Retail Leads Proximity Marketing, But Future Growth Could Come From Niche Categories
Gas stations, logistics, and real estate is where the commercial expansion of beacons and other sensors will be focused, says Proxbook.
Among the 19 industry verticals currently using location sensors — e.g., beacons, wifi, NFC, etc… — to target and connect with consumers, retail is by far the most attention from companies in the space, as 62 percent of the 142 global place-based tech providers listed in the Proxbook database are focusing their efforts on shops and stores. (The report can be downloaded on Proxbook’s homepage.)
“[Retail] is where [the listed Proxbook companies] currently are devoting their time, as they offer solutions for all these verticals,” noted says Thomas Walle Jensen, CEO and co-founder of beacon-based retargeting platform Unacast, and the one of the people behind the creation of Proxbook. The main takeaway I see is that even though retail is dominant, especially in the media, there are proximity deployment in a large range of verticals that doesn’t get the same media attention. Proximity is most likely more distributed than expected.
But as this technology becomes more mainstream for most physical businesses, Proxbook’s Q2 2015 “state of” the industry expects niche categories such as gas station operators, logistical planners, and real estate brokers will be part of the drive to expand online-to-offline marketing technology.
Retail’s Just Revving Up
Still, retail is hardly saturated when it comes to the embrace of sensors — primarily beacons — for indoor marketing. Just last week, Target said it would begin installing the Bluetooth-powered devices in a test at 50 stores located Chicago, Denver, New York City, Pittsburgh, Portland, San Francisco, Seattle, and its hometown of Minneapolis.
To put that into perspective, Target has 1,800 US stores. And to put that in further context, Target’s initial beacon usage will connect to its iPhone app only on Apple’s iBeacon system (though a Google Android connection across the search giant’s recently-released Eddystone beacon platform is in the works, Target said.)
Target’s adoption of beacons as part of a wider omnichannel effort comes almost a year after Macy’s activated Shopkick’s beacons in 4,000 of its stores last September and Lord & Taylor put Swirl’s beacons in all 50 if its stores ahead of Black Friday 2014.
Proximity-based marketing will drive about $5 billion in spending by brands by 2019, said Corey Elliott, director of Research at local media analyst Borrell Associates, in a client note published this spring, entitled, Bracing for Beacons: Why They Matter (A Lot) [download required].
The problem is that small-to-medium-sized businesses haven’t gotten the message. When Borrell asked if SMBs were already engaged with beacons (or other proximity devices), a mere 3 percent said “yes.” More than half said they weren’t, and the rest said they didn’t think beacons applied to what they do, or didn’t know one way or the other.
The Future Beyond Retail
More recently, the local market researcher’s principal, Gordon Borrell, wrote of a major disruption coming to the online ad industry in the form of geomarketing and beacons.
“Enabled by beacon messaging, mobile geomarketing will attack the $140 billion local advertising industry – principally print coupons currently distributed via direct mail and newspapers – but it will open up broad new opportunities as well,” Borrell wrote.
For one thing, local marketers across the board are intrigued by the possibility of cost-savings and efficiencies that beacons may produce when it comes to these businesses’ ad budgets.
In fact, local businesses tend to spend three to six times more on “marketing services” than they do on classic forms of advertising like banner ads, print ads, outdoor signs and broadcast commercials, Borrell noted.
“Beacons play right into those costs,” he added. “Installing them and learning how they work is the least of the costs. Managing them effectively will be key. That’s where the opportunity rests for local ad agencies and media companies.”
Database designed to help agencies and marketers make better sense of global companies that offer location marketing services. Aside from looking at “state of” the marketplace for retail and sensor technology, the report also examines the business categories that are likely to emerge as a greater focal point for proximity service providers.
Three areas primed for growth in the use of location marketing tech are gas stations, which represented 19 percent of Proxbook service clients; followed by “logistics” and “real estate,” both of which make up 20 percent.
Looking at the other 15 categories using some form of location service, shopping malls are the biggest after retail with 49 percent of Proxbook companies serving those businesses; hotel/tourism is next up with 41 percent; stadiums/sports arenas at 39 percent
“We believe the many industry verticals offered is a clear sign PSPs will be even more specialized in their offerings going forward,” Proxbook’s report says.
At the moment, the real question for tech vendors is which side to make the biggest bet on: supplying hardware for sensor-based marketing or the software. “The proximity industry is split into half, with 70 companies focusing on software only and 72 on software with proprietary hardware,” the report says.
Software companies provide ad services, mobile apps, Wi-Fi tracking, content management platform, indoor location, GPS/Geofencing, payments, analytics and audio triggers, while hardware typically provide beacons, NFC and other sensors.
Considering that the technology behind the actual devices for beacons and wifi routers tends to be pretty slim — and difficult to differentiate for non-techie store managers — the safe bet would be that software-related companies will ultimately win, since it’s the reach and marketing services that businesses actually care about. In other words, it’s hard to believe that there will be some version of the iPhone that captures businesses’ hearts and minds the way Apple’s chief product has done with smartphone consumers.
Nevertheless, the hardware and software naturally go hand-in-hand. So as the proximity market grows — 62 percent of the companies listed in Proxbook have been founded during the last three years, with 2014 as the peak year — it’s safe to say that there will ultimately be a consolidation and the biggest players in the space will likely have exclusive relationships with a few hardware companies to market software to target and analyze consumers’ location activity.