The Disruption and Evolution of IoT in the Retail Industry
The retail sector has faced an unprecedented amount of change in the past 100 years. With the transformation of manufacturing and supply chain management, mass-produced consumer goods are more accessible than ever before. Retailers have consistently and successfully responded to this transformation through the decades, adapting how they best operate their brick-and-mortar locations.
However, that approach that had been working effectively for the past couple of decades is approaching its expiration date. Industry 4.0, or what’s known as the fourth industrial revolution, is here — and the next step for retailers is adapting to this disruption.
Many think adjusting to Industry 4.0 is as simple as offering omnichannel retail strategies, meaning a unification of sales and marketing that transcends medium (whether that individual is interacting with that retail experience through an in-person store, a web browser, or a mobile application).
That approach, while well-intentioned, will not be enough to address the surge of consumer demand that affects the operational efficiency of the industry. As Forbes reports that consumer demand is expected to increase in the next few years, retailers are at a crossroads on how to implement long-term solutions to satisfy this demand while reducing monetary and human resource costs.
One effective approach to the burgeoning crisis facing the retail industry is proper utilization of the Internet of Things (IoT). IoT solutions are paving the way for modern retailers to evolve their entire operation. Emerging technologies of the IoT industry are one of the ways the modern brick-and-mortar can keep pace with the market forces currently at play.
With estimates of the impact of IoT in retail ranging from $410 billion to $1.2 trillion by 2025, a forward-thinking retail company will embrace what IoT can do for it.
Defining IoT
The term IoT is used to describe the connection of devices to each other and to the internet. IoT consists of a network of interconnected devices, sensors, and systems that can identify objects, devices, and even humans or animals through unique identifiers (UIDs) and is capable of transferring data over a network without human involvement.
According to MuleSoft, IoT is transforming the way people have been using computers for 30 or 40 years by adding an additional layer of connection to the previous two-layer approach of Client and Server. This “edge layer” role is to be as close as possible to the physical location of devices and sensors involved, aggregate the information collected, and then send that information to the server for manipulation.
The benefits of IoT to any organization, regardless of industry, are:
- Reduction and filtering of overall data transmission, making the information sent to the server more meaningful.
- Enabling data collection even if there is an outage or network failure due to the local storage of data on-premises.
- Synchronization of information across devices, regardless of vendor or protocol — allowing for agnostic data abstraction.
How Can We Apply IoT to Retail?
Overall, why is a modern and technology-focused IoT strategy needed for retail establishments? IoT strategies give a retailer more accurate information regarding their products and inventory. These insights give retailers real-time data, which helps decision-making, improves profit and loss statements, and fortifies the bottom line.
So while it’s understood that IoT utilizes UID devices to locally gather data and store it on-site for usage and manipulation, how can this strategy be applied to retail organizations? Here are the real, practical ways organizations can leverage IoT in the retail market.
Product Inventory and Tracking
Retail stores that choose an IoT solution can implement UID devices in products. That process can start as soon as it is packaged by the manufacturer in their logistics facility, known as end-to-end product tracking.
Since the UID sensor is vendor and device agnostic, the retailer can immediately log this product into their system when it is received at their location. From this point, retailers have options on how they can utilize and track the data received from this device.
Retailers can use IoT to:
Ensure Quality Control
Even before the product is put on the floor, the store will now have access to its entire lifecycle.
While in an ideal world, quality assurance personnel at the manufacturing facility verify compliance with safety and quality expectations, local retailers can also see the history of this product as well.
If the worst-case scenario occurs and the product was sold and returned as defective or harmful, this data can be transmitted from the retailer back to the manufacturer as it is returned. This helps empower the entire supply chain with the data needed to protect consumers and the bottom line.
Ensuring quality control via IoT can also look like automatically notifying stocking managers about expiration dates for perishable objects without having to look directly at the product itself. Implementing IoT solutions in food retail is estimated to reduce food waste by 40% and decrease energy consumption by 30%.
For example, retail giant Walmart uses Big Data and IoT to monitor refrigeration sensors, thus indicating to store management if a refrigeration unit is inoperable and would spoil the food inside it.
Track Products
As the product is transferred from the storeroom to the sales floor, retailers can get the exact location of a product through the use of UID devices. While this can protect the asset from theft, it can also inform store leaders or stockers of the exact location of a product, preventing mishandling or shelving errors. Tracking products via IoT reduces human error in manual inventory checks as well.
Track Non-Product Store Assets
While many might think of the assets in the store as solely the products sold, IoT devices also protect the store’s non-retail goods such as forklifts or shopping carts by transmitting their location via GPS.
Track Sales and Deliver Pricing Updates
Connecting all point of sale terminals via IoT allows for smarter data aggregation and real-time sales tracking. Traditional cash registers, consumer self-serve PoS, mobile checkout stations, and even vending machines can all be connected through IoT to aggregate sales and inventory reports to send to decision-makers.
Retailers can also utilize electronic shelf labels (ESLs) to reduce manual stickering and price maintenance. These ESLs can receive price updates instantly, allowing for delivery of special pricing updates. Once the price is updated, store management can get a near-instantaneous understanding of how these price specials impact the bottom line.
