Local mobile services - saviour for offline stores ?

Consumer buying behaviour change, driven by digitalisation, is inexorably advancing. This challenges consumer product companies to take advantage of new models to utilise the change. For traditional retailers, having physical stores, e-commerce growth means a serious threat. But after years of false promises, local mobile services based on wireless proximity technologies are wakening up. At best, they could get modern, digitally informed consumers to use their money in brick and mortar shops also in future.

Local services not-so-successful history

When computer-like features started to gradually appear in mobile phones in the 1990s, there was also a wave of interest in local services supporting retail merchants. In 1999, I was involved to establish a startup with a mission to use only recently published Bluetooth (BT) technology to send marketing messages to phones that were taken to shops. After that, I developed similar type of businesses at a large Finnish mobile phone company: in 2002, for example, we created patents for applications in local services context and for shopping experience improvement tools. Neither the startup nor the big company case turned out to be a success.

A number of other projects came up, both in local mobile marketing and in local payments. In addition to Bluetooth, for example Wi-Fi, RFID (or its offspring, NFC, widely used in mobile phones) and IrDA technologies were in use. For example, in the United States Wideray IrDA solution offered local data services for offline businesses. A little later, Wideray landed also in Finland, where Sonera's also Bluetooth-enabled iJack service was used, among other things, by individual stores, shopping malls and restaurants.

Wireless local marketing of brick and mortar stores has not really taken off in the last ten years. Today, it is easier, however, to analyse the reasons. The main obstacles were the factors related to retailers, ecosystem and mobile devices, for example:

• E-commerce has only gradually disrupted retail business, its global value in 2005 was about $ 150 billion - the forecast for 2013 is already $ 1.2 trillion
• Digital marketing has only recently established its position as a major tool for retailers and consumer product manufacturers
• Mobile marketing formats and business models were underdeveloped for a long time; ten years ago, the global market size was only around 100 million dollars, the 2013 forecast is close to $ 15 billion
• The number of mobile phones suitable for local marketing, i.e. smartphones, had a sharp increase only after 2007, after Apple launched iPhone; iPad tablets first came on the market only in 2010
• Usability of smartphones has not been very good; easy to use applications enabled by app stores and other usability improvements have gradually changed the situation

The great promise

Next we shall discuss factors which, if successful, could make local mobile services a significant marketing channel - or, if this is not the case, delay realisation of the great promise till not foreseeable future.

Retailers and digital change

Consumers' growing willingness to use digital channels has resulted in a huge increase in e-commerce and fierce price competition, which affects both online and offline merchants. Price competition also lowers margins, which creates pressure on consumer product manufacturers, too. In addition, digital channels have become key information and communication tools between brands, retailers and consumers.

In this context, both traditional brick and mortar merchants and their vendors are looking for new success factors by creating new, digital in-store experiences. By approaching customers when they are presumably ready to buy, i.e. when they are already in-store or in the immediate vicinity, marketing messages can be targeted much more precisely than when using only standard user profile and behaviour based models. The potential value of these messages, both to consumers and marketers, is therefore very high.

Mobile payments, as well as access to product information through reading QR codes or barcodes have been the main drivers of mobile device utilisation in stores. In addition, also local digital in-store marketing will benefit from wider and wider use of mobile technology. Marketing tools provide consumers, among other things, with information about new products or promotions, coupons, store maps, shopping lists, recipes, and other additional services that support products or purchasing. Identification of consumer location is the prerequisite of the service provision, and there has been various technologies available for that for a quite a long time.

Although the benefits of local digital marketing for merchant business are very concrete, the ultimate question is, however, consumer willingness to receive marketing messages and use related services. On the basis of recent studies, consumers seem to increasingly want local digital marketing, but it is not yet clear whether this is enough for large-scale deployment. It is also fair to assume that consumers must be able to determine who and when can approach them.

Ecosystem and development of mobile devices

Perhaps the most important event in the development of the ecosystem was Apple's recent iBeacons concept release. iBeacons enables low-cost Bluetooth Low Energy (BLE, or BT Smart or BT 4.0) beacons. They emit signals that Apple smart phones or tablets automatically react to when they come within range of the beacon - maximum distance of up to a few tens of meters. Offline retailers can use the concept, for example, to allow payment anywhere in the store, for coupons and other local advertising.


A number of BLE beacon manufacturers have already entered the market. For example, Estimote offers three beacons for $ 99, Sonic Notify ten pieces for $ 300 and Roximity service costs $ 10 per month for one beacon. Adomaly is an advertising network to reach consumers in-store using beacons.

NFC technology use, again, is widely supported by mobile phone vendors, mobile operators and payment service providers, but it is already widely predicted that its growth will be stalled. The problem is that key stakeholders are often competing with each other, which has led that NFC software package is not widely enough available in phones. In addition, Apple has not been favourable to NFC, and it looks that BLE will be positioned as a direct competitor to NFC in local mobile payments.

Amount of smartphones and tablets, as well as their usability are already at good enough level to boost local services mass market. Although all the major software platforms have their own application stores, processes and models to bring also store related applications available for consumers are already sufficiently developed. Notably, Android platform is the most fragmented one, in Apple and Windows Phone environments there are less problems.

BLE is already supported by most iPhone models, 4S, 5 and the newer ones, as well as by Apple´s tablets. In many high-end Android devices manufacturers have already implemented BLE support, and the support on Android platform level is coming in the near future. By the end of this year all the Nokia Lumia WP models will also support BLE.

In summary, local mobile marketing is still a great promise for retailers and consumer brands - but realisation of the promise still faces significant stumbling blocks that need to be avoided:

• There needs to be a common mode and format of communications between consumers, retailers and brands, and this needs to be supported by a sufficiently wide range of mobile device manufacturers and other ecosystem players 
• Offline merchants need to be willing to build the necessary local infrastructure in their stores, and use it effectively for marketing and other customer relationship activities
• Consumers need to be willing to adopt a new, mobile device based way to get information about products, access promotions, pay for purchases, etc.