Target testing beacons to provide in-store shoppers coupons, recommendations

Target Corp. is taking the next step to integrate smartphones into shopping by testing a system that alerts customers to deals and reviews as they walk through a store.

The Minneapolis-based retailer on Wednesday will become one of the largest to test a technology known as beacons, which are small transmitters placed above a shelf that send signals a short distance. They will link to shoppers' smartphones through the Target app, sending them relevant coupons, deals and product recommendations based on where they are in the store.

In the not-too-distant future, the company hopes to add other features such as one that would auto-sort customers' shopping lists in the app, reminding them to pick up milk if they are leaving the grocery department, or allow them to page a store employee for help.

The process is different from Target's popular Cartwheel app, through which customers scan an item and then learn if a coupon or offer is associated with it.

The experiment is Target's first major foray into beacons. It is starting out with 50 stores in markets such as Denver, Chicago, Seattle and San Francisco as well as in 15 stores in the Twin Cities. In each of the stores, Target has placed anywhere between 20 and 50 beacons that transmit a signal about 20 feet away. The technology will initially only work with iPhones that have iOS 7 or higher and require the smartphone's Bluetooth to be on.

But Target doesn't want to irritate customers with messages constantly popping up on their screens. So in this initial test, they will limit the number of push notifications to two per shopping trip.

Retailers such as Macy's, GameStop and American Eagle Outfitters are also weighing the pros and cons of the location-based technology. In the process, they are testing customers' comfort with letting them track their movements.

"We're seeing the 1.0 of beacons," said Maya Mikhailov, co-founder of GPShopper, a firm that works with retailers on beacons and other mobile technology. "Right now a lot of retailers are just trying to figure out best practices and how to use this without annoying customers."

While shoppers have become accustomed to being given personalized product recommendations while browsing online, the practice of shopping in a brick-and-mortar store has remained a fairly anonymous experience. Beacons are one way retailers want to try to bring that customized online experience to the stores.

"Target might know something about me from my online shopping, but when I go into a store, I'm a complete stranger," Mikhailov said.

Members of Target's Minneapolis-based apps team recently gave the Star Tribune a demonstration of how it works. As they walked around the women's apparel department in the downtown Nicollet Mall store, a $10 off Target coupon for clothes appeared on the top of a Facebook-like newsfeed on the Target app. In the baby section, a link to top Target items picked by the third-party site BabyCenter.com popped up at the top of the feed. And while perusing the grocery aisles, a recipe for a breakfast smoothie appeared with ingredients needed to make it.

"It's a matter of creating relevant, convenient and inspiring moments while you're shopping," said Eddie Baeb, a Target spokesman. "It starts moving us toward that smart store of the future."

In the future, Target officials see other potential uses of the technology, such as sending push notifications when a customer's prescription or in-store pickup order is ready.

But they know that not all consumers will be jazzed about the idea of Target following their path through the store. So they emphasize that shoppers have to opt in to the technology.

When shoppers download the Target app, or the update which is being released Wednesday, they will have to go through two screens asking them to opt in to location-based services and to receiving push notifications.

In an effort to be even more upfront about it, Target has also added a third opt-in screen asking shoppers to enable the beacon service it's calling "Target Run." Customers can later disable it if they don't find it useful or don't want to be tracked.

"Guest privacy is definitely at the forefront as we design this and other experiences," Baeb said. "That has influenced how we will use and treat data and why we are trying to be as clear and transparent as possible."

When companies haven't provided opt outs or been as open about location services, it has sometimes backfired. Last year, the outdoor media company Titan was ordered to remove 500 beacons it put in phone booths around New York City after residents found out about them and became uncomfortable with them. And a couple of years ago, Nord­strom ended a beacon pilot in 17 stores after shoppers complained about being tracked.

According to a survey last year by Forrester Research, more than half of customers said they would not be comfortable with retailers tracking their location. But others said they would be open to it if they received discounts or other incentives. The research firm also noted that older shoppers are more likely to be circumspect while millennials and other younger shoppers were more willing to let retailers follow their location.

Target will be able to use the information from the beacons to better map how shoppers move through its stores and to measure how long customers dwell in certain departments.

Officials say this will be aggregate data they could use to see if there are friction points in the store or if they should beef up staffing in particular departments at certain times of the day.

But the caveat with that kind of data, of course, is that it will likely be from Target's most loyal shoppers — the ones Target already has a lot of information about — who are likely to use the Target app and will opt in to beacons.

"It's going to be a very self-selected pool," said Amy Koo, an analyst with Kantar Retail. "That's one of the challenges."

Still, Target is interested to see how consumers will respond. Officials acknowledge there will likely be glitches in the beginning. But if the initial pilot of 50 stores goes well, the company plans to roll beacons out to more stores this year.

Richfield-based Best Buy is not yet deploying beacons in its stores, but does partner with Shopkick, an app that uses a different location-based technology to give shoppers rewards for walking in certain stores. Shopkick also uses beacons in some stores, but not at Best Buy.

"Beacons are certainly something we are examining and may test in the future," Jeff Shelman, a Best Buy spokesman, said in an e-mail. "We know that many of our customers shop in our stores and visit BestBuy.com, so there is potential in finding a way to have a digital presence in our physical locations."

Kavita Kumar • 612-673-4113