We have blogged previously about the steady rise of e-commerce, the benefits and challenges of creating a cohesive omnichannel experience, and some of the special issues omnichannel creates for the landlord-tenant relationship. Customers may appreciate the convenience of omnichannel, but they do not spend much time thinking about where a sale technically takes place. Retailers and their landlords, by contrast, need to understand the relative return of various channels and the location of sales to keep customers happy with their brand or experience. Both retailers and landlord need to keep their businesses running efficiently and profitably, even as a shrinking proportion of actual sales are run through the cash register. The key to that game may be “geolocation, geolocation, geolocation.”

Basics of Geolocation

In the retail context, mobile “geolocation” takes advantage of GPS and Bluetooth capabilities on customers’ smartphones, together with retailer and shopping center Wi-Fi networks and hardware known as “beacons”, to pinpoint exactly where customers are within a space. Retailers can establish a virtual perimeter or “geofence” in or around their store (or a competitor’s) and automatically send a text message or email with a special offer, or set up beacons to guide a shopper to exactly the right shelf. When a customer browses in-store and then purchases later through an app from home, the retailer will have the data it needs to make the connection between the store visit and the online sale.

A Range of Technologies

The technologies that enable geolocation are still developing, and each has its own benefits and drawbacks. Systems that require a user to opt-in may offer a less than complete picture of a customer’s movements, while GPS-based systems that rely on the customer’s cell network to connect may function poorly in some indoor spaces. Beacons are more precise, and use less battery power from customers’ phones, but have a shorter range.  As a result, a geofencing program requires careful and considered implementation so that a retailer understands not only the capabilities but also the limitations of the chosen technology, as well as the impact it may have on customers (shoppers who have not knowingly opted in may be dismayed to find a retailer has been tracking their movements, and even a customer who loves the coupons would be angry to find out the location-based app is draining their battery).

Benefits for Retailers and Landlords Alike

Not only can such data help retailers plan their store layouts and inventory levels and build brand loyalty, but landlords can use the data to establish appropriate percentage rent provisions for their retail leases, enabling them to preserve the traditional alignment of incentives between landlord and tenant and helping ensure they receive proper credit for “show rooming”— when shoppers visit a brick and mortar store to investigate options, but make their purchases later online.

In short, in addition to improving the customer’s experience and sense of convenience, the ubiquity of smartphones and the ever-better, ever-cheaper options for geolocation offer revolutionary opportunities for retailers and their landlords to gain insight into what is actually going on, and where.