Disruptors Reinventing the Retail Marketplace

The phone is the only device that’s with consumers all the way through the checkout counter. So the explosion of smartphones offers a new opportunity for retailers to communicate with consumers all the way to the cash register.

While there’s been an explosion of apps and websites bringing retail online, with the likes of Shoptiques.com, iBoutiques.com, and FarFetch bringing boutiques to the web, the latest wave of innovation is focused on bringing mobile technology into brick-and-mortar retailers. \(Read More: Interview with Shoptiques Olga Vidisheva.\)

Nielsen reports that almost half of U.S. smartphone owners, about 45 million people, used shopping apps in June, accessing them an average of 17 times.

It's no surprise, eBay and Amazon were the most popular shopping apps, drawing 13 million and 12 million unique users, respectively, followed by daily deal service, Groupon . But the fourth most popular shopping app is ShopKick, a startup focused on bringing shoppers into stores, rather than helping them shop online.

Not only did 6.5 million unique shoppers access ShopKick in June, but the average time spent on the app was many times more than any of the other shopping apps on the top 10 list —three hours and 19 minutes on average. (More: Top Disruptive Products)

Cyriac Roeding, Shopkick's CEO and co-foundersaid he created his app to reward people for visiting a store, to help drive the most important thing for retailers — foot traffic. "Once you get shoppers in the store you have a really good chance of actually making a sale. In the online world, conversion rates are usually between 0.5 percent to 3 percent. In the physical retail world, it's 20 percent to 95 percent," Roeding said.

Here's how ShopKick works: If the app is open on a user's phone, he or she automatically earns points, called “Kicks” for walking in to one of a dozen participating businesses, including Target , Old Navy, Macy's , Best Buy, and Exxon Mobil.

Users can earn more points by interacting with a brand or picking up a product suggested on his or her smartphone.

ShopKick works with some of the largest brands, including Procter & Gamble, Walt Disneyand Hewlett-Packard .

Roeding says that in an average trip to the mall, a user can earn enough "Kicks" for a dinner for two at say, Cheesecake Factory. And users can add up "Kicks" for a range of rewards, including aCoachhandbag.

Retailers only pay if they see an increase in foot traffic.

"ShopKick is the first 100 percent performance-based marketing model in the physical retail world," Roeding said. "If somebody walks through the door, they pay us for 'kicks.' If nobody walks through the door, they don't pay us for anything."

Why do brands pay? “Because when you stand in front of 20 detergents on the shelf at a grocery store you need to make a decision which one you pick up, and if you get ‘Kicks’ for picking up one product over another, you’re already holding the product,” said Roeding. “We’re flipping it on its head, from making a decision to pick it up to making a decision to not buy it.” (Top US Brands)

Shopkick has raised $20 million from big Silicon Valley names including LinkedIn founder Reid Hoffman, and Twitter investor Kleiner Perkins Caufield Byers. (More: How Venture Capital Sees Disruptors)

But Shopkick isn’t the only player using online technology to drive offline retail.

There's a startup called InMarket (formerly Checkpoints).

When users walk into a store the app shows featured products to scan with the app’s barcode reader. Then users receive an interactive game provided by that brand. Instead of partnering with stores, like ShopKick does, InMarket is focused on brands, and the barcode scanning-technology in particular.

As more people fiddle on their phones as they walk into stores and make decisions while inside, ShopKick and InMarket are at the start of what’s sure to be a big market for applying online tech tools offline.

—By Julia Boorstin