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Store of the Future

Enhancing the Customer Experience using NFC or BLE



by Maria Caceres, Byron Corum, Kristin Nwakobi, Jose Vides & Isabel Vordzorgbe

Submitted to: Prof. Anand Gopal
University of Maryland
Robert H. Smith School of Business
MBA Program - BUSI 621


I pledge on my honor that I have not given or received any unauthorized assistance on this assignment.
Introduction
In the past few decades, technology has advanced to an astonishing level with new
innovations that create products that a lot of us use on a daily basis. The telecommunications
industry has been a part of these advances in technology with many well-known companies such
as Samsung, Apple, and Google creating products from smartphones to TVs. This paper focuses
on the wireless sub-industry within telecommunications. This paper is also written to provide
investors with information about the NFC and BLE technologies and make a recommendation as
to how investors should invest their dollar in either or both technologies. The paper will be
broken up into the following sections:
- a brief history of wireless
- pitch to investors and venture capitalists about the NFC and BLE technologies
- an explanation of each technology its functionality, manufacturers, and features
- a recommendation on how an investor should invest his or her dollar
- an explanation of the Store of the Future and the benets of using these technologies
- lastly an explanation of the different security issues associated with implementation of
both technologies

A Brief History of Wireless
The wireless industry has grown signicantly since the advent of phones and has had a
tremendous impact on our lives through innovation, competition, the environment, and other
societal benets. In 1977, experimental cellular systems were launched in Chicago and the
Washington D.C./Baltimore region. By 1981, the Federal Communications Commission (FCC)
had issued the Cellular Communications Systems Order, which stated that the cellular industry
should have two carriers per market and create cellular A and B licenses for each area of the
country. In 1993, Congress adopted the Omnibus Budget Reconciliation Act that established a
national framework for wireless regulation and authorized the FCC to auction spectrum for the
rst time. Shortly after, IBM released the rst smartphone, called Simon, to consumers, which
gave them access to a calendar, address book, calculator, email, and games. By 1995, there were
over 33.8 million wireless subscribers, representing approximately 13% of the total U.S.
population.
With the continuing growth of the number of wireless subscribers and the new
smartphone innovations made by companies such as Apple, Samsung, and others, the wireless
industry has changed with consumer demand and the ever changing technology environment.
The wireless industry has made communication and transmission of information very versatile
for individuals and businesses. With the use of radio waves that travel through spectrum to
transmit voice calls and data from mobile devices, wireless technology has helped to improve
efciency in a number of industries. However, wireless technology is still growing and new
advances are being made daily that go above and beyond what we consumers are able to
accomplish with these technologies.

Investing in NFC or BLE Technologies
When most customers walk into a store to buy items whether it is clothing, groceries,
electronics, home goods, etc., they have to walk up to the cashier to complete the transaction.
There are advances being made within the wireless industry to improve the customer shopping
experience, improve store efciency, and cut down the time it takes to complete various
transactions. Enter the Near Field Communication (NFC) and Bluetooth Low Energy (BLE)
technologies.
NFC and BLE are technologies that allow the statement above to become a possibility.
Both technologies allow customers to utilize their mobile devices as a means of communication
with other similar devices in close proximity. By implementing these two technologies in all new
smartphones and handsets, carriers can enable customers to use their phones and other devices
in contactless payment. In doing so, customers would no longer have to use their credit cards or
cash to complete transactions in different store fronts. The NFC and BLE technologies are going
to revolutionize the way we utilize our mobile devices, and with the growth of the wireless
industry, investing in these two technologies now would yield considerable returns down the road.


