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A woman walking out of the Hudson's Bay Company store at Queen St. West and Yonge St. in Toronto on July 3 2014.FRED LUM/The Globe and Mail

Hudson's Bay Co. is testing out a mobile advertising program that will send messages in real time to shoppers in its stores.

On Monday, the retailer will announce that it is using technology from a company called Swirl to manage location-based mobile alerts at the five largest Bay and Lord & Taylor stores in the U.S. and Canada.

The technology is a step forward for Hudson's Bay, which has lagged somewhat in its e-commerce strategy. Swirl uses "beacons" – pop-up messages transmitted to a mobile phone via bluetooth, when the phone is detected in a certain location.

For example, a shopper who is near the handbags display might receive a message about newly delivered Michael Kors merchandise. At the flagship store on Queen St. in Toronto, the home wares floor has been remodelled, and people entering the building could be encouraged to visit it. The beacon could also recognize someone who has not been to the store before, and offer them a free cup of coffee to give them an experience that would encourage return visits.

"The amount of mobile usage that our customers are engaging in has grown dramatically," said Michael Crotty, executive vice president and chief marketing officer at Hudson's Bay Co. "As a retailer, if you're not thinking about the impacts of mobile on your retail marketing, you're really missing the boat. We saw this trend, we've watched the data, and we've been looking for ways that we can enhance the store experience through mobile."

The roll-out will begin with stores in Toronto, Calgary, Vancouver and Ottawa, and at Lord & Taylor locations in New York and Massachusetts.

However, that does not mean that every shopper who passes through the doors will immediately have the sense that the store is watching them. The messages will only be sent to people who have downloaded the Bay's mobile application, or a coupon-collecting app called Snip Snap. And the messages will only go to those who have agreed to receive "push notifications," or messages from those apps.

Experts in mobile marketing widely agree that this type of opt-in system is crucial in order to overcome privacy concerns.

"This is not like a Big Brother type thing where you get something on your phone and have no idea why you got it," Mr. Crotty said. "We ruled that out."

"You need the permission of the consumer, otherwise it would be chaos," said Hilmi Ozguc, chief operating officer of Boston, Mass.-based Swirl. "You'd walk into the mall and it would be, 'ping, ping, ping.' It would be nuts. ... You can't just start spamming people."

The system is built so that there are clear instructions to opt out, and frequency caps that limit the number of messages a customer can receive in a given visit to a store, he said.

E-commerce has become a major focus for Hudson's Bay Co. The retailer is spending $40-million this year to bring its strategy up to date with the digital age – and catch up to other retailers. For example, U.S. chain Saks, which the company bought last year, has a much more developed e-commerce strategy which will act as a model for Hudson's Bay and Lord & Taylor.

Canadian retailers have fallen behind in their online sales strategies, and as a result, have lost business to more digitally-savvy retailers in the U.S. and elsewhere. According to a survey from J.C. Williams Group, two-thirds of online shoppers in Canada buy from websites located elsewhere.

But the growth strategy goes beyond just shoppers who want the convenience of buying from home. Retailers are recognizing the importance of "omni-channel" strategies, which use digital marketing to better reach in-store customers as well.

That's important because consumers are increasingly doing online research on products before they walk through a retailer's doors, or will do research on the fly on their smartphones while standing in a store.

Other retailers such as Indigo Books & Music Inc. and Starbucks have been working on their own mobile strategies. And telecom companies such as Rogers Communications Inc. have also begun selling advertising to reach subscribers on the devices they carry with them all day. In addition to Hudson's Bay, Swirl is working with retailers such as Timberland, Kenneth Cole, and others that are not yet public because they are still in the test phase.

Nearly three-quarters of all purchases are informed by customers' online research before they ever come to a store, Hudson's Bay chief executive officer Richard Baker told analysts during a conference call to discuss the company's earnings in April. And customers who shop both online and at bricks-and-mortar stores spend three to four times more than the rest, he said.

With Swirl, the company will be testing different frequencies – one per hour, one or two per visit – to see what gets the best response from consumers, Mr. Crotty said.

"What is innovative on the Bay's part is going beyond their own app," Mr. Ozguc said. "Not everybody is going to have the Bay's app, but they might have a general purpose shopping app. It helps them reach an audience they might miss if they only focused on their most loyal customers.

"They started as fur trappers. It blows my mind that they're on forefront of mobile technology."

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