The Internet of Things (IoT)
in the Retail Industry

May 31, 2019

Digiteum Team

iot retail

IoT

The Internet of Things (IoT) in the Retail Industry

The retail industry has been riding a wave lately. Amazon alone has over 197 million monthly visitors bringing in over $350 million in revenue. Statistics are about as impressive when it comes to AliExpress with its 200 million monthly visitors, not to mention traditional brick-and-mortar stores.

The potential of retail in our digital age is staggering—that said, the industry is aware of its own issues and drawbacks. Unawareness of the audience, delivery issues, and lack of trust in online purchases are all factors that hold sellers back in an environment they could otherwise be thriving in.

Today’s technology has the capability to break the wall between brand, product, and customer. In 2019, brands have started turning to IoT in retail trends—according to recent reports, the market value of IoT in retail will grow to $94.44 billion through 2025.

What opportunities does technology have to offer? Are there any successful IoT applications in today’s retail? This post will answer these and other questions and give a complete rundown of IoT applications in retail.

What is IoT?

The Internet of Things—the extension of Internet connectivity into physical devices and everyday objects.

In broader terms, the Internet of Things means that all items we use on a daily basis will be interconnected, able to exchange data, and optimized to fit our preferences. This opens a wide range of opportunities in many fields, including transportation, healthcare, workplace, and retail.

Here are the two most common applications of IoT:

  • Data gathering and sharing through sensors. These devices can collect environmental, motion, and other data and share it with selected users in real time. Additional information will enable quicker and more informed decision making.
  • Acting based on collected data. IoT-enabled machines will be able to initiate commands on their own - this way, humans will be able to manage technology from a distance.

Based on the role of technology, hundreds of innovations have been planned and designed, including those for retail.

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Customer Experience Optimization with IoT

The Internet of Things and retail allows store managers to find new ways to establish a connection with a client, create a short and direct customer journey, improve the process of product maintenance, and build a long-lasting bond with first-time shoppers.

Here are the most common opportunities IoT offers for customer experience improvement.

1. Personalized communications based on the IoT-collected data

The Internet of Things makes a good case for improving communication between a customer and a brand. IoT sensors can track down a customer’s habits and share insights with the marketing team.

Content teams will be able to create segment-specific personalized content that would help a shopper to find the product he’s looking for, get tips and advice, or introduce a friend to the store.

Target used IoT-empowered beacons in order to collect user data and send hyper-personalized content. A visitor can download a ‘Target Run’ phone app and get product recommendations corresponding to the department they are currently shopping in. The system of notifications operates like a newsfeed, where all content is sorted by relevance based on the part of the store the user’s exploring. This way, Target successfully shifts the focus to the customer, manages to communicate with in-store visitors more efficiently, and cuts the idle browsing time.

2. Optimizing product usage

All the datum collected by IoT can allow brands to improve product maintenance. A company will be able to tweak the settings of a product as a client uses it at home. Moreover, all insights during the run of the product will be collected and transferred back to the company’s server. When it’s time to design a new lineup, all the gathered data will prove useful.

Rolls Royce uses the Internet of Things to improve the engine maintenance of its aircraft. The brand collects data about the state of the engine on a daily basis and alerts a client as soon as there’s a need for active maintenance. This way, the end user can detect damage in its earlier stages while the brand maintains an excellent reputation and long-term connections.

3. Monitor and predict in-store wait times

Long lines at cash decks are often a reason for low customer retention rates. It’s not just the wait that leaves the customer frustrated so much as not being able to predict the amount of time they will spend waiting.

The Internet of Things is helpful as it allows brands to manage in-store wait times. The technology can provide a store’s employees with data on how long a user has been waiting, suggest distractions for impatient shoppers, or offer a quieter place to make the time in line more tolerable.

Disney World managed to handle lines productively with the introduction of the IoT-enabled MagicBand. The wristband allows site managers to find out where the line is forming, how long people have been waiting for, and so on. This way, an additional employee can go to a busy part of the area and increase the speed of customer service. As a result, Disney is taking a proactive approach to ensure visitors do not feel helpless or disregarded by the brand.

iot retail wristband

4. Using wearables for loyalty programs

Wearable technology has been a known success for fitness and healthcare. However, the wearable IoT application in retail is not limited to tracking health data. In fact, retail companies can benefit from wearables to identify loyal clients. Hotels use wristbands to identify premium guests and offer additional bonuses and discount programs for their stay.

