbell's is working with Stickybits, part of another batch of startups distinct from check-in services like Foursquare and Shopkick but still pursuing the same goal of overlaying the Web onto the physical world. For Stickybits and its cohort, the bar code is the crucial ingredient—users don't just check into a store, they check into a product by scanning a UPC with the camera on their smartphones.
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