Shopkick systems sit in some of retail's largest chains including Best Buy, Target, Macy's, Crate and Barrel, Sports Authority, American Eagle Outfitters and Wet Seal. That's one reason why this issue is so potentially disruptive.

The second reason is that this fraud effort is so extremely easy for consumers to do. It requires no jailbreaking of phones, no scripting or anything else. All consumers have to do is go to the fraudster's Web site and play an MP3 file while their phones are nearby. The barrier to entry for this fraud is frighteningly low.

"The irony is that Shopkick was one of the leading vendors attempting to offer a more accurate alternative to GPS-based mobile applications," said StorefrontBacktalk Editor Evan Schuman.

"GPS absolutely has its issues, too. The ability to pinpoint where a store is can be frustrating, especially in an area where retailers are tightly next to each other-such as in a major city-or where the stores are mostly inside, such as a shopping mall. But the argument that the sonic sound approach is proof-positive that the consumer is really in the store, that's going away."

This issue is important now as retailers are experimenting with a wide range of mobile applications.

"Today, vendor incentives of various forms mean that the major chains are likely not paying much-and, most likely, nothing at all-for participating in these mobile trials," the report said. "That means that even if it yields just a few new customers, it's worth it. What about months from now when retailers will be expected to pay for every customer who checks in? Does this undermine the faith in the accuracy of these first-generation mobile systems?"

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