Wristbands are a non-invasive way to offer a loyalty program and say ‘thank you’ to those who have supported the brand since its first days.

Walgreens is using wearables to encourage users to walk 10,000 steps per day. The tool will give users a physical reward as soon as a daily goal is reached.

5. Keep the customer updated on the product delivery status

Insecurities regarding product delivery often hold people back from ordering online. Brands can use the Internet of Things to make sure customers are clear on expectations. The technology allows a retailer to create updates regarding the delivery status so a user can see the location of their order in real time.

ParceLive—a delivery service—allows users to track parcels in real time. Thanks to sensors, the company has a built-in GPS tracker for deliveries and a means of collecting data on temperature and the speed of delivery. A client will be alerted if their package has been dropped or potentially damaged in order to keep purchases risk-free.

How Does IoT Contribute to the Retail Industry?

IoT has a ton of applications to offer in terms of improving customer experience and just about as many in retail management. Here are the main opportunities of the Internet of Things in retail.

Customer experience personalization

Using the Internet of Things is a good way for a brand to foster a personal connection between the brand and its customers. For instance, you can attract passersby to visit your store by sending an IoT-enabled notification to their smartphones.

Retailers can use the technology to find out more about a customer in order to lay the groundwork for microtargeting. This way, marketing managers will be able to make more conscious choices and use advertising budgets more efficiently.

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Supply chain optimization

GPS and RFID technology will allow brands to track each individual item through the entire delivery process. You will be able to have a tight grip on your vendors as you will be able to monitor the delivery conditions and the location as well as predict a precise delivery time.

The range of applications of IoT in supply chain management is impressive. For instance, you can test different vendors, vehicles, and delivery routes; collect the data on the process; and find the cheapest framework that also transports the product with no damage.

The same stays true for product distribution and delivery to the end user.

Innovating in-store experiences

Implementing the Internet of Things can help retailers to redesign their stores completely. You’ll be able to provide a new experience for fitting rooms, create a system of intelligent suggestions, and go as far as to replace human workers with connected technology. Amazon Go is, without a doubt, the most famous and successful example of large-scale IoT implementation for revolutionizing in-store experience.

Iot retail cashless checkout

On a smaller scale, a store manager can replace a cash deck with a connected POS payment terminal.

By bringing IoT to physical stores, you’ll be able to cut maintenance costs, increase the speed of service, and eliminate human error.

Increased store management efficiency

The Internet of Things empowers a range of technologies that improve the efficiency of business operations in retail. These include:

  • Automated packaging services;
  • SKU accounting;
  • IoT drones for inventory monitoring;

Implementing IoT for retail management results in reducing shrinkage, managing each storage unit, and navigating the inventory easier.

Decrease the amount of workforce needed for running a store

One of the most effective ways of reducing the amount of workforce involved in store management is automating tasks to robots - what seemed like something straight out of sci-fi just a few years ago is now commonplace.

Robot employees are widely used at Target supermarkets in order to scan shelves and pinpoint missing items. OSHBot, designed by Lowe’s Innovation Lab, helps users find specific items and answers their questions.

Needless to say, the Internet of Things will not eliminate the need for a human workforce in retail—instead, employees will be able to focus on tasks that are not repetitive and mundane but rather require top-notch human assistance.

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IoT Applications in Retail

Now that we have outlined the main opportunities of IoT, it’s time to go over the most effective and popular Internet of Things retail examples. Here are a few of those:

Location tracking

The Internet of Things solves one of the biggest issues in retail - a lack of delivery reliability. The technology is capable of increasing operational efficiencies and improving logistic transparency.

The German supermarket chain Feneberg Lebensmittel uses IoT technology to get visibility on its goods and employees’ movements, both within the warehouse and in transit.

Predictive equipment maintenance

Malfunctioning electric appliances (refrigerator units, for example) can lead to tremendous reputational and monetary losses, and it can send dozens of product units to waste. In order to be updated on store maintenance and take a proactive approach in equipment managers, store managers often use IoT in retail. The technology is capable of providing real-time equipment monitoring and notifying the user in case of likely malfunctioning.

