2017 was the Year of Store Closings--Can the Internet of Things Solve Retail's Woes?

Written BY

Emily Friedman

January 3, 2018

The Internet of Things (IoT) is a network of Internet-connected objects that have been made “smart” with embedded sensors. These devices collect data about the physical world around us, about processes and the health and behavior of people and machinery—data which is then interpreted and shared with other machines and people via cloud-based software platforms. In retail, IoT solutions can improve in-store operations, optimize supply chains, deliver better customer experiences, and generate new revenue streams.    

2017 was the year of store closings. By year’s end, major retailers will have closed or announced plans to shutter over 8,500 stores. This in addition to the many brick-and-mortar retail bankruptcies, as e-commerce giants and fast fashion brands threaten traditional retail business models. How to solve retail’s woes? Is the future bleak for the industry? Has online shopping won or might the physical store survive with a little TLC and IoT?

Consumers today expect the shopping experience to be seamless across all of a retailer’s channels. That includes the brick-and-mortar store, e-commerce site, mobile app and even telephone customer service. So, when we talk about the Internet of Things in retail, we’re not just referring to the connected store of the future but rather to a system of sensors linking every aspect of a retailer’s business far beyond “buy online, return in store.”

What kinds of things can be made smart in retail? You may be familiar with beacons, RFID tags, NFC payments, and QR codes. Other retail technologies include in-store infrared foot-traffic counters, source-tagged SKUs, mobile device tracking, digital signage and kiosks, and classic video surveillance. There are electronic shelves that detect when inventory is low; proximity sensors that could be synced with digital coupons or AR cues activated via shoppers’ smartphones; and, potentially, interactive digital signs that tailor promotions to the person standing before them.

Sensors are being incorporated today into product packaging to monitor the quality of perishable goods; and digital price tags are enabling dynamic pricing, where item prices are changed in real time to reflect the most current trends in demand, inventory level and other data (i.e. surge pricing.) And on the horizon are self-scanning and self-checkout by smartphone, as well as robots that could aid in areas like product assembly, stock replenishment, and hazardous or heavy materials handling. Robots might even assist in stores by responding to spoken inquiries (voice recognition, AI,) helping shoppers to browse and locate inventory, and suggesting products based upon customers’ shopping histories. Imagine if a robot knew the last thing you left sitting in your online shopping cart and could inform you of a new reduced price or special sale for that item as soon as you entered the store.  And, of course, wearables worn by sales associates and managers, along with those on the wrists of shoppers, are another potential end point and data collector in the connected store of the future.

Let’s see how all of these “things” or potential parts of an Internet of Things strategy could impact retail operations:

In-Store and Supply Chain Operations

The Internet of Things promises to help retailers increase efficiencies through better visibility into their operations and supply chains. Inventory tracking (using RFID, smart shelves, and other sensors) is a good place to start—gaining real-time knowledge of where inventory is located and in what quantity and condition. By knowing exact stock levels, exactly when a replenishment delivery will arrive and how up-to-date goods are; retailers and their employees can make better on-the-fly decisions to meet customer needs and expectations.

Tracking inventory throughout the supply chain would help avoid out-of-stock situations that hurt customer satisfaction and result in missed store sales opportunities. Data collected in the cloud from different sources could be analyzed and delivered to the right agents like warehouse managers or store staff via mobile apps. Inventory tracking would also aid in handling unexpected surges in demand due to unscheduled events, situations in which a retailer must be highly responsive by immediately attaining and acting upon stock availability. Or, you could avoid the issue altogether by linking smart shelves in stores with a warehouse management system to automatically reorder products when store inventories reach a certain level.

Another means of reducing missed store sales is demand-aware fulfillment, where warehouse automation and robotics are driven by online and in-store shopping demand and inventory levels. By monitoring sales opportunities in real time and automating the movement of goods through the supply chain, you can reduce the chances of missing a sale due to the customer’s desired item being out of stock.

