Retailers have a long list of tricks they can use to encourage shoppers to walk into their stores, including advertisements, coupons, and direct mail. But even the best of those approaches have low hit rates: an exceedingly small share of consumers exposed to such enticements actually responds by visiting the retailers.
Cyriac Roeding aims to change the odds. Shopkick, the company he cofounded, has created a mobile app that rewards shoppers for walking through the doors of a store. Shoppers who have downloaded the app to their iPhone or Android device receive “kicks” when they enter participating stores. The kicks can be redeemed for gift cards, merchandise discounts, or charitable contributions.
Many entrepreneurs are focused on mobile commerce—the purchase of goods through mobile phones—but Roeding was more attracted to the far greater opportunity of traditional retailing that is influenced by online activity.
Besides drawing shoppers into stores, the mobile phone also allows them to have an interactive shopping experience. Because shoppers can, for example, also receive kicks for scanning a product’s bar code, the app is appealing to brands, too. Twelve retailers, including Target and Best Buy, and 30 brands, including Procter & Gamble and Kraft Foods, offer rewards through Shopkick, and more than 2.5 million people use the app.
The Shopkick Signal is the company’s “secret sauce.” Inside each store, Shopkick installs a small, inexpensive plug-in device that emits an inaudible signal that can be picked up by the microphones of cell phones. This “presence technology” is far more accurate than technologies built on the Global Positioning System (GPS), which is commonly used in other check-in apps such as Foursquare.
Dominic Field, a partner and managing director in the Los Angeles office of The Boston Consulting Group and leader of the digital economy topic area, recently talked with Roeding. Excerpts from the interview follow.
Cyriac, thank you very much for your time today. It is great to be able to talk to an entrepreneur in this space. As you think about m-commerce, what are some of the challenges and opportunities that are playing out for retailers?
Getting people through the door is the number one problem for every physical retailer. Conversion rates in the physical retail world are actually really good. In the online world, they are not good. Conversion rates are about 0.5 to 3.0 percent on a Web site. In the offline world, it is 20 to 95 percent depending on the category: it is 20 percent in fashion, 15 percent in electronics, 95 percent in groceries, and 99 percent in fast-food restaurants. You do not go to McDonald’s and decide that you are not hungry.
So how do mobile technologies play into this?
Cell phones can do two things for commerce. One is you can buy from your cell phone, and that is called mobile commerce. M-commerce is in the very early stages, but it is growing fast. But there is a whole different and equally exciting world, which is to turn offline shopping into an interactive experience while you are at the store. The size of the market—offline shopping that is influenced by online activity, meaning you go online, check out a product but then end up buying it in the physical store—is $1 trillion in the U.S. alone. It is four times the size of the e-commerce market, including Amazon’s revenue, and the kicker is that it is growing faster.
Tell us about the Shopkick concept?
If foot traffic is so important, how come nobody ever rewards anybody for visiting a store? The answer is that nobody has a clue that you are there. GPS cannot do it. You can use any check-in app and tap on a Starbucks that is two blocks away, and it will accept you as being there. You cannot reward people for being two blocks away, because you are just going to spend all your marketing dollars on people who are two blocks away. You are going to waste your dollars. GPS is a vicinity technology, not a presence technology. The Shopkick Signal is a presence technology. We know exactly which store you are visiting in a mall even where there is no GPS.
It is so accurate that we know whether you are in this room or in the hallway. If you are the chief marketing officer of a large retailer, and you want to drive foot traffic, you can reward people for coming through the door.
If I am retailer, spending a lot of time and effort trying to build a relationship with my customers through rewards cards and CRM programs, how do I feel about letting a third party such as Shopkick into my store?
Shopkick is not a competitor of existing rewards programs. In fact, we are a partner to them. We have no interest in being in the middle there. So what we’re doing is basically taking the mall concept of multiple retailers working together to drive traffic into one location and bringing it to the mobile phone. Best Buy has 35 million people in its reward program. What about the other 100 million people who also shop at Best Buy but are not in the Best Buy program? Shopkick is basically allowing Best Buy to start communicating with those shoppers: Shopkick is a program that lets people earn rewards at multiple stores. It is an alliance, the first of its kind in America.
Shopkick provides a powerful incentive to drive store traffic. How does it affect brands?
When we started Shopkick, we actually did not expect to work with brands a lot. We were thinking about retailers and consumers. It turns out that a stool with two legs is not as good as a stool with three legs. Shopkick has become the three-legged stool of consumers, retailers, and brands.
Retailers are interested in driving foot traffic. Brands are interested in starting an engagement with consumers when they are making their purchasing decisions—at the store, standing in front of the shelf. What we do is we let consumers scan bar codes of products that are featured in the Shopkick app. When consumers scan the right bar codes at the right stores, Shopkick gives them extra kicks.
This is exciting for brands. We have 30 big brands working with Shopkick now. Proctor & Gamble moved an executive from Cincinnati to our offices one and a half years ago, and he’s never left. P&G is a close partner of Shopkick. Kraft Foods has been working with us from the very early days. Now we have Unilever, Disney, Hewlett-Packard, Intel, Revlon, and Levi’s. All these brands have come on board and are working with us to reach consumers when they are making purchasing decisions. It’s amazing to me how excited consumers are about the engagement with products at the store.
So Shopkick supports the fun of shopping.
That’s right. Shopkick’s vision is to transform shopping into a more personal, rewarding, and fun-filled experience.
Do you have any plans to go global?
Shopkick is very interested in international expansion. Large, mature shopping markets where small changes in behavior can have a substantial effect on the bottom line and where smartphone penetration is heavy are really good markets for Shopkick.