Emerging Technologies: NFC and BLE
Even though NFC and BLE have been around for about ten years, these technologies will
continue to grow and allow users to utilize their devices in various industries, such as commerce,
health, sports, communications, and nance.
Bluetooth low energy (BLE), better known as Bluetooth Smart, is a wireless personal area
network technology developed by the Bluetooth Special Interest Group (SIG). BLE provides
reduced power consumption and cost while producing similar communication range as Bluetooth
Classic. The two technologies utilize the same radio frequencies which allow for dual-mode
devices to share a radio antenna. BLE, however, utilizes a simpler modulation system.
Modulation refers to the process of varying multiple carrier signals with a signal that contains
information to be transmitted.
The intended markets that will utilize this technology are in the health, sport, and tness
sectors due to its low power requirements, small size, low cost, and compatibility with a large base
of electronics (i.e. phones, tablets, computers, etc). Within the wireless sector of
telecommunications, BLE is compatible with every smart-device, such as iOS, Windows Phone,
Android, and BlackBerry.
BLE is gaining momentum in wireless telecommunications since it can be used for home
automation, wireless medical devices, exercise sensors, retail, and mobile payments. With BLE
retail stores can detect which department a costumer is standing in and send them relevant offers.
It may boost mobile payments since it is still in its early stages. It will allow for consumers to place
their homes online, allowing them to lock doors, adjust lights, and even adjust the thermostat
from their mobile device. Major companies using BLE are Apple with its iBeacon and PayPal
with its PayPal Beacon. iBeacon is being adopted by airlines and retail stores to make the check-
in process smoother or to locate a customer within the store. PayPal Beacon allows customers to
use their PayPal app to pay, verify their transaction, and get an emailed receipt.
NFC is a short-range, low-power radio frequency communication between two NFC
compatible devices with simple setup. Communication between devices is possible between an
NFC device and an unpowered NFC chip, or tag. The exchange occurs by bringing the devices
within proximity or by touching them together, allowing small amounts of data to be transferred,
sent, and received, wirelessly over a short distance of usually less than 4 inches. NFCs two-way
communication is built upon radio-frequency identication (RFID) standards, the wireless non-
contact use of radio-frequency electromagnetic elds to transfer data.
NFCs main concepts are pairing, sharing, and transaction. It maintains interoperability
between different wireless communication methods such as Bluetooth. NFC-enabled devices can
enable, pair, and establish a Bluetooth connection to share information quickly. It can be used in
social settings to share contacts, photos, or les and enter multi-player mobile games. Companies
such as Sony, Nokia, and Samsung have used NFC to pair Bluetooth headsets and media players
with one tap in their NFC-enabled devices. Services such as Googles Google Wallet and
MasterCards PayPass use NFC-enabled devices to make payments since NFC can be used in a
vast number of payment systems. Since it supports encryption, NFC-enabled devices may be
allowed to act as electronic identication cards or access tokens. NFC is currently available on all
new smartphones except for Apples iPhone.

Recommendation
We recommend investing 75 cents of your dollar into the BLE technology, and the
remaining 25 cents into the NFC technology. Although the technologies are comparable and are
competitors in some respects, we recommend investing in both because we believe there is great
potential for the technologies to complement one another. We weighed the investment slightly
towards the BLE technology because we believe this is the lower risk, and potentially more
lucrative technology. In addition, BLE is currently available to a larger consumer base than NFC.
However, NFC is not far behind. By 2016, all new smartphones, with the exception of iPhones,
will be NFC compatible.
Below we will explore the Store of the Future, a vision of how the BLE and NFC
technologies together can revolutionize how consumers shop. Afterwards, we will discuss issues
that the industry will need to address in implementing either (or both) technologies into a store.

