Retail IoT: How stores are using connected devices to drive business
The Internet of Things (IoT) has been a hot topic in the past year, because companies are now offering everything from fitness trackers that measure a person's activity level to smart refrigerators that text you when you're out of milk.
While retailers might be tempted to invest heavily in the latest buzz-worthy smart products, they should do so strategically. Smart retail IoT investments can help companies capture shoppers' dollars by creating omni-channel businesses that harness valuable big data insights.
Can smart shelves solve retail inventory woes?
Maintaining accurate inventory may seem like a lesson from Retail 101, but this task is an ongoing challenge for merchants. Computerworld reports that annual inventory losses cost the retail industry more than $1 trillion, and this mostly comes from over- and under-stocking items. Lack of inventory visibility leads to a number of problems, from reduced employee productivity to dissatisfied customers and lost sales, making it a top issue for many companies.
In a bid to get a more accurate read on inventory, stores are turning to retail IoT devices such as sensors and radio frequency identification technology. One of the latest IoT solutions that's piqued the interest of retailers is smart shelves, which give companies real-time information about what's in their aisles.
"The combination of store shelf sensors, smart displays, digital price tags and high resolution cameras makes it possible for retailers to see what is on the store shelf and in the stock room and link these two sets of data," according to ZDNet.
When real-time inventory data is fed into powerful analytics tools, retailers can maintain optimal stock levels and more accurately predict future demand for products. For instance, Denmark-based TOP-TOY uses data analytics to pinpoint its best-selling merchandise, plan future orders and optimize the layout of its stores.
"Using [the analytics platform], we can combine figures from our forecasting system with the previous year's actuals from the [enterprise resource planning] system, and get a clear picture of what we expect to sell in the coming year," explains Lars Andersen, performance management specialist at TOP-TOY. Andersen notes that this strategy helps the company avoid over or understocking merchandise.
What do beacons bring to the table?
These sensors are embedded throughout a retail store's digital touch points, such as shelves, signs and product displays, and can interact with shoppers' mobile devices. Many retailers have been banking on beacon technology to take in-store, personalized consumer marketing to new heights, but these retail IoT devices have yet to be perfected.
"All types of barriers, including signal interference, retailer inexperience and customer hesitancy to download apps, have limited [beacons'] utility as messaging and engagement tools," Yory Wurmser, a retail analyst with eMarketer, explained in an interview.
When retailers can overcome these barriers, however, they can use beacons to generate reliable location-tracking data. When analyzed, this information can help retailers generate insights on how shoppers move around the store, which can led to better store layouts and a better customer experience. Beacon-based location information can also be linked with a customer's online shopping habits for a next-generation customer experience.
"This data has to be opt-in [by the consumer], but it can serve to link online advertising with offline shopping behavior," Wurmser explained.
For instance, if a customer browses a store's website, looking at toasters, beacons can sense when the shopper enters a brick-and-mortar store. Retailers who conduct savvy data analysis will be able to automatically trigger a smartphone notification that tells the customer where toasters are located in the store and offers a complementary coupon for a cross-sell item. The possibilities to wow customers are endless if retailers can perfect their beacon systems and convince customers to opt-in to communications.
Smart shelves and beacons are two of the more prominent retail IoT technologies, but there are surely more in the pipeline. Retailers should consider the data collection opportunities that these tools create when it comes to improving operations, increasing sales and impressing shoppers.
Learn more about IBM solutions for retail.