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How can retailers capitalise on the Internet of Things?by
24th Jul 2015
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In recent years a wide range of technologies have emerged that have led experts in the wider retail industry to ponder about how they might revolutionise the sector. Big data analytics, the rise of mobile, smart devices, 3D printing, augmented reality, virtual reality – all of these have been tipped to change the face of retail and create experiential, “emotional” in-store experiences.
All of this has emerged in answer to the new challenges retailers are facing on a daily basis. From a broad economic standpoint, in the last few years retailers have suffered as consumers have seen their spending power reduced due to the global economic slowdown, causing a change in shopping behaviour and the desire to seek out better deals. This, by proxy, has decreased customer loyalty as consumers seek the best offer, resulting in a significant customer-base move to online shopping.
While the economic crisis has now somewhat abated, the consumer behaviours that became more prevalent during the crisis have remained. Lower prices and greater convenience are obvious benefits to time-conscious consumers, who are now cutting back on their spending.
Retailers have been looking to technology to create in-store experiences that will attract consumers back to them, even if ‘showrooming’ - the practice of browsing in store and then purchasing from the retailer online later - becomes the norm. New technologies, such as those mentioned above, can offer many benefits. However, much of the emerging, exciting and ‘shiny’ technology has been over-hyped and in reality, implementation of these technologies for retailers may prove to be expensive and may not provide a return on investment in the short to medium term. In these highly competitive times this will not do. So what will?
Internet of Things
The Internet of Things (IoT) is one of these new areas of technology that has received its fair bit of hype. However, IoT is not necessarily a new technology. In the automotive/transport, utilities and manufacturing sectors practical applications of it have already matured. “Infotainment” systems in cars have been around for a number of years already, and from a behind-the-scenes perspective, sensors that gather information and send it back to the manufacturer to run diagnostics so drivers can be alerted to any faults or potential faults are now commonplace in newer models.
Similarly, in manufacturing, sensors across the factory floor and also throughout supply chains help end-to-end processes run more efficiently and effectively. Gartner has stated that these three sectors will be at the top in terms of Internet of Things adoption in 2015. However, retail is quickly catching up.
Technologies for now
The golden egg of reduced cost and increased revenue is within reach for retailers, thanks to a number of simple and practical applications of the Internet of Things.
In-store video analytics is one such example. Using existing store cameras, video analytics can generate heat maps, calculate dwell time, improve customer flow and also monitor stock levels. For example, cameras in store can pick up when a shelf or tray is empty and then alert the member of staff assigned to that area to replenish the stock. In the US, a well-known supermarket chain has used video analytics to lower fresh bread out-of-stocks from 35% to just 6%.
Cameras and video analytics can also monitor customer flow and queue length to help improve customer experience. If customers are concentrated in a particular area of the store, staff can be alerted and sent to that area, helping the store to use staff resource more efficiently and also provide a better customer service. Using video analytics to monitor queue length implies that stores can open new tills if required.
Another practical use of IoT that retailers can leverage now is the use of beacons. Beacons are small wireless devices that constantly send a low power Bluetooth signal, allowing mobile devices to detect them and provide retailers the opportunity to offer personalised and context-relevant suggestions and communications to customers within their stores.
As an example, for a store with an omnichannel presence, if a shopper had viewed a certain item when browsing on the store’s mobile app the use of beacons means that when they pass near that item in the physical store they are sent a notification, alerting them to its presence, and possibly offering them money off. This kind of personalised technology can help to increase sales and also loyalty in customers, although does come with its challenges.
Both video analytics and beacon technologies are relatively small investments that retailers can make and take advantage of now, but it is not just about the front-line customer experience. 'Back-of-house' IoT applications can also help increased efficiency and reduce retailer costs.
For the big name supermarkets, stores, warehouses and distribution centres represent a significant operational cost, particularly in regards to energy consumption. Internet of Things sensors, like those used to monitor machines and shop floors in manufacturing industries, can be used to monitor and control all energy use centrally, ensuring that energy is not wasted and thereby actively reduce costs.
By 2020 Gartner predicts that there will be 25 billion connected “things” in our world. While the idea of a virtual reality store that consumers can visit using their Oculus Rift headset is currently a far-off dream in terms of widespread application, there are elements of IoT that retailers can leverage and use to their benefit now. With a relatively small investment, retailers can take advantage of some of the newest technologies, increasing their customers’ satisfaction, reducing their operational costs, and increasing their bottom line.
Kuru Subramaniam is a managing consultant with Wipro’s Retail Domain Consulting Group where he leads multiple business consulting engagements.
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