The Internet of Things (IoT) will disrupt all industries, but there’s little doubt that retail will be one of the most disrupted. More so than companies in other industries, retailers are increasingly coming in direct contact with consumers that fully embrace digital transformation in their lives, including IoT-related technology and innovation. Retailers that want to be innovative and stay current with the latest technologies need to embrace the IoT and embed it into their operations not only to impact front- and back-office process efficiencies, but also to earn the loyalty of the next-generation consumer.
Leading retailers are already developing strategies and plans to leverage IoT-related technologies.
- Nearly 96 percent of retail decision makers say they are ready to make the changes required to adopt the IoT.
- Global spending on retail IoT initiatives is expected to grow from $14.3 billion in 2015 to $35 billion by 2020.
- Eighty percent of retail decision makers believe IoT technologies will drastically change the way companies do business in the next three years.
- More than 70 percent of retailers have already implemented at least one sensor-based project and are actively exploring additional IoT-related projects.
- According to surveyed retailers, maintaining inventory accuracy in stores is the top IoT opportunity in retail.
- Most retail associates (80 percent) agree that improving in-store communication among staff and managers would have a significant effect on shopper satisfaction.
- Digital signage use in retail outlets will grow from $6.0 billion in 2013 to $27.5 billion in 2018, as retailers continue to digitize the consumer experience.
New technologies are permanently transforming how customers communicate, interact, research and shop for goods and services. IoT data harvested from smartphones, wearables, sensors and other devices will provide significant new insights and opportunities. Paired with retail analytics, this IoT-generated data can assist retailers in understanding and responding to the disrupted landscape and changing customer expectations.
Retailers looking to leverage the Internet of Things will innovate in four areas:
- Enhanced customer experience
Increasingly, customers are expecting personalized service based on their shopping histories and value a one-on-one relationship with a brand. Combining data from IoT devices with shopping history and other customer data, retailers can create a single view of each customer, find patterns and deliver a more relevant shopping experience in real time, for example:
- Use a shopper’s in-store location to deliver timely, relevant and personalized content and offers, such as digital coupons or loyalty rewards.
- Provide new ways for shoppers to interact while in the store like scanning a barcode on a garment or other product to show product information, find other colors or sizes on the retailer’s e-commerce site, or check reviews and social media conversations.
- Use smart mirrors in dressing room areas to allow customers to “try on” different clothing brands, colors and styles virtually. The mirror could quickly “add on” accessories and then offer to have everything delivered to the shopper’s home.
- Deploy beacons (in-store sensors) to provide employees with notifications of locations of VIP shoppers and frequent store visitors. Employees can then access purchase histories and personal preferences to help them deliver high-touch service to their most valuable customers.
- Provide digital signs that suggest products and services based on desired activity level tracked by wearable fitness or a branded medical monitoring device.
By leveraging the Internet of Things, retailers will be able to shape brand experiences in real time and in ways that reflect customer interests and lifestyles.
2. Optimized store operations
Data harvested from IoT sensors and devices will enable retailers to improve their operations. The IoT not only can help retailers better manage store assets, employee labor and energy usage, but also improve in-store marketing efforts, for example:
- Smart building technology, including IoT-connected thermostats, lighting, refrigerators and freezers can manage energy usage.
- In-store IoT-enabled smart cameras, beacons, sensors and microphones can be combined with real-time location data from apps on smartphones to show customer traffic patterns and buying behaviors. Employees can quickly react to bottlenecks, reducing customer wait times.
- IoT-connected digital signs can display information on products and services in real time, customized for specific stores, cities or regions as well as specifics such as in-store location, time of day and weather conditions.
- IoT-enabled price tags can be changed in real time based on demand, weather or other trends.
- Contactless checkout technology can automate the scanning of products and payment processes as VIP customers walk out of the store.
This operational data will provide real-time insights to store management and employees, empowering retail staff to make solid decisions.
