Shopkick sets its sights on local merchants with free offer

Shopkick, a location-based deals and rewards shopping app, is going local, offering merchants free hardware that integrates with its loyalty service. In a deal with Shopkick investor Citi, the company is offering free installation of Shopkick signal boxes at 1,000 stores owned by local merchants.

The deal represents a turn for Shopkick, which has focused so far on lining up big national retailers like Target, Macy’s, Best Buy and American Eagle. The goal for Shopkick is now to recruit small and medium-sized businesses in locations starting in Austin and Dallas/Fort Worth; Chicago; Detroit; Los Angeles and the San Francisco Bay Area; New Orleans; New York City; Seattle; and Washington, D.C. Business owners will need to apply with Shopkick, which is looking to help places like coffee shops, yogurt shops, cafés and local fashion stores.

If you’re not familiar with Shopkick, it allows users to earn “kick” currency for visiting stores or doing specific things like scanning a product. Shopkick recognizes a user with a signal box installed at a location, sending out a notice received by iPhone and Android devices that have the Shopkick app installed. Users can eventually redeem real rewards with their accumulated kicks. The app has been downloaded 1.8 million times since it became available in August.

The service has been well-received by some retailers, because it allows them to drive actual foot traffic, and measure how their deals are faring with users who are confirmed to be in the store. Sports Authority, for example, was able to get 50-70 percent more walk-ins by increasing the amount of kicks it awarded to Shopkick users. By ensuring that a consumer is present, the app allows merchants to engage directly with their customers, and to reach out to them with offers and rewards based on loyalty.

This is part of a larger battle brewing between companies like Foursquare, Facebook, Google, Groupon and a bunch of other services, which are trying to tap into marketing budgets of local merchants. Shopkick’s move to broaden its outreach to smaller businesses makes sense, because the opportunity in the space isn’t just limited to companies with national footprints. But it also faces challenges. Convincing people to sign up for free signal boxes may work to attract an initial pool of 1,000 locations with relative ease.

But local businesses who don’t qualify have to pay for hardware, which costs something less than $100. And retailers who aren’t in the free program will need to pay Shopkick a small commission fee for each “kick” a customer earns and a percentage of any transactions people make after using an offer. Check-in based services like Foursquare don’t require the same investment, which could be a selling point for the competition

But it seems like Shopkick is connecting with its users; 40 percent of those who sign up are active monthly. That’s a solid percentage for a new service, and shows the model can work. Now, the company needs to be able to convince local merchants that it makes good financial sense to sign on. Making it free for a limited number business owners can help, but Shopkick still ultimately has to prove that its success with national retailers can translate and scale to local shops.