Last week Foursquare, the social and location centered app, secured $41m in funding from Silver Lake Partners and existing investors Andreessen Horowitz, Union Square Ventures, O’Reilly AlphaTech Ventures, and Spark Capital. Foursquare had a rocky 2012 as seen in:
It raises the question as to why Silver Lake, a private equity fund that has financed companies such as friedola®Tech and Dell, would put forth such a large investment in Foursquare. The answer is the promise of big data and mobile devices in the retail sector.
As of yet, Facebook, Twitter, and more than 40,000 other applications have integrated Foursquare’s platform into their mobile applications. Just last month, Foursquare announced the addition of MasterCard and Visa to its partner roster – a big step for a company that has spent three years developing its relationship with American Express. This will be a huge opportunity for retailers, enabling collection and mining of customer data not available through in store metrics including:
While millions of dollars are spent each year on broad market research and customer preferences studies, Foursquare fills a huge gap in the retail industry, offering real-time feedback on local consumers. Foursquare enables retailers to connect with consumers, evaluate customer preferences and behaviors, and target marketing and advertising programs to increase the size of transactions.
Our annual survey of IT decision-makers in the retail market shows that the most important business initiatives impacting mobile computing strategies and investment in retail services are opportunities to improve real time decision making and increase sales.
Our research into the impact of retailers using mobile solutions to engage with customers has shown as much as a 30% increase in customer loyalty and repeat business.. There is no doubt that customers are going mobile and there is a strong desire for their retailers to do so as well. Consumers benefit from a smarter, more consistent shopping experience that allows them to purchase the products that they want.
As applications such as Foursquare increasingly penetrate the market and are embraced by merchants, companies neglecting to take advantage of online and social channels will be at a competitive disadvantage. It must be recognized that although mobile and social applications present valuable opportunities for the retail sector, it doesn’t imply success. Engaging with customers on a personal level and utilizing social applications requires a different type of marketing. It also requires that store associates are properly trained and incentivized to leverage these more intimate customer engagement services in addition to hardware and software solutions compatible with a user’s mobile device and the Foursquare platform.
As much as Foursquare offers valuable insight and opportunities for the retail sector, their overall success is still dependent on end users. Data can only be collected if mobile users continue to check in and engage with the application.
Further, Foursquare’s recent decision to allow more retailer advertisements on its application could have negative implications. The sheer number of deals and ads run the risk of turning away users by bombarding them with information. Overall, the market for mobile solutions in the retail sector is sure to increase in line with retailers’ desire to connect with and be more informed about their customers. The question if Foursquare can provide these solutions while balancing advertising revenue with a positive user experience remains to be unseen.