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Store Loyalty Apps are Catching on Fast with Smartphone Shoppers

By Steve McLinden

Open the app. Enter the store. Earn virtual points just for showing up. Scan an item and get the pop-up discounts. Take your stuff and your codes to the cashier. Move on to the next store and repeat. This formula seems to be working nicely for those shopping at the clients of Palo Alto, Calif.-based shopping-app company Shopkick.

Within the growing universe of smartphone and Web-based shopping applications, Shopkick seems to have a leg up on location-based store promotions. The company also displays a knack for driving foot traffic, having posted 2 million users by July, fully a month shy of its first birthday.

Shopkick is out to link up to retailers’ store-loyalty programs, too. Instead of using GPS technology, Shopkick installs high-frequency receivers near a store’s entrance to exchange information with a customer’s cell phone. Just for walking in the door, shoppers get “kick bucks,” redeemable for gift cards, music downloads, restaurant vouchers, movie tickets and more. They can win points for scanning an item’s bar code with a camera phone and receive a discount on that item and others.

“Part of our advantage is that Shopkick is so simple to use,” said company co-founder and CEO Cyriac Roeding. “And people are really interested in those ‘kicks.’ ”

Shopkick enjoys partnerships with such prominent retailers as American Eagle, Best Buy, Macy’s, Sports Authority and Target, and the company is rolling out its service to smaller businesses too.

Simon Property Group provided a boost by agreeing to a rollout of the app at 100 of its malls even before Shopkick’s official launch in August 2010. Since then, Simon has added 60 centers, with an eye to including even more. “They’re going all in with us,” Roeding said. Having researched location-based apps for a year, Simon went with Shopkick because it offers the best means of direct communication with a smartphone-toting shopper, says Mikael Thygesen, chief marketing officer of Simon Property Group and president of Simon Brand Ventures.

Shopkick was designed to get customers through the door and to greet them with the enticement of add-on sales through discount deals and the like, Roeding says. “Getting them through that door is the key,” he said. The company calls Shopkick-induced customer visits as “the offline equivalent of clicks.”

Others make similarly offbeat observations. Shopkick is “bricks on steroids,” says Martine Reardon, Macy’s executive vice president of marketing and advertising. The app will open new channels of communication with shoppers, Reardon says, allowing Macy’s to coax them with just the right offer.

Julie Ask, an analyst at Forrester Research, lauds Roeding’s enthusiasm. “He is an evangelist with a strong vision,” she said. Among Shopkick’s strengths are personalized offers based on shoppers’ past behavior, the locations shopped, the demonstrated interests and previous scans, and points that can be redeemed as soon as they are awarded, Ask says.

Going forward, Shopkick may make sense primarily for big-box and grocery stores, general retailers and multiple-department stores, she says.

Shopkick is backed by venture-capital firms Kleiner Perkins Caufield & Byers; Greylock Partners; and LinkedIn founder Reid Hoffman. But the company’s unique partnership with Citigroup has generated the most buzz. Citigroup is footing the bill for installation of Shopkick high-frequency receivers in as many as 1,000 small businesses in Chicago, Dallas, Detroit, Los Angeles, New York City and other cities. “Our aim is to drive foot traffic to the small-to-midsize local stores, like we have done for the national chains,” Roeding said.

Shopping-app providers are appearing more frequently as malls face competition from online sellers, whose sales last year hit $176.2 billion in the aggregate. Groupon, which offers daily deals in league with local merchants, is seeking public investment after spurning a $6 billion takeover bid from Google last year. Groupon, which has been in existence for nearly three years, has absorbed oceans of red ink trying to position itself for future growth, losing $413.4 million last year and $113.9 million in the first quarter of this year. Groupon filed for an initial public offering in June; at press time an IPO date had yet to be set. Meanwhile, the company’s subscriber base is expected to exceed 100 million by year-end.

Google did succeed in buying The Dealmap, though, a California-based mapping technology platform that provides promotions customized to users’ preferences and locations. Google completed the deal last month, soon after launching its own daily deal service, called Offers.

Discount site LivingSocial, meanwhile, is establishing beachheads in the Asian market, through the purchase of Ticket Monster, a social-commerce site with approximately 2 million members in South Korea and Malaysia, and similar acquisitions in Indonesia, the Philippines and Thailand.

Most location-based deal-services providers are still evolving to the point where they can target shoppers already inside a store, Ask says. “It should make a difference to a retailer if I am at home, at work, in their store or a competitor’s store,” she said.

Social-networking site and location-based retail platform Foursquare has roughly 4 million U.S. users after 30 months in operation. And Modiv Media facilitates sales-targeting based on the aisles in which consumers are standing and what they may be buying, though this does require proprietary hardware, Ask says. “It targets exactly what I scan and put in my cart,” she said.

Sure, there may be some Big Brother-type concerns over technology that enables virtual tracking of a shopper’s thought process this way, but participation is voluntary, says Ask. And consumers are gradually offering up more and more personal information to brands and companies they trust in exchange for convenience, she says.

This field will continue refining such services, a challenge it can meet as mobile phones get tasked to do more and more. “We’re barely getting started,” Ask said. “With sensors in phones such as microbolometers, magnetometers and chemical sensors, our phones will know more about us than another person or entity.”

From the September 2011 issue of Shopping Centers Today

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