Internet of Things in Retail: Top 3 Business Opportunities
Retailers always seek new ways to reach target audience and cut operating costs. It’s no wonder they’ve been among the early adopters of the IoT technology! By 2020, the Internet of Things hardware spending in retail will reach $ 2.5 billion. Here’s how beacons, RFID tags and analytics software will change the landscape of the retail industry in the nearest future.
3 ways IoT impacts retail
- Improved customer experience. In 2016 Macy’s and Walmart have closed over 300 stores across America. The US e-commerce sales, on the contrary, are expected to reach $ 373 billion (up 36% from 2011). The reason why brick and mortar stores keep losing revenue is the change in target audience they’ve failed to see. Your potential customers confidently shop on mobile: in less than four years mobile commerce will drive 45% of all e-commerce sales. 18% of Americans (with millennials taking the lead, of course) use smartphones and wearables as a means of payment in stores. They are willing to communicate with retailers through social media and messengers – and that’s why tech-savvy retailers like H&M and Sephora build AI chatbots. Consumers don’t mind receiving relevant promotional content (especially coupons; 127.5 million of US shoppers will redeem digital vouchers this year). Customers expect seamless shopping experience across multiple channels, and IoT retail solutions can help you deliver it. Here’s what we’re talking about. Newcomer Wines, a UK-based cocktail bar, made headlines in mid-2015, becoming the country’s first horeca facility to accept Apple Pay. Now its customers can purchase a bottle of wine by simply tapping their smartphone or Apple Watch on an interactive display. Several US department stores including Target and Macy’s use beacons to interact with their customers. Last year Macy’s held a beacon-driven Thanksgiving promotional campaign, encouraging shoppers to download the Macy’s mobile app, make a purchase and win $ 1 million in gift codes. By tracking customers’ location, the retailer managed to document their in-store journey and create high-converting displays. This year Macy’s will go beyond in-app beacon notifications and leverage IoT-generated data for retargeting. Another example comes from Kroger, the US largest supermarket chain that developed smart shelves to deliver media content to their customers. Now Kroger has plans to integrate the shelves with customers’ smartphones via Bluetooth and send alert notifications to visitors who walk past an item that’s been on their shopping list. Walmart went even further and patented a self-driving shopping cart that identifies a customer’s location using sensors and smart lighting systems. The cars will communicate with customers through the Walmart mobile app, check the uploaded shopping lists and navigate visitors in stores. Although the technology is still in development, it would certainly take customer experience to the next level;
- Effective inventory and supply chain management. Professor Bill Hardgrave from Auburn University claims accurate inventory management is the only thing retailers need to do right for everything else to work – and we couldn’t agree more. In 2014, US retail chains suffered shrinkage-related losses worth of $ 42 billion. 43% of customers will simply go to your competitor’s store if you don’t have an item they need in stock. American retailers currently rate the visibility of their supply chains at 6.5 out of 10. How can the retail sector possibly benefit from investing in the Internet of Things? Using smart sensors and analytics software, retailers can boost inventory accounting accuracy up to 99% (it’s only 63% as of now), reduce shrinkage by 70%, increase revenue by 7% and make quicker and cost-effective business decisions to satisfy customer demand. Levi’s has recently implemented the Intel Retail Sensor Platform technology to track in-store inventory using RFID tags. The technology enables Levi’s to gain a better insight into customer behavior, evaluate product popularity and measure the time between an item is taken off the shelf and is actually purchased. Provided you develop similar solution, your staff won’t have to check the point of sales system to determine what and how many products have been sold and will be able to devote more time to customers;
- New customer acquisition channels and revenue streams. Proctor & Gamble, Kimberly Clark, Pepsi and several other retail companies have joined the Amazon Dash Button innovation project, enabling consumers to order products in one click. According to Amazon’s recent report, the use of Dash devices increased by 70% within three months; however, the gadget gives Amazon something better than sales. By analyzing Dash-generated data, the company and its partners can create more detailed buyer personas and boost the effectiveness of their marketing efforts. Samsung’s Family Hub is another example of IoT home replenishment solutions. The smart refrigerator has a touchscreen mounted into its door and several cameras inside. Families can use the gadget to create daily calendars, stream Samsung Smart TV media content, check the amount of available food and automatically order groceries from FreshDirect and ShopRite.
Retail innovation: barriers to success
Although 54% of retailers with the above-average revenue growth believe IoT will change the way they’ve been working for decades, there are several factors that prevent the retail Internet of Things from going mainstream:
- Outdated enterprise software. According to the 2016 State of the Retail Supply Chain research, 23% of US retailers cannot implement sensors to monitor storage conditions and goods’ movement through supply chains due to the inflexibility of their existing ERP software. If you have plans to incorporate RFID tags into your IT ecosystem, start your IoT journey with Proof of Concept to make sure the whole system would work;
- Perceived complexity of IoT solutions. The Internet of Things has three levels, including hardware (sensors and gadgets), a computer program that runs on a corporate server or in the cloud and analyzes the data generated by smart sensors and complementary mobile and desktop applications. Retailers’ main concern is to capture IoT-generated data and boil it down to something meaningful (customer journey map, advertising effectiveness, key revenue channels, etc.). It sounds terrifying at first. However, the retail IoT environment is crowded as it is. Companies that embrace the new technology now get a competitive advantage over their rivals. Make sure not to be the last to jump on the Internet of Things bandwagon;
- Security issues. Family Hub surely offers a whole new revenue channel for grocery stores and streamlines online shopping experience. But the gadget can also expose user Gmail credentials over a network, giving hackers an opportunity to access payment data. It doesn’t mean you should immediately give up your IoT dreams – on the contrary, most vulnerabilities discovered in connected gadgets have already been solved by mobile and web application developers. And that’s why you should trust your IoT project to a reliable vendor.
In a world where US beacon-driven revenue will soon reach $ 40 billion, successful retailers can no longer afford being tech-ignorant – and neither can you.