Outside of the Internet of Things used in retail, predictive equipment maintenance has already been implemented in transportation (Volvo and IBM), manufacturing (Chevron and Microsoft), and utilities (Florida Power Light)

Inventory management

IoT allows store managers to automate product orders, is capable of notifying when a certain product needs to be re-ordered, gathers data regarding the popularity of a certain item, and prevents employee theft.

There is no lack of inventory-centered IoT solutions, including:

  • MIT Drone Inventory System—an IoT-based drone that monitors inventory in real time and sends alerts in case there are no available units left.
  • Intel Retail Sensor Platform - the RFID antenna scans the number of units on the sales floor and alerts a store manager in case it’s low. The platform looks like a plug-and-play device.
  • Lululemon—a technology for customer-facing inventory managers. A buyer can conduct a real-time check to ensure the desired product is available at the nearest store.

Shopper mapping and analyzing mall traffic

By placing IoT sensors around the store, managers will be able to get a better understanding of the most popular zones and products. User activity heat maps help understand where it’s better to put items for sale, how to optimize store space to use spaces with low activity in a more efficient way, and record and trace shopping trends over time.

A technology developed by Prism Skylabs uses the store camera and IoT to create heat maps of a shop’s layout and transfer the data to a dashboard in the form of readable insights.

iot retail monitoring

Smart shelves

Smart shelf technology was widely introduced to the retail market when Kroger, the supermarket chain with the highest revenue in the US, tested over 2,000 smart shelves in 2016.

As a stocker walks around the shop with a digital shopping list on their smartphone, the cell phone will vibrate in case a needed product is on the shelf nearby. For better visibility, a shelf in need of more merchandise will even light up.

Smart shelves have three common elements - an RFID tag, an RFID reader, and an antenna. A microchip on a tag is transferred thanks to the help of antenna to an IoT platform where it’s processed by a reader. All the data collected by smart shelves during the day will be later shared with a store manager to provide customer-related insights.

Personalized alerts

IoT-based hyper-personalization is widely used in retail. Geofencing and IoT beacons are both tried-and-true ways to catch a customer’s attention. Here are a few IoT examples in retail that have to do with these technologies:

  • Starbucks IoT beacons. Passing by a Starbucks, people would get notifications about new coffee brews or promotions and were invited to visit. According to RT Insights, the campaign has proven to be highly efficient.
  • Avery Dennison managed to personalized shopping experiences by turning clothes labels into RFID tags. These tags were the VIP passes shoppers could use to access bonuses in stores around the town. As soon as an Avery Dennison client was near the store that offered promotions, they were immediately alerted.

What Are the Benefits of IoT in the Retail Industry?

After having conducted a thorough review of IoT opportunities in retail, let’s go over the benefits of implementing the technology as a part of your own retail business.

  • Reducing shrinkage and fraud as the Internet of Things adds an additional layer of traceability and visibility of the inventory and delivery process.
  • Optimizing product placement. IoT allows store managers to identify premium store areas, test the placement of different items in those spots, and find the most efficient layout thanks to detailed reports based on the data gathered by sensors.
  • Efficient use of in-store staff. IoT can use cameras, sensors, and facial recognition algorithms in order to identify an impatient or confused shopper. Staff will be able to make proactive decisions and successfully engineer the atmosphere within the store.
  • Improved retail management and tracking. IoT helps store managers be aware of the number of products on the shelves and in the inventory, replenish stocks on time, and more. The technology can also send automated reports that will later improve financial management and taxing.
  • Connecting online and in-store experiences. The Internet of Things in the retail industry allows users to benefit from brand-related digital solutions while using physical stores. This way, retail companies can achieve synergy between online and in-store experiences.

Learn more
About IoT design and development services.

The Internet of Things is a key to disrupting modern-day retail. A store manager can increase the quality of consumer connections, improve communications with vendors, cut down operation costs, get press, and attract new shoppers.

If you’re looking forward to implementing the Internet of Things at your own store, reach out to Digiteum. We’re building IoT solutions for businesses, homes, and smart cities, both on a small and global scale.

The Digiteum team has a 100 percent command of all common hardware platforms, big data gathering, and processing technologies. We rely on proactive management and open communication principles, and together, we test and validate our clients' ideas, dynamically build their systems, and make sure their investment is optimized and well-placed.

To get to know Digiteum better, take a look at our work. To discuss your project, contact our team—we’ll reach out in no time!

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