Store of the Future
The NFC and BLE technologies allow customers in a brick and mortar store to have the
same facility, low hassle, in and out experience as an online shopper, with the ability to physically
encounter merchandise. For starters, when entering a shopping area (via a BLE based system),
the client would be recognized by name or unique identication settings. Searching throughout
the store for a particular item (BLE supported), availability (both), particular features (NFC), price
range (related to onsite or offsite stores - both), and nal pay options (NFC).
Availability of an item is provided up front to the client with a guaranteed sense of
accuracy because inventory is tracked in real time. Furthermore, the client has the choice to place
an online order for an item that is not actually present in store.
Pricing of each item is provided up front, to include any manufacturers coupons, if
need be. Upcoming sales of items, which may cause a consumer to buy in larger
quantities, will also be promoted before nal purchase. This provides the customer a
more tailored and satisfying experience.
Allowing the consumer to create save his or her own experience is key to what NFC
technology is able to offer its users. Just as an online shopper sets and saves particular
parameters on his or her virtual store, an in-store shopper is able to opt in or out of
each feature provided, at any given time.
Through a BLE sustained system, each consumer has a unique recognized store
identity, and the store has of the consumers payment, product purchasing history, and
shopping preference information store for future use.
Customers would gain wide availability to obtain particular item information via NFC.
This would lead clients to require less attention from store employees. Such a change
would allow stores to reduce payroll and shift the roles of existing staff. Some employees
may be retrained to provide higher levels of customer service and increase client loyalty
level.
Information on available discounts and deals and a price comparison tool can be made
available to the client, instead of providing them with unwanted and unsolicited notices. In other
words, a shopper, who has properly set-up his or her account with the store, will be greeted with
relevant, cost-saving offers. The popular shoppers who purchased x product, also purchased a, b
and c items, located in specic area of store feature would be embedded into the store
experience via BLE and NFC. This capability will increase income for the store and create a
virtual personal shopping experience that the customer could opt out of at any point.
Checkout lines will become a thing of the past. Consumers will be able to purchase items
as they go. Items not available at the time of purchase would be delivered without the consumer
having to return to the store for pick up or to receive a rain check voucher for future purchase.

Ready-made CRM and ERP









NFC and BLE technologies cannot only help customers by improving their shopping
experience; it can help companies make their internal processes more efcient. A company can
utilize the technologies to improve their workforce tasks by limiting time-consuming tasks such as
manual inventory count and any potential human errors that are associated with the task. It can
also improve their inventory management in various ways. With the scan of a tag, they will be
able to receive real-time information about their inventory needs via the cloud on the employees
mobile phone. Companies will be able to see information about how many times a product has
been viewed, purchased, or returned.
They can also utilize the technologies to determine where certain products may sell well
within different locations in the store (i.e. candy and magazines at the checkout lines). When a
particular product is running low, companies will be able to facilitate dynamic route optimization
and other logistic efciencies. By recognizing their inventory needs, companies will also be able to
maximize oor-space and sales per square foot by maintaining stock of popular products. By
having an efcient inventory management process, the store will be able to see revenue growth
from fewer abandoned orders due to out of stock merchandise, an increase in brand loyalty
amongst their customers, and be able to provide greater customer service to their customers.
Combining customer resource management (CRM) with NFC and BLE technologies
gives stores access to a vast amount of information about their customers that will allow them to
make informative purchasing decisions. From the business perspective, knowing the buying habits
of their customers, in-store staff have relevant information that is of interest to a customer when
they are in the store. For example, a manager can be notied when a big spender is shopping in
the store. Another example is when a sales associate notices that a particular customer tends to
order healthier items, which will prompt the associate to inform the customer about a new salad
that is being offered. A business can also send coupons to the customers phone based on the
customers purchasing history when they are within the store. As a result, the store can then take
appropriate actions to upscale pertinent products.

Issues with Emerging Technologies
There are a number of issues that a store will have to consider when implementing these
technologies.

Electronic Security
In order for the Store of the Future to function the way we envision it, customers will
have to share their private information with the store. To get customers to consent to share their
information, the store will have to ensure them that their information is safe, and consider the
following things to make sure the information is actually safe.
Monitor the points of contact between the customers smartphone and the stores
infrastructure to prevent tampering.
In our example, our stores system interacts with the customer upon entry into the
store, and when the customer selects an item for purchase. If an outsider is able to
compromise any of these tether points, he or she could potentially gain access to
the private information of the customers.
Ensure that the personal data collected from customers remain secure.
For any given customer, the store will have access to his or her credit card number,
phone number, address, shopping habits, and many other pieces of valuable
information. Securing this information will be of paramount importance if the
store intends to earn and maintain trust.
Design the software so that the store only collects information relevant to store
transactions.
A customers smartphone saves many pieces of data that he or she would not want
to share with the store. The stores software should be designed to restrict access to
information outside the scope of a customers purchase decision, such as personal
pictures or private documents.

