Co-Author: Prerna Daga
The Internet of Things (IoT) is transforming us, our perceptions, and the way we interact with ‘things.’ This is driving innovation and is creating opportunities across all industries. The retail sector is not resistant to this transformation. Retailers across the globe are experimenting with IoT in order to optimize their operations and bring in a frictionless shopper experience. Once the industry adapts to the innovations, IoT is poised to create opportunities for retailers in improving customer experience, increasing operational efficiency, and creating new business streams.
Improving customer experience
Customer experience is pivotal to the fortunes of the retail industry. Hence, retailers make use of a variety of tools to reach out to and retain their customers. Point-of-purchase (POP) digital signage with appropriate content provides retailers one more customer touch point to promote their products and increase engagement with customers. A survey by global information and leader in internet research company reveals that nearly 68% of the shoppers change their purchase decision based on in-store messaging and 30% of the shoppers make unplanned purchases on the basis of POP displays. Analytics on purchase history, store visits, and customer preferences can be used to send personalized recommendations and high-touch services to the customers.
In-store navigation is one of the common problems in retail. IoT devices integrated with BLE and Wi-Fi can facilitate in-store navigation and help customers in finding the desired product. The integration of lighting controls doesn’t only help store managers conserve energy but also enables them to study the movement of shoppers within the store for over a period of time. By generating heat maps, the shop layout can easily be optimized in order to fit it with shoppers’ requirements.
Another cause of dissatisfaction among shoppers is the long checkout queues. Smart shopping cart enables contactless checkout/self-checkout by scanning the products automatically when the customer walks out of the store.
Increasing operational efficiency
IoT has the potential to transform the retail supply chain. RFID enables tracking of inventory to the SKU-level as it moves across the supply chain. Additionally, a data visualization layer on top of this provides real-time visibility to inventory. The same can be extended to self-service kiosks to enable the customers to locate the desired products. Sensors on perishable SKUs help maintain the quality of the products.
Stock-outs are a major concern for retailers. RFID tags communicate information about the stock levels of items on smart shelves, triggering an alert for automatic replenishment of shelves. RFID tracking increases inventory accuracy to 95% and reduces stock-outs by 50%. Tesco started tagging its clothing range with RFID tags and emitters. They have since reduced stock-outs by 95%, and shortened stock-checking times by 7%. RFID tracking doesn’t just improve inventory accuracy but also reduces inventory shrinkage by 55%.
Analytics on Point of sale and inventory data helps identify underperforming and overstocked SKUs in advance to reduce inventory carrying costs for retailers.
Retailers feel the need to integrate their fulfillment and delivery options to provide seamless shopping experience to their customers across multiple channels. This Omni channel experience requires the retailers to have inventory accuracy of more than 90% and visibility into inventory throughout the supply chain. IoT-based tracking solutions and data visualization of inventory enables retailers to provide Omni-channel experience, which is now becoming a service differentiator for retailers. One of the early adopters, Yankee Candle, well-known for its scented candles, have one of its division – Scent Systems – use a connected network of smart sense dispensers to monitor the consumable and provide uninterrupted service to its customers.
Creating new revenue opportunities
Location-based marketing using GPS and beacon technology to push personalized coupons and information on sale whenever the customer is in the vicinity of retail outlet is creating one more touchpoint and giving an opportunity of converting a mere passer-by into impulse buyer. A report from Koupon media states that a personalized coupon motivates 39% of the customers to spend more.
IoT implemented with analytics can help retailers increase their sales through not only physical stores but also through other channels. Amazon is already analyzing customer consumption pattern to provide automatic replenishment of consumables to customers’ doorsteps through Amazon Dash. Huge customer data helps in increasing sale through not only existing revenue streams but also offers retailers insights into new services and products that can be offered to customers.
Challenges and barriers to IoT adoption
Lack of infrastructure: One of the reasons behind slower IoT adoption is organizations’ belief that their infrastructures cannot support cutting-edge technologies. A benchmark study by RSR supports this: 51% of the retailers think that their infrastructure cannot support IoT. Many of them are stuck at a stage when IoT PoCs (Proofs of Concept) have yielded successful results. But scalability seems to be a challenge because not much importance is given to infrastructure during PoCs. It is only when the same PoCs are extrapolated to millions of devices on the traditional infrastructure that it fails. Unavailability of communication standards, non-scalability, regulatory compliances, and network infrastructure are some of the issues with legacy infrastructure.
Uncertainty around business case: A lot is being said about IoT and the benefits it is bringing to enterprises, employees, and customers. But there are fewer examples of business cases attributing dollar value to new revenue streams and reducing the operating cost. As with any other business investment, executives would like to know the RoI before taking the big leap.
IoT security: With billions of connected devices, the biggest challenge posed to IoT adoption is privacy and security issues like authenticity, confidentiality, integrity, etc. It is distressing that a couple of years back, hijacking of Mattel’s Hello Barbie Doll made news in consumer space. In retail, it becomes more challenging with tons of consumer data at stake. Vendors need to work together to mitigate the risk of these security issues with help of proven technologies. Some of the essential requirements from a security standpoint are resilience to attacks, secure communication, data authentication, access control, and client privacy.
The final word
In order to reap the benefits of IoT despite the challenges it poses, retailers will have to understand the importance of IoT implementation and industry requirements. There are unsolved problems, risks, and concerns that are impossible to mitigate for one single player. A gamut of partnerships has to be developed and a conducive ecosystem has to be built in order to thrive on IoT and the benefits it has to offer.