September 9, 2010, 3:43 PM

Mobile app rewards shoppers for entering a store

American Eagle uses shopkick to offer loyalty points as customers approach and shop stores.

Lead Photo

Shopkick has made quite a name for itself in recent months. The location-based iPhone app recognizes when users are near a retail store, then offers them rewards for coming closer to it and bigger rewards for stepping inside.

Shopkick first made a splash when it received $15 million in funding this summer—before it had even rolled out its retail rewards app. Then, a scant month later, it went live with the app and announced deals with big-name retailers including Best Buy Co. Inc., Macy’s Inc., The Sports Authority and teen apparel retailer American Eagle Outfitters Inc.

American Eagle has been using shopkick technology in 52 of its stores in New York, Chicago, Los Angeles and San Francisco for about a month, says Mike Dupuis, vice president, marketing and operations for American Eagle Outfitters Direct. And, he says, the retailer plans to roll out the technology to all its stores soon.

Shopkick is just one facet of American Eagle’s mobile strategy. The retailer has an m-commerce site, participates in location-based social network foursquare and has for years operated an outbound text messaging program. Dupuis, however, particularly likes shopkick for a few reasons: the location technology is extremely precise and was easy to implement in stores, and it’s the first app he has seen to offer shoppers rewards for entering a bricks-and-mortar store and taking steps that typically are steps to a sale, such as going into the dressing room area.

Unlike most other location apps such as foursquare, shopkick can tell when consumers are inside a store, not just standing in the parking lot, Dupuis says. Shopkick can recognize the difference between what it calls a ‘Check in’ (a customer nearby a store) and a ‘Walk in’ (a customer actually entering a store). Check-ins use GPS technology, but Walk-ins use signal transmitters about the size of bricks located throughout the stores, Dupuis says. The transmitters, which Dupuis says required nothing but a power outlet to deploy, send out an inaudible signal picked up by the iPhone’s microphone and then by the app—if the app is open. For now, shopkick only works with Apple Inc.’s iPhones.

“A lot of location-based programs leverage GPS technology, and are at best, not precise,” Dupuis says. “Knowing that customers are crossing over the store threshold is huge.”

Shoppers out and about can open the app to view a list of nearby stores or locations where they can ‘Check in’. Check-ins get users a couple of rewards points—what shopkick calls kickbucks—which users can cash in for gift cards at shopkick retailers, prizes and for other small rewards such as song downloads from Napster or donations to charity.

Stepping into a store, however, will gain them more—depending on what the retailer wants to offer. For example, Dupuis says American Eagle offers around 35 kickbucks for a ‘Walk In’. The points automatically drop into the app when the customer walks into the store. Then, once a retailer knows the shopper is in the store, it can give her special discounts and offers, let her know about items on sale or shell out more kickbucks for taking actions that indicate she is involved and more likely to buy.

For example, shoppers who get so far as to enter a dressing room at a participating American Eagle can scan a poster for an additional 35 kickbucks, Dupuis says. Dupuis envisions taking the rewards throughout the store, offering, say, another 35 kickbucks for scanning the bar code on a jeans tag.

However, it can take a lot of kickbucks to get much. Dupuis estimates the going rate for a song download is around 250 kickbucks, and a shopkick spokeswoman confirms a $5 gift card at American Eagle requires 1,250 kickbucks. But she adds merchants can structure rewards however they wish. For example, she says one merchant is currently offering a $25 gift card for 250 kickbucks. Not to be outwitted by sly shoppers, merchants put caps on the amount of times per day shoppers can enter a store and complete tasks to earn kickbucks.

Shopkick gets paid a small fee for each kickbuck a store doles out. If a consumer buys an item after using the app, Shopkick gets a percentage of the purchase price, shopkick says. There’s also a fee for the shopkick signal transmitters, which the spokeswoman says cost less than $100 each.  American Eagle says it has two to three in each store.

In addition to kickbucks, retailers can offer store discounts or promotions for shopkick users. The way a shopper redeems a special store offer presented through shopkick depends on the retailer. At American Eagle, for example, consumers click a “Use it” button in the app to apply the offer. When she is ready to purchase, she clicks a “Checkout” button to display a discount code to present to the cashier. To use an offer at Best Buy, a shopper informs the cashier she is a shopkick user and provides her cell phone number. Then, any applicable shopkick discount is deducted and appears on the shopper’s receipt. 

Shopkick CEO Cyriac Roeding says his company is not competing with the likes of foursquare and Gowalla, which he views as location-based social networks. Shopkick, he says, is a location-based shopping app—tightly tied to the shopping experience and designed to entice shoppers to buy.

Dupuis agrees, although he says it’s still too early to share results. “Shopkick is the first mobile application that truly rewards the user for engaging in the physical store environment,” he says. “And it offers a level of location precision I’ve yet to see anywhere else.”

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