Physical Security
One of the goals in implementing a BLE or NFC system is to make customers more
autonomous. If they choose, customers will have the ability to shop and pay for items without
interacting with a store employee. While this works well to prevent long lines and for customers
who are in a hurry, it presents a logistical shrink problem for stores.
An inventory system that links a selected item to the customer and pulls it from the shelf
will need to be developed and implemented. In the extreme case, this will require each piece of
inventory to be individually marked with an NFC tag. This would allow the store to track each
item as it is viewed, moved around the store, and paid for. If an item goes missing, the store will
have a log of all customers who have handled the product.

Consumer Awareness
A successful implementation of a BLE or NFC system will depend on consumers being
aware of the system and understanding its benets and uses. With the exception of the recent
upswing in eCommerce, basic store-customer relationships are the same today as they have been
in the last century. A customer travels to the store, shops around, receives assistance from staff,
and pays a cashier for the products. A successful BLE or NFC system will change this, and make
the process more efcient for both the store and the shopper.

Implementation Costs
Implementing a BLE or NFC system in a store will come with various costs. The most
immediate cost will be the cost to set up the BLE beacons and NFC tags. Please see Exhibit 1 for
a rudimentary cost estimation based off the average K-Mart store. Beyond this, the store will
have to pay to train its employees and invest in an appropriate support structure. To maximize
the benet of a BLE or NFC system the store will need to design both CRM and ERP systems
that can use the information.
If the store is unable to effectively use the data it collects to tailor a customers shopping
experience, then it is not properly using the system. Investing in a proper CRM system will allow
a store to exercise as near to rst-degree price discrimination as possible. The ability to send a
coupon to a customer as he or she enters the store should help to ensure that the store extracts as
much of consumer surplus as possible.
The inventory tracking solution discussed in the physical security section will lend itself
well to a proper ERP system. Recall that the system will give a store a very accurate account on
how many times an item is viewed, bought, and returned. At an in-store level this will help the
store to keep it shelves stocked. On a broader level it can help the stores manufacturing and
ordering decisions.

Conclusion
It is clear that benets are found in each, the Near Field Communication (NFC), and
Bluetooth Low Energy (BLE) technologies. NFC, with its short range capability, provides strength
in the sense of personal information security for users, especially when used to making payments.
BLE provides a system for long range uses, and removes any need for interacting, BLE supported,
devices to be in closer proximity of one another. Our take, in terms of near future nancial
growth in each area, is BLE will have the most momentum. NFC will also see growth, but in
smaller scale. The success of the Store of the Future concept depends on both NFC and BLE
technologies to be present. One key factor, in the success of any NFC or BLE system, will depend
heavily on consumers awareness of product existence, learning how to actually use the
technology, and embracing the benets each system has to provide.

Citations
http://en.wikipedia.org/wiki/Near_field_communication

http://www.popsci.com/gadgets/article/2011-02/near-field-communication-helping-
your-smartphone-replace-your-wallet-2010

http://en.wikipedia.org/wiki/Bluetooth_low_energy

http://www.cio.com/article/
748509/5_Things_You_Need_to_Know_About_Bluetooth_Low_Energy

http://en.wikipedia.org/wiki/Radio-frequency_identification


















Exhibit 1
BLE and NFC Cost Estimation
1 refer to footnote 1 below
1
This exhibit estimates the purchase price of BLE or NFC hardware, respectively for a
large retailer (average K-Mart store). The tables refer to the cost of the beacon or NFC
tag, but not the supporting systems. Because our recommendation is for our investor (and
later stores) to use both technologies together, we assume that any system will support the
technology, thus those costs will be the same for each.

2
Technically, three beacons should be sufcient to cover the store, however physical
structures can affect the range. K-Mart would be wise to have multiple sections of
overlap. Furthermore, we want beacons near each entrance to greet each customer.
Therefore, we are estimating the average K-Mart will need nine beacons.

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