The Internet of Things (IoT) is changing our everyday lives, and some of the most immediate and impactful changes will lie in one of the most unlikely of places – the retail store.
Online shopping continues to grow rapidly, but it’s important to note that over 90 per cent of purchases are still made in brick-and-mortar stores, and physical stores will remain a key shopper touchpoint in the multichannel, cross-channel reality of today and tomorrow. A proof point lies in the brick-and-mortar expansion of traditionally online merchants, including the likes of Warby Parker, Bonobos, and, yes, even Amazon.
However, stores in the not-so-distant future will look and feel much different, and, in fact, the ‘store of the future’ is increasingly becoming the ‘store of today’, a massive disruptor and differentiator in a retail industry that is much more fast follower than early adopter.
A long time coming
Retail’s adoption of IoT technologies faced a prolonged incubation stage for two primary reasons. First, competition is fierce and margins razor thin, requiring retailers to prioritise investments of scarce resources, and up to this point many retailers have focused on survival by fixing gaping holes in their fundamental foundations. Secondly, IoT technologies themselves needed to be vetted, proven and improved upon, with costs coming down and benefits more readily delivered to retailers and their shoppers.
Despite the challenges, IoT is now poised to reinvent the entire 360-degree retail ecosystem.
A convergence in time
Visionary futurists have predicted connected lifestyles – including stores – for years, but only now has technology moved from science fiction to reality.
Remarkably, semiconductor chips are smaller than ever, at the same time being exponentially more powerful and – maybe most important of all – less expensive. It’s now to the point where semiconductors can be attached and integrated into anything and everything.
And, they are.
In 2002, it was famously calculated that the annual production of semiconductor transistors exceeded the number of grains of rice harvested each year [1,000 quadrillion (one quintillion, 1×1018) to 27 quadrillion (27×1015)]. Over 14 years, the gap has widened and now it’s the rare product that isn’t connectible.
As connected ‘things’ proliferated, telecom networks expanded, and the entire globe is now crisscrossed with webs of bandwidth providing the infrastructure for all those ubiquitous chips to inexpensively connect.
Finally, Big Data analytic platforms have been built and refined to efficiently and effectively collect, process, analyse and present vast amounts of information created every millisecond of every day.
The convergence of technology and infrastructure makes it easier than ever to generate, collect, analyse and share data, and over time price points have decreased to levels where it makes good business sense.
Numbers game tips scale
Adoption usually comes down to the tipping point when a technology moves from being ‘nice to have’ to ‘need to have’. It’s a matter of scale, and the IoT ecosystem is scaling rapidly.
According to a Gartner, Inc. forecast, there will be 6.4 billion connected ‘things’ in use worldwide this year, up 30 per cent from one year ago, and projected to reach almost 21 billion by 2020.
Those connected things are making their way into the retail environment, with the global retail IoT market estimated to grow to $36 (£25) billion by 2020, a compound annual growth rate (CAGR) of 20 per cent.
One of the fastest growing areas of IoT deployment in retail is in RFID (radio-frequency identification) tags and sensors, empowering organisations to optimise supply chain efficiencies, improve employee performance, minimise waste and better manage compliance requirements. According to Oracle, through the use of RFID tags, retailers can expect near 100 per cent inventory accuracy, leading to a 50 per cent reduction in stock outs, a 70 per cent reduction in shrink and a total sales increase of 2-7 per cent.
Consortiums like the Acuitas Digital alliance bring together leading companies specialising 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 behaviour and aid in creating better shopping experiences.
A need for shopper-centricity
Of course, technology for technology’s sake is often expensive and almost always a losing proposition, and data for data’s sake isn’t particularly useful. However, technology centered on shoppers – their shopping journeys and experiences – is almost always a great idea, for what’s good for shoppers is good for retail businesses.
While some of the most publicised retail technologies directly touch consumers, like magic mirrors and other interactive displays, mobile point-of-sale (mPOS) and even augmented reality, perhaps the technologies most valuable to shoppers are those that empower retailers to deliver optimal, and often personalised, shopping experiences.
To be optimally successful, the IoT store of the future must really be the shopper-centric store of the future, built around a retailer’s specific mission, brand and objectives, and the foundation rests on real-time shopper data. Whether directly or indirectly touching consumers, if technologies are shopper-centric, the data gathered across platforms can be used in existing business processes to improve operations and the shopper experience.
New IoT-enabled combination sensors, integrating stereo video in HD, Wi-Fi and Bluetooth into a single device, enable retailers to deploy fewer devices and collect more information, and cloud-based analytics platforms make data available to decision-makers across the entire enterprise. All that power leads 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 marketing.
New-age shopper traffic data not only enables retailers to reduce friction points along the shopper journey, but also powers other friction-reducing technologies designed to accelerate outcomes, including tools to engage shoppers in the digital realm and then guide them into the physical store. Utilising digital data in the in-store environment, service is delivered quicker and more personalised.
With insights from store traffic and the additional traffic derived from digital channels, retailers now drive smart scheduling through workforce management systems, ensuring the proper sales associates are on the floor at the right times. Moreover, through connected technology applications, those sales associates are trained with the click of a button on products most engaged with on the floor, and all retailers know better trained sales associates better with shoppers, and engagement drives conversion.
Other retail IoT technologies bring digital collateral into the physical store environment, elevating notions of showrooming and webrooming so shoppers have all the necessary product and service information at their fingertips. Plus, retailers can use robots to automate the most mundane and repetitive tasks of retail execution, like auditing shelves and displays for out-of-stock products, misplaced products or mispriced products, freeing up sales associates to deliver the knock out service that makes a true difference to shoppers and their shopping experiences.
Tomorrow’s store, today
In previous years, retail 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 and differentiated competitive advantages.
The good news for shoppers is that the connected store of the future is increasingly becoming the store of today, and stores that respond first to this shopper-driven change are the stores destined to be shoppers’ stores of choice.