Geofencing? Can Texting Save Retail Stores

Trial and error.

Merchants are trying to figure out how to blunt the impact of online sales on retail stores.

The data suggest that convenience makes the trend inevitable. The act of shopping will never entirely disappear because it remains such a popular form of entertainment.

The success of convergence in other commercial realms suggests that a combination of mobile and tangible shopping may be part of the answer. Hence geofencing. It is the term being used to describe offers available on mobile devices within a certain geographic area. Which will, ostensibly, entice the potential customer to enter the store and make the purchase. Or at least phone ahead and transact the business anyway.

The question is whether this will really be enough to constitute 'the answer.' Or whether this is simply a transitory, interim step. Research is demonstrating that consumers will respond to sales and other deal offers via social and mobile channels. Scaling this sufficiently to make a difference is the next challenge. JL

Dana Mattioli and Miguel Bustillo report in the Wall Street Journal:

Retailers are trying to make smartphones work for them instead of against them.

Take Maurices. The women's clothing chain last month started sending promotions to the phones of people who come within a few hundred yards of its stores. Consumers who opt in to the service are sent messages about in-store sales. There is little evidence that sort of marketing actually works, but Maurices wants to give it a shot, in hopes of drawing people to the chain's bricks and mortar locations.
"If you don't try, you don't know," says David Jaffe, CEO of Ascena Retail Group Inc., ASNA -0.87%the parent company of Maurices.

Retailers desperately hope the technology—called "geofencing"—can be at least one successful response to the dreaded "showrooming," where a shopper comes into a store to see an item but then makes the purchase online after finding a better price via smartphone.

The idea behind geofencing is to target consumers when they are nearby—and the promotions can get hyper-local, like beaming a special on umbrellas to people within a 10-mile radius during a rainstorm, or touting a markdown on aisle 6 when a customer is walking down aisle 3.

But adoption by shoppers has been spotty, retailers report, underscoring a fundamental imbalance of power when it comes to mobile. While consumers have figured out to use smartphones to retailers' disadvantage by checking the prices elsewhere, chains are still fumbling around for a way to use mobile phones to boost sales.

Some 15% of respondents to a recent survey said they use their mobile phones in stores to compare prices to online-only rivals, according to market research firm Forrester Research. But fewer consumers use their devices in ways that could be beneficial to brick-and-mortar retailers: 8% of respondents said they used their phones to "check in" to stores, and 7% said they used phones to learn about in-store promotions or events.

Customers are becoming more comfortable with using coupons that arrive on their phones. More than 3.4 billion mobile coupons were redeemed in 2011 globally, according to Juniper Research.

Meijer Inc., a Midwestern chain of supermarkets, now uses sensors in its stores to offer customized information and virtual coupons via mobile phone. Customers who prepare shopping lists online can open up the retailer's app inside the store, and the app reorders their list based on their location in the aisles, speeding up the shopping process. Coupons and weekly specials also appear, said Josh Marti, chief executive of Point Inside, a company that helped develop the technology.

"The question, beyond trying to get a defensive scheme against showrooming, is how can these retailers capitalize on that mobile activity?" says Mr. Marti, who said numerous larger retailers are working on similar programs. "What you have to do is engage with those customers in the physical domain."

North Face, the maker of parkas, has been using geofences since 2010 through an app called Shopalert produced by mobile-commerce company Placecast. North Face has put geofences not only around its stores, but around parks and ski resorts, says Aaron Carpenter, vice president of global marketing for the clothing line, owned by VF Corp.

In the two years that North Face has had geofences, though, it has enrolled just 8,000 people. "These programs are all in their infancy," Mr. Carpenter said about geofencing, social media programs and other experimental initiatives. "But they keep people connected to the brand."

Some companies are expanding their experiments. Kiehl's began a geofencing trial last July at its 44 free-standing stores but made the trial permanent this year, says Tory Diamond, director of customer relation management for the skin-care label, owned by L'Oréal SA. The company is now exploring geofencing for Kiehl's kiosks located in department stores, she says.

The company's fences range from half a mile in New York and other big cities to two miles in more suburban areas. So far thousands of customers have signed up for alerts, which Kiehl's advertises at its cash register, social media pages and through its email list. In November, it offered customers a free lip balm for enrolling, causing its numbers to spike, she says.

Kiehl's limits its texts to three per month, says Ms. Diamond, adding, "Texting is a very personal medium and it can annoy people."

Yamilky Vincente, a 23-year-old banker visiting a New York store, was keen to sign up. She says she's a newfound fan of the brand and text alerts would make it easier to find locations.