- Improved inventory and supply chain management
Retailers not only want to know what products are selling but also why. To help answer that question, they want to know who is buying those products, where (in the store) those products perform the best and any other information that can better predict future sales.
The IoT can help retailers monitor and track inventory in new ways, including:
- Sensors, high-resolution cameras and digital tags can enable retailers to measure inventory on a real-time basis, enabling timelier reordering.
- IoT-enabled systems can trigger inventory actions based on data from sensors on packages, shelves and other devices. This data also can be analyzed to help understand what’s underperforming and overstocked, what’s running out of stock and the impact of time of day, weather and other environmental conditions, online trending and countless other potential variables.
- Sensors on packaging, shelves and display cases can monitor the quality or age of perishable items and notify suppliers about the need to replenish inventory or offer discounts on aging stock to improve turn.
By leveraging the IoT, retailers can achieve smarter merchandising and have a more agile supply network.
- Capture new revenue opportunities
Leading-edge retailers will learn how to leverage the Internet of Things to seek out new methods of acquiring customers and increasing revenues, for example:
- By connecting the home with the retail store, items can be replenished faster and more conveniently. For example, sensors on products, kitchen pantries and refrigerators will automatically order groceries when needed. Buttons on a washing machine can help homeowners order new laundry detergent.
- Customers left waiting too long may leave without spending money. An in-store app can identify long wait times at certain locations in the store, sending employees and customers text alerts and notifications to save at-risk purchases.
- Smart display signs, augmented reality apps and barcode scanning can provide shoppers with deeper information about products, influence buying decisions and promote up-sells. These solutions can be customized to the shopper based on historical shopping and buying patterns revealed through loyalty programs, online browsing and search trends.
If you’re a retailer interested in developing a strategy for the IoT, here is a checklist to get you started:
- Think security. The cost of data breaches is increasing. Security should not be an afterthought; design it into your IoT strategy from the start.
- Build in cloud computing, big data and analytics. These are enabling technologies that must be in place to optimize any IoT strategy.
- Use an employee mobile platform. Build a set of employee-facing mobile apps that improve workforce productivity, customer service, merchandising and supply chain management.
- Provide a customer mobile platform. Build mobile apps for customers that they can use in your store, at home or somewhere in between.
- Build digital skills. Invest in technical and business leaders who understand the importance of a data-driven culture. Educate all employees about your plans for leveraging data collected from the Internet of Things.
- Develop an in-store IoT strategy. Think of the entire store as a giant nervous system. Where would the “nerve endings” be? Develop a plan for putting sensors throughout the store to collect the data needed to fully understand everything that is happening.
- Develop an inventory management IoT strategy. Reimagine the way stocked items and the shelves they sit on interact with the digital world.
- Brainstorm new revenue opportunities. Develop strategies for in-store promotions as well as for connecting to the home.
- Develop a supply chain IoT strategy. Involve your supply chain partners in digitizing both upstream and downstream.
- Pilot, learn, pilot again. Embrace the idea of agile development to quickly pilot your IoT strategy in various areas. Learn from your failures and innovate.
Retail customers are more empowered than ever before. Creating real, relevant connections with them has become extremely challenging. Innovative retailers that lead in the adoption of IoT systems and solutions will gain an important advantage in a hypercompetitive environment, improving the overall customer experience, optimizing store operations, improving inventory management and providing new ways to grow revenues. If you are a retailer, it is time to ask what the Internet of Things has “in store” for you.
- 2015 IBM Retail Solutions Guide
- Watson Shopping Trends App
- The Internet of Things in Retail: Great Expectations
- The Internet of Food Retail Things: How Game-changing Transformations Are Opening New Opportunities for Savvy Food Retailers
- Beyond Apple Watch, a retail strategy for the IoT
- The Internet Of Things Will Transform Retail As We Know It
- 2014 Motorola Solutions Shopping Study (North America)
Re-published on Forbes on December 28