- The Internet of Things provides an opportunity to reduce friction and create value for both consumers and retailers.
- Retailers should be looking at new ways of interacting with customers, using connected technologies such as AR, VR and mobile payment to add value to the retail experience.
- Today, IoT is mature and relatively inexpensive, while being flexible enough so companies can either start small or ‘go big’ depending on their needs.
Few industries have faced greater disruption than retail. Consumers use smartphones, apps, image and voice searches, augmented reality, GPS and other tech tools to find and buy all kinds of products. And thanks to sophisticated supply chain and logistics systems, retailers can quickly give customers the items they crave.
Adapting to this new retailing world can be challenging, but it presents opportunities that shouldn’t be ignored. Retail executives who understand how to catapult their business to a competitive advantage by using digital technologies are weaving them into business practices to generate greater value for customers, business partners, and employees.
At the center of this equation is the internet of things (IoT), promising benefits that extend from warehouses and supply chains to store designs and customer interactions. The right mix of sensors, devices, software, and systems can make a lot of ‘dumb’ objects smart by introducing a level of intelligence that was unimaginable in the past.
IoT provides an opportunity to reduce friction and create value for both consumers and retailers in a variety of ways. For example, it can make it easier to track a product across a supply chain and ensure that it is properly stored while en route to a store shelf. Image recognition can help retailers learn when customers enter a store and then serve up age- or gender-appropriate promotions via the consumers’ smartphones. The Internet of Things can also make it possible to develop different types of payment systems.
For example, some retailers have eliminated point-of-sale (POS) terminals. Instead, their employees use handheld devices to ring up transactions at any spot in a store.1 This approach frees up valuable space in stores and allows a retailer to use the space more effectively — particularly in high-value areas such as the front of the store — and arrange displays in interesting new ways.
Taking this concept to the next level with autonomous checkout, Amazon Go stores don’t need their workers to process payments.2 Instead, these stores are filled with sensors that let shoppers peruse aisles, pick up items, place them in a bag and walk out. The connected system — using a variety of technologies, including image recognition — processes payments automatically. With a smart checkout system like this, there’s no need for customers to wait online and pay for purchases, and employees can spend more time helping customers find the products they seek.
IoT data aggregation and analytics can also give retailers in-depth insights into business trends. These insights could include who buys what and when they buy it. Is the weather affecting consumer shopping? Are traffic patterns? What other environmental issues are coming into play?
When these types of analytics are combined with facial recognition and other sensing systems, retailers might even be able to determine the mood of shoppers and respond appropriately in order to drive customer satisfaction. In fact, recent PwC research found that 72 percent of retail companies plan to use advanced data analytics to boost the customer experience and build a more customer-focused supply chain.
Of course, not all retailers are ready to make such a major investment in IoT. Many want to start on a small scale with practical solutions that include occupancy sensors, remote climate controls and smart lighting to reduce energy usage and meet sustainability goals in their stores and storage facilities.
A new vision
Ultimately, the task for retailers is to develop new ways to create more value for their customers and their business. As the Internet of Things and related digital technologies mature, the art of what’s possible continues to grow. For example, augmented reality (AR) presents innovative ways to reimagine retail, such as by offering different models for interacting with customers.
Retailers are experimenting with smart mirror technology, which allows people at home to see how a retailer’s clothes would look if they were actually wearing them.3 And some cosmetics companies have created AR apps that show consumers how specific types of makeup would look on their face.4
Virtual reality, while in the early stages as a business tool, allows retailers to present products in new ways and take customer experience to a higher level. For example, several automobile manufacturers offer VR apps that let people who are sitting in a car at a dealership (or on their sofa at home) strap on a head-mounted display and experience what it’s like to drive that car.5
The takeaway is that IoT requires individuals and businesses to view the retail industry through a different lens. Consumers continue to research products both online and in stores by using multiple channels and different devices. A customer might begin a product search on a phone, switch to a laptop, and then decide to order the item through a smart speaker — or at a store.
Embracing this next phase of retailing requires a well-conceived strategy, a flexible IT platform, an IoT framework, and the right systems and software. It may also require new investments in indoor GPS systems, specialised sensors, cellular technology (including emerging 5G), cloud computing services, facial or image recognition, voice assistants and other forms of artificial intelligence (AI) and machine learning. Retailers also may need to interact with wearables, particularly smart watches.
What’s promising about retail IoT initiatives is that they can start small and grow as needed — running the gamut from simple point solutions to huge supply chain ecosystems. They can include open innovation frameworks, incubators, and new and sometimes unconventional partnerships.
The good news is that IoT technology is now mature enough and inexpensive enough to drive impressive business results. Many sensors are available for pennies apiece, and retailers can build out a framework and incorporate business partners for a reasonable investment in time and money.
It’s time for retailers to take their business to a higher level with IoT-enabled connected solutions, which can help them compete effectively in today’s demanding and ever-changing marketplace.