163107501You know those geo-location services that tap a smartphone's internal GPS to match consumers' whereabouts to local businesses and special offers? That technology has been successful outdoors -- and now it's moving indoors too, allowing the same kind of tracking and promotional capabilities. Major players like Apple and Google are jumping into the space, along with scores of startups.

The biggest challenge is to overcome the poor performance of GPS in indoor environments without the need for retrofitting smartphones with expensive sensors. Apple's offering in this space is iBeacon. And last year Apple acquired WiFiSlam, an indoor GPS location tracking technology that can pinpoint a person's location to within 2.5 meters. Also in the space are newcomers such as ShopcloudDónde, and IndoorAtlas, which are coming at the problem with approaches that include WiFi triangulation, Bluetooth, beacons, sensors, and magnetic fields.

Just like the more familiar geo-location services, indoor location services provide retailers with a way to serve up coupons and special offers to shoppers based on their physical location in a mall. But they can also enable retailers to take the marketing concept a bit further, letting them target offers based on where a shopper is actually standing in a brick-and-mortar complex. We're talking about the ability to serve up a coupon for Crest toothpaste just as a customer strolls down the health and beauty aisle, or pushing a 20% discount offer to a buyer just as she's examining the quality of the wool on a specific sweater.

Other possibilities for indoor location services include providing a roadmap of sorts to on-sale items throughout the store, and delivering product-specific content based on shoppers' actual browsing behavior. Retailers could also leverage the technology to keep better tabs on product SKUs in stores.

Macy's has been pilot testing a program whereby it notifies shoppers of what's on sale in a particular store location. Major League Baseball has announced plans to leverage Apple's iBeacon technology to deliver content to fans in the stadiums.

Exploding Market

While it's still early on in the trial phase, market analysts are betting big on indoor location services. ABI Research is projecting the market will reach $4 billion by 2018, fueled by wireless technology and fresh retailer location content. IndoorLBS says there are at last 170 companies currently operating in the indoor location market, offering up everything from indoor map content to in-building tracking and indoor navigation capabilities.

One of the newest entrants in the expanding field is a service called Inside, launched by Israeli startup Shopcloud. While other competitors employ a WiFi triangulation technique, Shopcloud maintains it has come up with a unique learning system and computer vision algorithms that work in tandem with a smartphone's camera and gyro sensors to propel its location targeting, an approach it claims gives it the highest levels of accuracy.

Inside builds on Shopcloud's initial product, which was a digital platform used by retailers to create apps that helped customers navigate products on display in stores and even pay for them.

While early pilot success is one thing, Shopcloud, and any other indoor location services provider, is going to have to come up with a plan to get mapping data and product location data from retail providers. Shopcloud launched with 10 initial locations mapped in Israel, and the company is aiming to up that significantly to 200 once the technology comes out of beta, as part of push into the United States.

Dónde is another startup pitching innovative location technology for what it's billing as a better store locator. Dónde's service will not only tell you if a particular store is nearby; it also promises the ability to offer insight into what specific products are available at each store.

It will take a bit of work on the retailers' part to participate in the Dónde service, however. Retailers will have to provide the company with details on product availability via distributor sales reports, their vendor database, or in some cases, via integration with a real-time inventory database.

What users will see is a list of the nearest stores on their mobile device, based on their current location, filtered by the specific product they are searching for. Early customers for the service include SkinnyPop popcorn, LasikPlus, and Louisville Slugger, among others.

The next time you reach for that bag of chips at the grocery store or a power tool at a big box home store, don't be surprised if the retailer does really have a deal made just for you.

Originally published Feb 13, 2014 9:00:00 AM, updated February 13 2014