There is no doubt that the internet of things (IoT) will drastically change the way that retailers do business in the next three years. In a recent benchmark report from Retail Systems Research, underwritten by Software AG, more than half of retailers surveyed said their existing infrastructure is not capable of supporting IoT.
In addition, 44% of respondents said they need to find new ways to connect with consumers using IoT and 47% admit their business leaders don’t understand the benefits of IoT.
IoT holds a lot of potential for retailers in one of two categories, according to Oliver Guy, Software AG’s Global Industry director of retail. The first is the ability to improve the efficiency of operations. This includes things like inventory in real-time and visibility into the supply chain. The second area is customer engagement and customer service, in terms of understanding customer activities and responding accordingly.
“While retailers understand there are great benefits to be had from IoT, there is a growing disconnect between this awareness and a call to action,” Guy said. “In retail analyst RSR’s recent report, 'The Internet of Things in Retail: Getting Beyond the Hype,' 65% of retailers stated there is much to gain from IoT, but, worryingly, more than half don’t feel their infrastructure can support it.”
Guy believes resolving these infrastructure issues is paramount to retailers getting value out of IoT. He expects that in the next few years retailers will test the technology in small areas of the business before adopting it companywide.
When it comes to current trends in IoT, Guy is seeing a clear shift away from focusing on operational efficiency to being more focused on the customer engagement angle.
“Retailers across the globe are setting up laboratories with which to experiment around IoT. The opportunity to offer automated, or near automated, replenishment using in-home devices similar to Amazon’s Dash buttons is something a number of retailers are working on,” he said.
Guy also said there is a renaissance in RFID for retail operations. For example, using RFID to track inventory not just in the supply chain, but on the retail floor.
“These and other innovations have similar requirements, in that in order to add the most value, they require both real-time connectivity and the ability to digest data and make decisions based on many real-time inputs,” Guy said.
What’s coming down the IoT line of the future?
Guy believes connected kitchens will be hot, as they will have shopping list devices which will allow consumers to dictate or scan a shopping list, not to mention smart wine decanters and egg trays.
“Soon consumers will be able to walk into a store and a robot will be waiting with their prior search history on a retailer e-commerce site and it will direct them right to the item they want,” he said.
Guy also referenced the growth of the use of smart mirrors. This is a way for customers to virtually try on clothes, which enhances the shopping experience and offers added convenience for the shoppers by avoiding the hassle of fitting rooms.
“Overall, IoT will enable retailers to provide customers with the ultimate personalized experience knowing their preferences. In many respects, the future of retail is true omnichannel powered by the Internet of Things,” Guy said.
While the adoption is slow, retailers will get there. The holdup involves one of two issues, either connectivity and integration into the company’s current software systems or analytics and response, so interpreting data and responding accordingly.
Guy says that Amazon is the most successful retailer in terms of taking advantage of IoT so far this year.
“First, Amazon Go is an attempt to streamline the in-store experience using IoT technologies,” he said. “While commentators point out that it is not ready for real commercial use yet, Amazon’s attempts to eliminate the single biggest frustration in the in-store experience—queuing—are to be applauded. But Amazon’s attempts are not limited to the store—Amazon Dash buttons are in many homes around the world and Amazon Echo devices offer the ability to make purchase transactions as frictionless as possible.”