Retail Buys-in Big on IoT Technology
Today’s retail industry is going through a revolution thanks to intensifying competition, continually evolving customer expectations, and innovation - constant innovation. One of the major sources of disruptive innovation in the retail sector is the Internet of Things (IoT).
IoT solutions offer enormous potential advantages for retailers and they are starting to put money on it giving them a competitive edge. According to Juniper Research, merchants around the world are expected to spend $2.5 billion on IoT technologies by the year 2020. Nearly four times the estimated $670 million spent in 2016, the increase is a clear reflection of the immense opportunity IoT offers. Accounting for the diverse business models and objectives of IoT projects, such as service revenue, spend and cost-savings, Juniper forecasts that the IoT opportunity will approach $300 billion annually by 2020—a big crunchy carrot for retailers looking to increase returns.
Three big IoT solutions being implemented by retailers are on-demand ordering and payment, location-based marketing and inventory management.
What You Want When You Want It
Meeting the typical “I want it yesterday” customer expectation is key in the fight to maintain competitive advantage—and increase market share. IoT-based technologies like the Amazon Dash Button are taking this difficult-to-meet expectation and using it to drive sales.
The Wi-Fi connected Amazon Dash Button device enables customers to reorder their favored products with the simple push of a button. Just a single tap and you’re done—no having to open up your computer, or even touch your phone. This button takes the realization that you’re running low on laundry detergent or toilet paper and turns it into the point of (re)purchase. Users can strategically disperse devices around their homes, so they’re there just when they need them—and just like that, a new customer satisfaction level is achieved, thanks to the connected genius of IoT.
Launched in 2015, orders using Amazon Dash increased by 500% in 2016. And the items available continue to expand with the retail giant adding 60 brands to the program in October 2016, growing its lineup of more than 200 buttons. With that kind of growth, it’s only a matter of time before other retailers want a piece of the pie.
Marketing in the Moments that Matter
Location-based marketing is another disruptive IoT-powered concept whose implementation is growing quickly in the retail market. In-store Beacons are the leading IoT-based solution used for this kind of engagement.
Retailers are using these location-based devices to reach shoppers while they are physically in brick-and-mortar stores. The minute they walk into the store, the technology automatically sends notifications and discount codes right to the customer’s smartphone. Clever, since according to Google research, 84 percent of shoppers use their smartphones to help them make purchase decisions while in-store.
The success of location-based marketing is gaining a lot of attention from retailers, particularly during busy shopping months. According to digital advertising firm MaxPoint, location-targeted ads accounted for 85% of its clients’ mobile ad spending last holiday season. And that’s paying off. inMarket, one of the world’s largest beacon platforms, says its analysis shows its platform influenced $14.5 billion in consumer spending during the Black Friday weekend in 2016.
The use of beacons is expanding significantly. BI Intelligence, Business Insider's research service, expects the installed base of beacons to swell from 96,000 in 2015 to 3.5 million in 2018. Walgreens, Target, Rite Aid, Neiman Marcus, Best Buy, Urban Outfitters, Macy’s, Wal-Mart and many, many more retailers have already recognized the value of location-based marketing and are firmly aboard the beacon bandwagon.
Creating a Smarter Supply Chain
Another way that retailers are leveraging IoT technologies is to drive operational efficiencies in their inventory management.
The accuracy of inventory information is essential to a successful retail business. This is an area where the incorporation of IoT is elevating the oldie-but-goodie RFID to a whole new level. And, it’s much cheaper than it used to be—making item level tagging a financially feasible option. In the early 2000s, a single RFID tag might cost $1 whereas today it’s closer to 10 cents.
Thanks to IoT, RFID item level tagging is transforming retail inventory management.
From enabling shipments to be automatically scanned, rather than by hand, to giving companies access to a comprehensive, real-time view of their inventory, whether they’re looking for a certain item in-store, or checking stock numbers available for online sales, the benefits are numerous. The numbers don’t lie. According to a recent Retail Wire report, the use of RFID tags improves inventory accuracy by 32% and decreases out of stock item incidents by 50%, all of which produces a sales increase of 18%.
And RFID implementation among retailers is gaining steam. Retailers used 5 billion RFID tags in 2016, and that number is expected to rise to 7 billion in 2017, according to IT Jungle.
Keeping Customer Information and Goods Secure
There are many benefits to reap from deploying IoT-powered devices in the retail vertical, but steps must be taken to ensure customers’ personal information and information about the company’s goods and assets stay secure.
Cyberattackers target mobile devices and traditional endpoints as an entry point into a retailer’s network. All devices, including payment systems, Wi-Fi and Bluetooth Low Energy (BLE) beacons, and digital signage—as well as desktops, laptops, tablets and smartphones—must be protected.
But the reality is that many retailers don’t even know what devices are on their networks—both traditional endpoints and fancy new portable devices—or whether they belong to shoppers, retail associates, store managers, or third-party contractors.
The first step to protection is to gain real-time visibility into all connected devices—so IT knows what they are, where they are and what they’re doing. Devices should be authenticated securely before granted network access and set up so that shoppers’ devices aren’t on the same segment as operational systems. Devices should be continuously monitored for any potentially suspicious behaviors that might indicate compromise.
But don’t let the security concerns scare you off from an entirely new way to engage with shoppers in stores and in the digital world. Retailers unwilling to adapt risk being left behind as more nimble retailers enter the market.