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Euromonitor Interview Series: The Rise of Beacon Technology and Prospects of it Displacing NFC (Part 2)

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By: Michelle Evans

Euromonitor International is pleased to present an interview with an executive of Estimote, a US-based start-up that creates small, wireless sensors known as beacons that use Bluetooth Low Energy (BLE) to detect the location of nearby smartphones. Euromonitor’s Consumer Finance Analyst Michelle Evans had a recent conversation with F. Mark Modzelewski, senior advisor to Estimote, about the benefits of BLE for merchants and the possibility of it displacing NFC technology. In the first part of the interview series, the two discussed the fast-rise of beacons and the potential loyalty and payments applications.

Euromonitor: How does Bluetooth Low Energy compare with NFC?

There are several differences between a BLE chip and NFC chip. Even though Bluetooth Low Energy chips are significantly more expensive, in general, what you are talking about it something that has a range of 200 feet. Your range starts leaving optimal for NFC after about four centimetres. The NFC thing you can basically do with cheap stickers, but when you start looking over the course of an entire store as a footprint, you start seeing the power of Bluetooth Low Energy. Basically, you don’t have to go up and almost touch it. Even on things like corralling, you can essentially set up a range so if consumers left a store with a bunch of products in their bag, you have an instant payment with Bluetooth Low Energy. You wouldn’t be able to do that with NFC because you have to get it down to almost a scan level because you are still talking about a four-centimetre range.

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How does Bluetooth Low Energy recognize that the consumer has products in hand?

If you have an application on your phone, the beacons are constantly signalling to the BLE chip in the smartphone.  Basically with Bluetooth Low Energy, our beacons are constantly emitting a signal. It has about a two-year battery on it. Whereas with the NFC technology you are pinging it or bouncing the signal off of it in order to make it active it. That’s why it can only do that in very close range.

How would consumers use the product?

A consumer would use the product by downloading an app. We imagine over time as it becomes a more ubiquitous technology, in general, there will be a more standardized app that will work across many different stores so you are not downloading a Stop and Shop app, a Wal-Mart app and a Nike app.

We view this as an opt-in technology. You are using it because you downloaded the programme and you have chosen to use it as opposed to being randomly monitored because you walked into a store. There are companies out there already that are pinging off your phone, figuring our things about you as to your behaviour and walk patterns and supplying that information to retail stores without you knowing it. That is a path we have chosen not to pursue. We want this to be something more of a consumer experience.

What is the role of the merchants?

The merchants are the ones purchasing the beacons. What’s interesting is there seems to be some tension that we are noticing now where the actual suppliers are also interested in it and the merchants are wondering what they are or aren’t losing in allowing there to be that full exchange of information to  all parties.  Many merchants certainly are the providers of much of the information back to their suppliers. Calvin Klein underwear is reliant on Wal-Mart telling them what sales are. In this situation in it possible for suppliers to also be getting a robust amount of information by adding such beacons to their packaging, theoretically.

How many beacons would a store need to purchase?

In a big-box store, depending upon interruptions, the layout of the store and the amount of information a retailer wants a 2,000-square-foot store could get away with a minimum of 10, but probably is more likely to put in a few hundred. There’s a few apps we are developing in consultation in them, but many developers are developing programmes and apps for what we are putting in place as well. Consumers and stores will have a range of options and how they chose to collect the information. Right now we are in the very early stages. We are working in direct consultation with the larger store brands that are buying this to get them through the process and developing a programme that meets their needs.  Right now because this is so new that many need the technological help to understand what is going on. One of the things we are finding out is there are people that have developed apps for store environment and they are going to add this feature to it to make it more powerful.

Do you think beacons would add value for both local and chained retailers?

We actually think it would be great for local ones mainly because one of the big issues that you have right now is people going around doing showrooming. Consumers are checking prices on everything as they walk through a store. Some of the apps we are seeing in development are ones that ping the option to negotiate the price. Basically, someone sits there and is able to pull up on this phone and check against it and see that on Amazon right now that they are offering it for $20 less. They could match it right there. The box retailers are already getting very close to being able to implement this mainly because they have been looking for a way to handle showrooming. Even with places like Wal-Mart, sometimes their site has a different price than their retail location. People literally showroom against Wal-Mart’s store by going online at times. We are seeing a lot of the major retailers already getting behind the idea that they need to offer this and are now coming to us for a solution.

 

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Where does Estimote make money?

The long-term goal isn’t so much to make money on the beacons as it is to get the beacons everywhere. We are much more about creating this platform where we are developing apps and other people are as well. It is really more about the information and platform side of it. Estimote plans to move toward developing a platform around it. We certainly have a great deal of that in place where developers are already developing on our platform. It is not that beacons are not a major part of the design and the research part that is going on with ourselves, but really the idea get as many of them as out as cheaply as we can. The big interaction is having them everywhere.

Do some merchants already have these in place?

Retailers are testing it in the US and Europe, but in a very controlled testing. We are a couple months out of the box. They are using them in a very controlled setting to figure out what they are doing. It’s in that early stage. People will notice these in certain areas around Christmas time, but it will become more common in the spring. Retail stores will integrate this into their pre-existing app. We will also publish a list of retailers where consumers can download an app and go try this out. All that will start to happen right around Black Friday.

What are Estimote’s plans for the future?

We are really trying to find new ways of introducing these into life whether it be auto showrooming or anything that might help with interior mapping. For us, it is about expanding the number of places these sensors are and building a robust platform for people to build applications on.

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