In addition to preventing missed sales, (RFID) inventory tracking can help decrease product loss and shrinkage, and increase accountability at all operational levels. For instance, an IoT solution featuring smart shelves, source-tagged SKUs and security footage would “know” whenever an item is taken off a shelf (instantly updating inventory records) and could raise a red flag if the item weren’t subsequently paid or accounted for. Goods can also be lost due to environmental factors. Tracing those goods is important for health and safety reasons, but an IoT-savvy retailer would be able to intervene before items “go bad” by using sensors to monitor variables like heat and humidity that impact perishable goods. You could move things around, prioritize one shipment over another, etc. and create an audit trail to identify the cause and/or responsible party.

The product is important, as is the employee who sells it—employees are key assets that can be tracked to help a retailer understand how to best manage them, ensuring there is always an employee prepared and in the right location to serve a customer. IoT solutions can reveal whether store associates are responsive to shoppers’ needs in addition to helping them be so by analyzing employee activity data (movement, number of sales, etc.) against factors like store traffic and customer demand and by giving them the information to work efficiently. For instance, employees could use smartwatches or smart glasses to look up real-time stock and other product info on the sales floor, never having to leave the customer’s side to walk over to a computer or “check in the back.” Shoppers needing assistance might also use an app to summon help in stores, with an automatic wearable alert sent to the nearest salesperson.

What else can IoT technologies do to improve store operations? How about managing energy consumption, a major expenditure for large stores, using smart lighting and thermostats? Or enhancing workplace productivity? An IoT solution could tell you how your employees should spend their time (helping customers or doing operational tasks) and where to place them on the floor by analyzing current and past data; including high-traffic areas, seasonal shopping trends, customers’ shopping histories and digital wish lists, delivery and inventory audit schedules, etc. And predictive maintenance isn’t just for manufacturing plants; retail stores have equipment, such as grocery store refrigeration units, which can be sensor-ized to monitor power consumption, temperature, etc., reduce product loss, and ensure food safety. With electronic inventory tracking, suppliers can be automatically notified when stock needs to be replenished and digital coupons can be offered to shoppers to improve turn on aging stock.

Customer Experience and New Revenue Streams

Another major application of the Internet of Things in retail is customer service—helping customers to shop more easily and empowering employees to better serve them. In the brick-and-mortar store of tomorrow, (wearable) contactless payments and automated home replenishment could provide ease; robots or even smart shopping carts could help customers navigate aisles; digital marketing could be customized for individuals and different regions; optimal store layouts could be designed in Virtual Reality; and shoppers could try on clothes and select automobile options virtually.

IoT solutions can help retailers connect the physical store experience to shoppers’ digital lives and thereby make store shopping more engaging and seamless. As soon as a customer enters the store, for instance, customized offers and product recommendations could be sent to his or her mobile device based upon that person’s online shopping and browsing history, app usage, and possibly activity level (from a wearable fitness tracker.) This is proximity marketing; it can be automatic (BLE beacons) or personalized (NFC tags, QR codes and now also AR cues) by leveraging the same type of rich data and advanced analytics brands use to drive e-commerce and consumers’ own devices.

Shoppers are more likely to download a retailer’s app (and give up their location) if it gives them access to those kinds of promotions or even the power to scan items and call up product reviews, find their size at other store locations…anything that makes the in-store experience as frictionless as the online one. That same rich data and instant product info can be leveraged by store associates who’ve never had access to it before; to identify loyal customers, incentivize undecided shoppers, upsell products and provide overall better service.

The possibilities for the Internet of Things in the retail industry are great: Retailers can use IoT technologies to collect real-time data on shopper behaviors but a decision management system is necessary to (automatically) orchestrate action, whether that’s directing an associate (via wearable) to assist a customer or provide relief in a really busy area of the store; remotely changing prices or tailoring an in-store display; or having warehouse workers reposition inventory elsewhere in the supply chain.

The 5th Annual Enterprise Wearable Technology Summit 2018, the leading event for enterprise wearables, will take place October 9-10, 2018 at The Fairmont in Austin, TX. EWTS is where enterprises go to innovate with the latest in wearable tech, including heads-up displays, AR/VR/MR, body- and wrist-worn devices, and even exoskeletons. For details, early confirmed speakers and preliminary agenda, please stay tuned to the conference website.

photo credit: arbyreed Cold Drinks via photopin(license)

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