With retail store footfall dropping, retailers are scampering to deliver that aspirational shopping experience, which often starts with online research but continues to culminate in the physical store, over 80% of the times.
Internet of Things (IoT), and the rapid influx of ‘connected devices’ is ushering in a new platform for retailers to bring innovative use cases that could excite the shopper. Simple devices are becoming ‘smart things’ and are accelerating the merger of the physical world around you to the digital world that you interact with. Gartner predicts that there will be more than 21 billion connected devices by 2020 and over 65% will be consumer touchpoints. Industry specific devices, for instance, for retail will triple from 2015 figures. This is both an immense opportunity and a challenge for retailers.
The Opportunity for retailers adopting IoT solutions into the shopping experience are broadly in three areas:
– Engaging the consumer better by knowing their wants and meeting these consistently and accurately to deliver a memorable experience;
– Improving efficiencies and effectiveness in fulfillment, store operations; and
– Monetizing new business models and product/service offerings
1. Impactful Customer Experiences to build a lasting brand memory
The IOT devices are ‘endlessly attentive’, if provided a basic power source and connected to a wireless sensor network (WSN). While the well-trained, engaging Store associate can deliver that too, human ability to provide the same level of attention and service consistently all over the store and at scale, is sub-optimal.
Imagine if the ‘store shelf’ is able to, in real time, offer a discount for a cereal category that hasn’t sold enough, when a consumer is just about to pick the last box of an adjacent cereal category that is fast-moving and on the verge of being sold out in the store! This collaborative ability to work across physically adjacent sensors can avoid a stock-out on a fast-moving category while capturing a sale and pushing a promotion on a slow moving one! The system can then trigger a re-order to the warehouse of the fast-moving cereal in time for the next interested consumer.
These retail sensors capture consumer information at decision making moments within the store, and help the retailer react closer to those ‘moments of truth’. These connected devices are becoming enablers within the retail store to improve shopping experience to the shopper and retailer alike.
2. Operational efficiencies in fulfillment, supply chain and store operations
As manufacturing and logistics industries design and build service capabilities leveraging smart IoT devices, it will enable a Supply Chain that watches, listens, and can then potentially acts to adapt or self-correct. Downstream supply chains will have the ability to track dependencies for retailers so as to improve real time replenishment capabilities and supply chain visibility.
Below are some examples where retailers and components of their operations are investing with IoT use cases.
– Inventory accuracy, and active tracking of shelf inventory using RFID can help optimize availability with respect to demand, and channelize reordering and timing of shipments.
– Loss Prevention with product/ shelf sensors tracking items picked through the shopping journey to checkout (making pilferage a non-occurrence in an Amazon Go store!).
– Waste Management – In a grocery supermarket, shelf or aisle sensors can track expiry dates on perishable merchandize and smart price tags can adjust pricing to enable a faster sale.
– Heat maps within the store during times of the day or week, can help plan for the workforce needed, and reduce labor costs while improving customer service. These heat maps can also help ensure better utilization of heating, lighting, and other infrastructure services, while improving customer comfort.
These operational improvements would increase the availability of the store associates and give them more time and enable them better to engage with the consumer and service them.
3. New Products, New Business models, New Competition
Large corporations like Intel, AT&T, Cisco, GE and thousands of startups are designing and creating completely new products and use cases for IoT based applications. Ranging from smart homes, smart cars, smart factories to smart cities, the investments in R&D and product development leveraging IoT technologies is believed to grow to be in trillions by 2020. These technologies and devices will give birth to new products and even new industries over the next decade.
Retailers therefore have the distinct advantage of completely new product categories and brands, that address new business and consumer needs. Retailers in consumer electronics, home appliances, office equipment and healthcare devices are already experiencing a splurge of ‘smart’ products that create the need for improved merchandizing of these products and accelerated workforce training in stores.
IoT will also give rise to untried business models leading to either new revenue streams or unexpected competition for retailers. Smart sensing refrigerators that can demand for fresh produce directly, or automatic replenishment models for food or OTC medicines can transfer the responsibility of home/office grocery shopping to the retailer. The next step would be to collaborate with delivery providers like Instacart or Good Eggs (which might eliminate the grocery chain and source directly from the farm!). Office equipment manufacturers are already bypassing the retailer by enabling printers that can track print volumes and order their own ink cartridges or printer paper for a nominal subscription.
Part 2 of this blog will look at the path to IoT enabled retail, and what typical challenge lie ahead for retailers designing processes and systems to leverage the power of the Internet of Things.