How the IoT is Poised to (Finally) Change Retail

Kindra Tatarsky
Kindra Tatarsky
Head of Corporate Development

Retail pundits have long predicted the connected store of the future, and due to the unique convergence of technology advancements, adoption rates and sheer scale, the Internet of Things is finally changing shopping as we know it.

[Editor’s note:  This article was originally published in the July 2016 issue of The Robin Report.]

For several years now, when the topic of “the store of the future” arose, conversations quickly – and almost always – veered into technology and the Internet of Things (IoT). The idea of having items like merchandise, shopping carts and display fixtures connected to the Internet was intoxicating, and retail professionals clamored for the vast amounts of data potentially available that would empower better decision making.

So, what happened on the way to the store of the future?

Adoption of IoT technologies in retail faced a rather prolonged incubation stage for a number of reasons. Let’s face it, the industry is not generally thought of as early adopters of new technology. But, there were good reasons for retail’s slow and steady approach.

First, in today’s omnichannel retail reality, competition is fierce and margins are razor thin, and the result means retailers must prioritize the investment of scarce resources, and up to this point, many retailers have focused on survival and fixing gaping holes in their fundamental foundations. Secondly, the technologies themselves needed to be vetted, proven and improved upon, with costs coming down and benefits more readily delivered not just to the retailer, but to shoppers themselves.

But, that was then. Today, the IoT is poised to reinvent the entire 360-degree retail ecosystem.

So, what’s changed?

A unique convergence in time

Borne out of the powerful connectivity and global adoption of mobile smart phones, visionaries have predicted a connected retail future for years, but the capabilities to turn science fiction into reality have only begun to emerge.

Shopper on Phone, Showrooming

Remarkably, semiconductor chips have become smaller than ever, all the while becoming exponentially more powerful and – maybe most important of all – less expensive. It’s now to the point where a semiconductor can be attached and integrated into … almost anything and everything. And, they are: Way back in 2002, it was famously calculated that more semiconductor transistors were produced than the number of grains of rice harvested annually [1,000 quadrillion (one quintillion, 1×1018) to 27 quadrillion (27×1015). Over 14 years, the gap has only grown larger, and now it’s the rare product that isn’t connectible.


Telecomm networks have expanded, and the entire globe is now crisscrossed with webs of wired and wireless bandwidth, providing the infrastructure for all those ubiquitous chips to inexpensively connect.

Finally, Big Data analytic platforms have been built and refined to effectively and efficiently collect, process, analyze and present the vast amounts of information created every second of every day.

The convergence of technology and infrastructure has made it easier than ever to generate, collect, analyze and share data, and over time the price points have decreased to the level where it makes good business sense.

A numbers game

When it comes to contributing to sweeping changes, it almost always comes down to the tipping point of when a technology moves from being a “nice to have” to a “need to have.” It’s a matter of scale, and the IoT ecosystem is expanding rapidly.

According to a Gartner, Inc. forecast, there will be 6.4 billion connected “things” in use worldwide this year, up 30 percent from that of just one year ago, and that number will grow to reach almost 21 billion by 2020.

Those connected things are making their way into the retail environment too, with the global retail IoT market estimated to grow to $36 billion by 2020, a compound annual growth rate (CAGR) of 20 percent.

One of the fastest growing areas of IoT deployment in retail is in RFID (radio-frequency identification) tags and sensors, empowering organizations to optimize supply chain efficiencies, improve employee performance, minimize waste and better manage compliance requirements. According to Oracle, through the use of RFID tags, retailers can expect near 100 percent inventory accuracy, leading to a 50 percent reduction in stock outs, a 70 percent reduction in shrink and increases in sales between 2-7 percent.

RFID chip

Consortiums like the recently formed Acuitas Digital alliance bring together leading companies specializing in analytics, networking, hardware, software, content management, security and cloud services to integrate a wide range of technologies, including RFID and other IoT sensors, software and analytics, into a single comprehensive solution to predict customer behavior and aid in creating better shopping experiences.

A shopper-centric approach

Of course, technology for technology’s sake is always expensive and almost always not a good idea. However, technology centered on shoppers, their shopping journeys and shopping experience, is almost always a great idea, for what’s good for shoppers is good for retail businesses.

To be optimally successful, the IoT store of the future must really be the shopper-centric store of the future, built around the retailer’s specific mission, brand and objectives, and the foundation rests on real-time data on shoppers.

New IoT-enabled combination sensors, like RetailNext’s Aurora® sensor, integrating stereo video in HD, Wi-Fi and Bluetooth into a single device, enable retailers to install and deploy fewer devices and collect even more information, and cloud-based analytics platforms – like RetailNext’s Saas platform – make that data available to decision-makers across the entire enterprise. All that power has led to the continued evolution of the most critical shopper data, driving simple metrics like front-door traffic to “traffic 2.0,” and delivering unprecedented dimensionality to traffic counts, including age and gender demographics, shopper directionality and navigation of the store, and shopper engagement (or lack thereof) with merchandise displays and sales associates – all wonderful insights to aid retailers in making adjustments to staffing, merchandising and/or marketing.

Aurora sensor, full, at angle

New-age shopper traffic data not only directly enables the retailer to reduce friction points along the shopper journey, but also powers other friction-reducing technologies designed to accelerate outcomes. For example, companies like Brickwork provide tools to engage shoppers in the digital realm and then guide them into the physical store, and by using digital data in the in-store environment, service can be delivered faster and with more personalization.

With insights from store traffic and the additional traffic derived from digital channels, retailers now drive smart scheduling through offerings like Workplace Systems, ensuring the right sales associates are on the floor at the right time. Moreover, through technology applications like Tulip Retail and Myagi, those sales associates are trained with the click of a button on the products that see the most engagement on the floor, and all retailers know the better sales associates are trained, the more they engage with shoppers, and engagement drives conversion.

Other retail IoT technologies like CloudTags bring digital collateral into the physical store environment, elevating the notion of “showrooming” so shoppers have all the necessary product and service information at their fingertips. Plus, some retailers are already using robots from technology companies like Simbe Robotics to automate the most mundane and repetitive tasks or retail execution, like auditing shelves and displays for out-of-stock or low stock products, misplaced products or mispriced products, freeing up sales associates to deliver knock out service that makes a true difference to shoppers and their shopping experiences.

There are even technology applications like those from Celect that combine inventory, sales and shopper data streams to determine optimal hyper-local merchandising.

Today, not tomorrow

In previous years, the retail industry has only scratched the surface in deploying new, innovative retail technologies to better reduce friction in shopper journeys. Now, the proliferation of IoT technologies and their value-added applications allow retailers to thoughtfully and purposely create shopper-centric stores of the future and differentiated competitive advantages.

But, a warning for retailers:  The store of the future is not a tomorrow thing, it’s a today thing, and if a retailer is not already experimenting with technology solutions to smooth and refine the shopping experience, it’s already behind.

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