• by Mark Walsh  @markfwal, August 12, 2014

In a new report, Forrester analyst Adam Silverman suggests beacons will succeed where WiFi, near-field communication (NFC) and other location-focused technologies have failed as retail-boosting tools. But he warns that privacy remains a major barrier because of user concerns about location sharing.

In favor of beacon adoption, the report points out that the Bluetooth low-energy technology needed to power beacons is simple and already standard on many mobile phones. Beacon trials are also easy and cheap to set up to evaluate performance, and customers must opt in to use the technology via an application. Although this may limit the size of the user base, it also helps to ensure it’s made up of interested customers.

On the down side, Silverman highlights Forrester research showing that 56% of customers overall are not comfortable sharing their location in-store with retailers. Even with an offer or discount, 41% are still reluctant. Younger shoppers, however, are more amenable -- with half of Millennials (ages 26-34) comfortable sharing their location in return for product offers and discounts. That compares to 39% of Gen X-ers (35-48) and 30% of younger Boomers (49-58).

When it comes to new in-store beacon networks like Shelfbucks and InMarket serving “hyper-targeted” ads by aisle or department, Silverman also sounds a note of caution. “This is because customers have yet to indicate that they are interested in seeing ads on their mobile devices as they shop in a store, and retailers will be hesitant to open up their stores to a new form of advertising without fully understanding the implications and controls,” he writes.

Still, companies involved in beacon trials seem to be working with vendors such as InMarket and Swirl Networks to get things off the ground. Silverman suggested in an e-mail exchange that reliance will go away, assuming that retailers find value in beacons and build the infrastructure into their own campaign management systems.

Many of the trials to date have focused on offers, but the report urges companies to look beyond incentives to how they can use location context from beacons to provide better service. That might be something like eliminating the need to wait in line to pick up an order or letting customers use their phones as keys for dressing rooms.

“Understand how customers prefer to engage with the brand, and create location solutions that enhance the experience,” it states. To address privacy concerns, retailers should be clear about the information they collect and how it will be used, letting customers choose the kind of data they’re willing to share.