Improve Trade Promotion Management
Additionally, using smart devices like IoT sensors can also inform trade promotion management efforts as well. Vendors can get reports on their product’s sales based on the location of the product in the store, allowing for efficient testing of end-caps and other location-based promotions.
Stores can implement beacons, as Macy’s has done as early as 2014, to provide tailored offers and discounts. While customers need to download the proprietary store app, that app will ping a beacon based on the location of the individual in the store, giving them tailored promotions directly related to the area of the store they are in or what they liked online.
Even if an individual chooses not to download a store’s proprietary app, if the customer utilizes the free WiFi provided in most retail locations, this can allow for stores to track the movement pattern of the consumer around the retail establishment. This movement tracking also can help determine high-traffic areas so store managers can decide where to put popular items.
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Improving the Customer Experience
Beyond just the benefits to the retailer, IoT can impact the consumer experience drastically, increasing customer satisfaction and retention. Here’s how IoT can be utilized to work with consumer-grade mobile devices and within products to make a seamless customer service experience.
Providing Digitally-Enhanced Shopping and Checkout Experiences
Earlier it was discussed that Retail 4.0 is more than just omnichannel shopping experiences; IoT can enhance these efforts in response to customer demand.
Retailers can utilize digital signage based on IoT. Small digital displays, similar to digital billboards, can receive data from an individual’s smart device via Bluetooth, which will indicate which advertisement to display and when.
As previously discussed, individuals can also receive tailored discounts directly on their mobile devices. This is taken to the next level through the use of advanced checkout stations that are completely hands-free. Individuals can take the item, walk through a terminal, automatically have their selected discount applied and pay for it using their mobile device — all done through the usage of IoT.
Empowering Customer Support Resolutions
For brick-and-mortar stores for the last 20 years, customer returns and dissatisfaction have been a major point of contention. Long lines and understaffed counters mean inefficient usage of store team members.
From the consumer side, this directly impacts their perception and happiness in working with and buying from the retail establishment.
However, IoT can simplify this process by simply reversing the automated checkout process, as indicated before. Consumers can get on their device with their product in hand, indicating they want to make a return, and walk through the checkout terminal, leaving their product on an RFID scanner that confirms that it was returned. The money would be instantly credited back to the person’s account, allowing them to painlessly get their needs met without them having to wait in line for extended periods of time.
For a larger-scale example of improved customer resolution through the use of IoT, upon a safety recall by the National Highway Safety Administration on their vehicles, Tesla used 3G cellular towers to make updates to their vehicles to comply with the notice. This was done before many individuals were even aware that their car had a safety recall, proactively solving the issue without the consumer needing to take it into a Tesla repair facility.
Real-Time Stocking Updates
Before a consumer travels to a brick-and-mortar store, smart shelves (using the power of IoT via RFID tags) can give insight into current stocks of particular products.
While some stores with online shopping experiences already provide a less efficient version of this, an IoT-enabled version of this concept would also inform the consumer if the product was in stock but shelved incorrectly. They could also see when they could expect their desired product to be stocked back on the retail floor.
An Example Use Case of the Power of IoT in Retail Establishments
While this discussion has utilized many real-world examples of how IoT in retail can improve and supercharge this industry, it is also beneficial to explore what this could look like in a prospective retail establishment.
The Client
A supermarket chain based in the U.S. wanted the ability to better track inventory in their stores and get shoppers the product information they needed.
Challenges
This retailer faced a number of challenges that led them to seek an IoT retail solution. Besides supply chain issues and increasing consumer demand that affects all brick-and-mortar retailers, this supermarket chain experienced the following challenges in their product sales:
- No real-time data into product inventory: without IoT solutions, this retailer had no insight into products currently on the shelf, stocking amounts, and expiration dates.
- Have to manually update pricing: team members were tasked with constantly updating pricing details for each SKU in their system.
- Human error in manual inventory counts: due to the lack of real-time data, products were counted by hand or needed to be scanned, yielding inaccurate amounts of product inventory.
- Customers had no easy access to inventory data: as the entire product inventory management process hinged on different systems, information about what products were actually available at the store was not available for customer use.
Goals and Ideal Future State
After assessing the problems facing the retailer, they identified where they wanted to be as an outcome of IoT solution implementation. Their desired end state was:
- Shoppers and customers could integrate their digital grocery lists with the smart shelves making it easier to locate products and know if specific products were actually available for purchase.
- The retailer could track expired or recalled products in the stores, as well as improve loss prevention from theft or product mishandling.
Solution
This supermarket chain installed smart shelves which were equipped with RFID tags. These smart shelves were able to read products and send real-time data to the company’s IoT system.
The supermarket was able to find information about products that were low in stock or popular with consumers. They could also utilize ESLs to provide real-time pricing updates and deliver those instantly to the labels without significant human interaction.
From the consumer standpoint, shoppers not only could know the status of the inventory before they headed to the store but receive product information on their mobile devices when they approached the smart shelf.
Embracing Retail’s Digital Evolution
There are many benefits to digital evolution, but unforeseen issues often emerge along the way. Request a complimentary consultation to learn how AVIO helps leading retailers overcome critical challenges.
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