How Shopkick Aims to Kick Off a 'Geo-Retailing' Revolution

Shopkick co-founder and CEO Cyriac Roeding addresses Best Buy's sales team and shoppers last week. (AP)

In New York City, it's all about "location, location, location." The same seems to apply to hot startups these days with the ascendance of red-hot mobile networking application Foursquare, which lets you track your friends' whereabouts -- and more important, allows retailers to get a better sense of who their most loyal customers are.

The latest entrant into the geo-location game is Shopkick, a Silicon Valley-funded startup that has been attracting some strong buzz in recent weeks. Shopkick's free iPhone app -- launched today -- combines location-based features with shopping, hence its slogan "mobile meets retail." It hopes to deploy this "geo-retailing" service to hundreds of retailers across the country.

Here's how it works, according to the company. A customer walks in the door of a Shopkick-enabled retailer. Instantly, on their mobile phone, they'll "learn of great deals at that store that can stretch their dollar. In addition, just by entering the store, the customer earns a new Shopkick currency called 'Kickbucks' that can be redeemed for rewards or even donated to charity."

Last month, Shopkick announced a $15 million B funding round, led by Greylock Partners and Reid Hoffman, CEO of LinkedIn, and an investor in Facebook and Zynga. Shopkick has also been funded by Silicon-Valley venture capital titan Kleiner Perkins's iFund.


Bridging Digital and Physical Shopping

"Location-based apps at the intersection of physical retail stores and smartphones are the next big opportunity in mobile. Shopkick has created an extraordinary model for consumers, retailers and brands where everyone wins," Hoffman said in a statement. "Shopkick will catapult location technology forward, turning offline stores into interactive worlds, and offering retailers and brands the first marketing vehicle that is entirely performance- and location-based."

To begin, Shopkick has partnered with Best Buy (BBY), Macy's (M), American Eagle Outfitters (AEO) and the Sports Authority, as well as shopping-mall giant Simon Property Group (SPG), a public company that owns or has an interest in over 100 malls across the country. Best Buy will launch a test-run of the service in over 250 of its stores by Oct. 1.

"We think consumers have more opportunities than ever to bridge their digital and physical shopping experiences, particularly through smart phones and mobile technology," Matthew Smith, Best Buy's vice president of marketing services, said in a statement. "We intend to explore ways we can use the power of location-based technology to personalize a Best Buy shopping experience, from check-in to check-out, with rewards and offers delivered right on a customer's smart phone."

Julie Ask, a vice president and principal analyst at research firm Forrester, recently wrote that Shopkick is "one of the most interesting mCommerce [mobile commerce] plays I've heard about this year. The location detection really works, as do the personalized offers. A performance-based model that retailers control will be attractive. Depending on the deployment costs, Shopkick's capacity to build out locations, and network growth, this service may emerge as one of the "must tries" for those looking to drive real and not imaginary traffic into their locations."

Selling Your Privacy Too Cheaply?

But as with many location-based services, Shopkick has raised concern among privacy advocates.

"Shopkick should rename their awards currency 'kickback' -- instead of 'kickbuck' -- because you are handing them a treasure trove of your personal data," Jeffrey Chester, the executive director of the Center for Digital Democracy, said via e-mail. "Consumers have to ask themselves -- is this a good trade-off for my privacy? Shopkick's so-called rewards are really digital bribes so you will gave them carte blanche to collect reams of data on you."

"In today's ubiquitous digital marketing world, what appears to be a relatively harmless trade-off of your information for rewards or discounts is really misleading," Chester added. "Your information can now be instantly combined with both offline and online databases, that can contain information about your health, financial and family status."

Will Shopkick revolutionize the retail experience? Time will tell, but the company has certainly enticed some big-name backers and generated a nice amount of buzz -- and not all of the positive variety.