NEW YORK - The nation's biggest mall operator is teaming up with a Silicon Valley start-up to reward smart-phone-equipped shoppers for walking into its shopping centers.
The partnership between Simon Property Group, which owns 370 shopping centers, and technology company Shopkick Inc. is a big step in realizing retailers' long-held dream of using cell phones to beam ads and coupons to passers-by.
Simon plans to start the program by the end of the month in 25 malls in New York, Los Angeles, San Francisco, and Chicago.
Separately, four retailers including Macy's Inc. and electronics chain Best Buy Inc. will start Shopkick offers at the same time at some stores. The other two are being kept under wraps.
The potential to expand the program and affect how and what shoppers will buy is huge, said Mikael Thygesen, Simon's chief marketing officer. He is traveling around the country to recruit more retailers into the program.
Mr. Thygesen expects to roll the program out to 100 of Simon's 370 shopping centers over the next couple of months. He anticipates one-third of the centers' stores to sign up over the next year. Each center averages about 140 stores.
Shopkick's system doesn't use the Global Positioning System, or GPS, which is what phones usually use to determine their location. Instead, it relies on retailers installing small speakers at the entrance to their stores or the mall. The speakers emit an inaudible sound that can be picked up by cell phones and contains a code that identifies the store.
Customers have to pull out their phones and fire up the Shopkick application - available for iPhones and Android phones - to pick up the signal. The app figures out where they are, then credits their account with "Kickbucks," which can be redeemed for songs from Napster; Facebook credits, a currency that can be used to buy games; magazine subscriptions; and cash-back rewards at store partners.
Participating stores also will be sending their own offers, which could include sneak previews to a new fragrance launch or discounts on goods.
One step that may give privacy-conscious customers pause is that they have to give their cell-phone number to the cashier to redeem the rewards to identify their accounts.
"We view this as a win-win … for retailers and for consumers," Mr. Thygesen said. Shopkick will drive shoppers not only to enter stores but also steer them to particular merchandise, he hopes.
Shopkick's transmitter system guarantees that customers are in the store, not nearby, because the sound doesn't travel far, said Cyriac Roeding, co-founder and CEO of Shopkick. That sets it apart from GPS systems like Foursquare, an app that encourages people to "check in" to stores and other locations to let friends know where they are and compete to accrue "points," which have no cash value. Retailers want more accuracy than that, Mr. Roeding said.
"Nobody can reward anybody for being in the parking lot," Mr. Roeding said.
Mr. Roeding said Shopkick isn't intrusive because shoppers have to actively use the app, and the system can't track their location outside the store.
At the beginning, shoppers will get generic offers, but as they keep using Shopkick, the technology will learn their preferences and send more customized offers. Retailers will pay Shopkick only for those consumers who walk into their stores with the app recognizing the signal. Payment terms weren't disclosed.
Forrester Research analyst Sucharita Mulpuru, who previewed the Shopkick technology, said it will help drive customer loyalty but does require a shift in shopper behavior.
"Right now, people are using their smart phones for texting. They're looking at news sites and playing games," she said. "But they're not really shopping yet."