Retailers Reach Out on Cellphones: Software Apps Provide Shoppers With Rewards to Help Lure Them Into Stores


Thanks to Internet-equipped smartphones, shoppers are increasingly using software applications to check prices at other stores without leaving the mall. Now retailers are trying to use technology to fight back.

Peter McCollough for The Wall Street Journal

Wsj photo

Shopkick CEO Cyriac Roeding, here at a shopping mall in Palo Alto, Calif., says the goal of his company's app is to turn offline stores into 'interactive worlds' that are more entertaining for shoppers.

A start-up called Shopkick Inc., for example, has signed up Best Buy Co. and Macy's Inc. as launch partners for a new kind of app for iPhone and Android handsets that detects when shoppers are in or near stores and offers rewards targeted to them. Shopkick exploits the phones' location-sensing abilities—and cameras that customers can use to scan bar codes on items—to offer product information, coupons or other marketing offers when shoppers are in a convenient position to buy.

In a retail world that is typically divided between the "bricks" of physical stores and the "clicks" of online customers, Shopkick "is like bricks on steroids," says Martine Reardon, Macy's executive vice president of marketing and advertising. The app, she says, will help the department store find new ways to communicate with consumers while they are inside Macys and when they are nearby and might be lured into the store with just the right offer.

Shopkick isn't alone. Other start-ups are also racing to exploit new cellphone features and new habits among their users, which include location-aware social networks as well as doing product research before and during store visits.

Social-mapping service Loopt Inc. gives its users special offers and coupons from retailers nearby where the shoppers are carrying their phones. "Traditional local advertising is not what retailers want. They want not just for you to see an ad—they want you to come into the store, to be a repeat customer and to spread the word," says Sam Altman, the company's co-founder and chief executive.

In the coming weeks, Loopt plans to unveil a service for retailers that will enable them to use the app as a loyalty program. Instead of charging a rate based on how many times an ad is shown online, Loopt will charge local businesses "cost per pair of feet," Mr. Altman says.

Another location-sharing app, FourSquare Labs Inc., also wants to become the "digital loyalty card" for retailers, says business-development director Tristan Walker. For its nearly one million users, FourSquare turns reporting one's location into a game, by awarding virtual badges for so-called check-ins. For businesses, it offers information about their most loyal customers, and the ability to run location-specific promotions and specials, which have been used by about 2,000 businesses around the world. FourSquare will soon launch a self-service tool for businesses to enter their own specials, which it expects will increase the number and ways that retailers use the service.

The moves reflect a broader push to bridge the online world—the best resource for finding information about products—with the real-world habits of shoppers who carry cellphones.

With the Shopkick app, the retailer will know who individual shoppers are and can communicate "when you need it, and how you want it," says Rick Rommel, Best Buy's senior vice president of new business. With the proliferation of smartphones, "there is a tidal wave here that we need to be a part of," he says.

The goal of the Shopkick app—which is to launch this summer—is "not just to drive foot traffic, but to turn offline stores into interactive worlds" that are more entertaining to shoppers, adds Cyriac Roeding, the CEO and co-founder of Shopkick, which is backed by venture-capital firm Kleiner Perkins Caufield & Byers's iFund.

Shopkick, which is based in Palo Alto, Calif., expects to be paid for its performance, such as driving additional sales and bringing in new customers. Just as Google Inc. matches online ad offers to users' actual online activity, Mr. Roeding argues Shopkick can improve the efficiency of marketing in the physical world over the traditional Sunday coupon circular.

As proof that consumers are willing to use this sort of smartphone app while they are shopping, Mr. Roeding points to the early success of an app his company unveiled in January, called CauseWorld. That app rewards consumers for virtually checking in at businesses, granting so-called Karma Points that can be redeemed for advertiser-funded donations to charitable causes, such as the American Red Cross.

In its first four months, Mr. Roeding says CauseWorld has been downloaded 500,000 times, and some 10% of its users are active on it daily. When the app tried offering double Karma Points for checking in with a particular retailer, the number of check-ins quadrupled, he says.

In another experiment, CauseWorld offered users extra points for scanning the bar codes of certain Kraft Inc. and Procter & Gamble Co. products in stores. Kraft's director of consumer-experience innovation, Ed Kaczmarek, said it is too early to tell how well the scanning effort worked. Still, "there are not many marketing vehicles that you could use where the consumer is actually picking up your product in the store," he says. "It brings us one step closer to the point of purchase."

P&G has embedded an employee, brand manager Sonny Jandial, inside Shopkick since October to participate in the start-up's experiments in mobile marketing.

CauseWorld has also been testing users' interest in less altruistic motivations. In early April, Causeworld offered users 10% off Best Buy purchases in exchange for checking in. Mr. Roeding said a high single-digit percentage of those who checked in at Best Buy during the testalso used the coupon to make a purchase.

To go mainstream, all of these applications may still have to overcome privacy concerns about allowing one's smartphone—and big companies—to keep track of your location.

The app developers see it as a trade-off between giving up a little bit of privacy in exchange for an improved shopping experience. "I hate spam," Mr. Roeding says. "Checking in needs to have a purpose."

Write to Geoffrey A. Fowler at geoffrey.fowler@wsj.com


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