If Your Phone Knows Which Aisle You're In, Will It Have Deals on Groceries?

Todd Dipaola has seen the future of advertising, and it’s a Giant Eagle grocery store in Cleveland.

Dipaola’s company, inMarket, will today begin turning on a network of sensors in dozens of grocery stores in Cleveland, Seattle, and San Francisco that will allow companies to beam advertisements to people’s smartphones at the exact moment they’re standing in aisle six trying to decide which brand of beans to buy.

This scenario has been the dream of retailers and advertisers for years, but it’s become more plausible in recent months because of an update to Apple’s mobile technology. Many observers see the feature, called iBeacon, as the most important part of iOS7, even though more attention was paid to the radical design changes. The technology allows Apple to pinpoint the location of a smartphone user within a few feet by bouncing signals off of inexpensive sensors constantly on the lookout. Because the technology uses Bluetooth Low Energy to send and receive signals, it can do so in confined spaces like stores without draining phone batteries.

People have pretty high hopes for the new Bluetooth standard and iBeacon, and similar capability was integrated into a recent version of Android’s operating system. While the applications stretch beyond retail, stores have been pretty quick on the draw. Last month, Apple began using iBeacons in its own retail locations, and Macy’s is working with Shopkick (PDF), an app developer, on a pilot program running in its New York and San Francisco locations. InMarket says it will activate its own iBeacons in more than 100 Giant Eagle and Safeway stores in the next few weeks, a major test for the concept’s appeal beyond the world of early adopters.

For developers and retailers, the enthusiasm about iBeacon is based on targeted advertising; we’re talking about Silicon Valley, after all. “The more data you have about the customer, the more you can upsell them,” explains Hari Gottipati, an independent tech consultant in Phoenix.

InMarket has been selling advertisements based on location since 2010. In the past it relied on a combination of GPS, which is battery-intensive and can be inaccurate indoors, and customers themselves. When someone opened an app designed to be used in a store, for instance, the company deduced that person was, in fact, in that store. In other cases, it asked customers to scan bar codes, which established their presence in a certain place. With iBeacons, however, the company will know when anyone who has downloaded its Checkpoints loyalty app walks into a store. From there, let the marketing begin!

Dipaola says that InMarket chose to work in grocery stores initially because shoppers visit them several times a week, making them great places to form new habits. ”The fact that you go to a grocery store on a regular basis gives us the opportunity to communicate with the consumer frequently,” he says. He declined to name any specific brands that had purchased advertising or to detail the offers InMarket is planning.

Before that happens, though, iBeacon enthusiasts will have to deal with two challenges, neither technical in nature. First is whether stores and advertisers can really tell customers things they want to know. I recently took a few laps around the Macy’s store in Manhattan, and all the app did was welcome me to the store each time I got near an entrance. When I got to one end of the store, the app also reminded me about an Old Navy nearby. A reporter from tech website the Verge didn’t seem very impressed after a similar test of Apple’s own experiment with iBeacons.

Then there’s privacy. While InMarket insists that all users opt in by downloading the app, there will inevitably be questions about how data on consumers’ physical movements are used. People are clearly getting more comfortable with location-based services. A Pew Internet & American Life survey recently found that 74 percent of people use location-based services on their phones, and 30 percent of adult social media users include their locations in posts on at least one service.

While consumers consistently voice concerns about privacy, they’ve also proven to be transactional, and are generally willing to share personal information in exchange for something of value, such as the loyalty cards ubiquitous in supermarkets and drug stores. The technology is now in place for advertisers to begin striking these deals. Whether they can come up with a compelling offer has yet to be seen.

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