Beacons Explained: The Powerful New Technology That Is Transforming How Retailers Communicate With Customers

Beacons are a low-cost piece of hardware - small enough to attach to a wall or countertop - that use battery-friendly, low-energy Bluetooth connections to transmit messages or prompts directly to a smartphone or tablet.

They are ideal for pinpointing the location of smartphones indoors, where GPS and Wi-Fi aren't always effective, and sending alerts and data to apps on those devices.

Apple has its own beacon system, known as iBeacon, which is part of its current mobile operating system, iOS 7. Startups are creating beacon apps for Android too.

In a recent report from BI Intelligence, we explain what beacons are, how they work, and how startups, retailers, events companies, payments tech players, retailers, home automation apps, and digital couponing specialists are all lining up to test beacons and incorporate them into their business models.

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Here are some of our findings:

• In-store retail and offline payments are part of the first wave of beacon applications. Retail outlets are adopting beacons to provide customers with product information, flash sales or deals, and to speed up the checkout process with a completely contactless payments system.
• Consumers seem receptive to beacons as a way to enhance their in-store shopping experience. Half of American adults already utilize their mobile devices in stores. Consumers could also use them to inexpensively automate their homes. For example, beacons could turn on lights in a room as soon as someone with a smartphone has entered it, or open doors or window shades.
• But there's a barrier to wide adoption of beacon technology: several layers of permissions.Customers have to turn on Bluetooth, accept location services on the relevant app and opt-in to receive in-store or indoor notifications.
• People are confused about Apple iBeacon because it has yet to take a true physical form. Apple hasn't manufactured a physical beacon. Instead, Apple's iBeacon is built into its devices and iOS7 mobile operating system. Already, 200 million iOS devices can already serve as transmitters and receivers. But third-party manufacturers have built beacons that can send iBeacon messages to Apple devices.
• The beacon wars are heating up. Large tech companies, including PayPal, have developed beacons of their own. Smaller vendors are entering the mix with beacon management and consulting on top of hardware or software platforms.
• The applications go beyond retail: We expect beacons to be deployed all over airports and ground transit hubs so that notifications on departures, delays, and gate and platform assignments can be delivered instantly to passenger phones.

The report has charts and data that can be easily downloaded and put to use.

In full, the report:

• Makes the case that beacons will take off once a handful of major retailers roll them out.
• Includes the points-of-view of executives at several start-up beacon-focused firms.
• Dives into the data on consumer attitudes toward location-based notifications, and whether beacon-powered alerts will be welcomed or resisted.
• Lists many of the possible applications for beacons, and how some large retailers and organizations have already tried them.
• Explains why beacons powered by Bluetooth low energy is much more effective than Wi-Fi or GPS for powering notifications indoors.
• Breaks down Apple's innovative strategy of making all of its devices potential receivers and transmitters in any implementation.

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