Canadian Retailer Magazine | Supply Chain & Logistics

Embracing the revolution: How the Internet of Things is changing the world of retail

September 17, 2017
Embracing the revolution: How the Internet of Things is changing the world of retail

Asset Tracking. Fleet Management. Customer Insights. Even Store Layout—How The Internet of Things Is Changing The World of Retail From The Ground Up

BY JESSE DONALDSON

OVER the past decade, there has been no shortage of hype about the Internet of Things (IoT).

Known also as the Industrial Internet, the Programmable World, and even “the Next Industrial Revolution”, it has captured headlines around the world, with magazines, websites, and trade shows breathlessly predicting a brave new world of connected cars, smart cities, and wifi-enabled AI appliances. And while, for many years, the IoT mostly existed in the realm of dreams, today the “Next Industrial Revolution” stands poised to change everything—not just for consumers, but for the retailers and manufacturers who serve them.

“I think we’ve hit the tipping point,” says Daniel Moneta, Co-Founder and EVP of Corporate Development at MMB Networks, an IoT connectivity company. “Before now, all of this was sort of theoretical. The phase we’re in—and I think this is true of both the consumer, and the more commercial space—is that people are convinced there’s enough value there, that they’re investing in the infrastructure. There’s enough benefit to justify the investment, and we know that it’s only going to become more useful over time.”

A recent report commissioned by Business Insider predicted that globally, there will be 34 billion individual devices connected to the internet by 2020 (compared to a mere 10 billion in 2015). And that’s not just on the consumer side; by 2020, business investment in IoT solutions is expected to top $6 trillion. IoT technology in retail alone is projected to be a $94 billion US business by 2025—technology and infrastructure that will facilitate everything from asset tracking and fleet management, to energy efficiency, customer insights, and predictive analytics.

“They’re doing their ROI calculations, because you can then hang a bunch of other things off of that infrastructure,” Moneta explains. “The same wireless technology that can be used to control smart lighting can be used to track inventory, can be used to track assets, can be used in a retail environment to determine where shoppers are moving and where the hotspots are in the stores. There are so many applications.”

IMPACT OF IoT

34 billion

The number of individual devices connected to the internet by 2020. Source: Business Insider

$6 trillion

The amount of business investment in IoT solutions in 2020.
Source: Business Insider

$94 billion

IoT technology in retail alone is projected to be a $94 billion US business by 2025.
Source: Business Insider

72%

Percentage of businesses that plan on reinventing their supply chains to integrate IoT technology.
Source: Forbes

$2 trillion

The estimated impact of IoT technology on the logistics industry in the years ahead.
Source: Cisco

So much more in store

As it turns out, some of those applications begin right at the store level. In fact, as Rob Barton, Principal Systems analyst with IT giant Cisco explains, IoT technology can be used to enhance the customer experience from the moment they walk through the door.

“A lot of stores have free WiFi, and that’s a nice thing for shoppers,” he notes. “But it’s also a huge advantage from an IoT perspective for the retail chain or the store, because it allows them to see where people are. Where they’re congregating, where they’re spending their time. And that information can allow you to make changes to the business.”

“…WE NEED SERVICES THAT ARE MORE ACCESSIBLE, THAT ARE EASY TO DEPLOY. AND WHEN THAT HAPPENS, I THINK THE PENETRATION RATE IS JUST GOING TO SKYROCKET. WE JUST HAVE TO MAKE IT EASIER FOR THE WORLD IN GENERAL TO DO THIS.”

ROB BARTON
Cisco

This information can be gleaned using multiple methods, including Bluetooth beacons, GPS, and even Visible Light Communication—high-frequency pulses from LED lights that communicate with smartphones to provide accurate customer positions within ten centimetres. Starting in 2015, Target took this concept a step further, pioneering a smartphone app that was one part indoor positioning system, and one part digital shopping assistant. Mounted on shopping carts, the app greets customers with a free cup of coffee, provides directions to products, and automatically gives detailed comparison information when they approach items they’re looking for. The same sorts of technologies are currently being explored in Europe by retailers such as France’s Carrefour. And the applications go further still; with this ability to track customers on such a granular level comes an unprecedented opportunity for in-store promotions.

“In the case of one of our clients, they implemented a connector with Cisco’s location-based services tool, where they could actually send pop-ups to customers as they shop,” Barton says. “As they come close to a bookstore, for instance, they will get a pop-up message on their phone that tells them about a sale on a particular magazine or book, once you come within ten feet or so.”

And while these advances have already created big changes on the digital plane, they have also begun to affect stores in a physical sense—not only does it allow retailers to negotiate higher lease rates for high-traffic areas and endcaps, but it’s even being used to transform a store’s entire layout.

“With one client, they noticed that a large percentage of people were going to the Hardware Department,” Barton explains. “And directly after that, they would go to the Food Court. They concluded these were probably men shopping for tools, and then grabbing a bite to eat afterward. So, they started to look at their floor plan to accommodate that demographic. For example, putting Sporting Goods in the path between the Food Court and the Hardware Department, to get that demographic to go in a certain direction. You can take all of this data, and use it to inform business decisions in a way you couldn’t before.”

Breaking the (Supply) Chain

Beyond the stores themselves, IoT technologies are already transforming the retail world from the ground up. And nowhere is that transformation more apparent than in the supply chain. Auto-ID tags and Low Power Wide Area Networks have begun to supplant the traditional barcode, allowing companies to track their assets at a granular level anywhere in the world (even when there’s no cell service), and analyze that information in real-time. NFC (near-field communication) tags can now be used in conjunction with apps that transform mobile devices into portable scanners. Companies like Amazon are already using wi-fi connected robots that work alongside humans, locating merchandise, and reading QR codes. And although these changes are only in the early stages, the effect has already been profound, allowing for the expansion of traditional top-down supply chains into integrated “value networks”—agile, nonlinear webs of manufacturers, retailers, and distributors.

“There are also tons of applications for IoT in the supply chain, and inventory management that will go a long way toward making things like logistics more efficient,” Moneta says. “If you look at how some of the big guys have been doing it, and being able to integrate into those larger supply-chain systems, it’s just going to get more affordable.”

As it turns out, that trend toward affordability is already happening. According to a recent Globe and Mail article, Auto-ID tags, which cost 50 cents each in 2015, will have dropped down to 38 cents by 2020. And companies of all sizes are excited about the possibilities; most major retailers, including Amazon, WalMart, and Target, have already invested substantial capital in supply chain infrastructure, and a Forbes study recently noted that 72 per cent of the businesses they surveyed were planning on reinventing their supply chains to integrate IoT technology. All of those changes look poised to pay off; in 2015, a Cisco report estimated that IoT tech could have as much as a $2 trillion impact on the logistics industry in the years ahead. Assets can be tracked anywhere in the world, allowing for greater supply chain efficiency, more exact on-demand orders, and ultimately, increased customer satisfaction.

“Any efficiencies should theoretically lead to lower prices and better service,” explains Moneta. “It allows products to be on the shelves when consumers expect them. It allows me to be able to check things like inventory via the web, without people having to do manual counts. The days of calling Best Buy to ask, ‘Do you have this in stock?’ and waiting for somebody to go check—are behind us.”

But on an even larger scale, IoT tech is already being used to manage entire fleets—vehicles, containers, and merchandise—collecting and analyzing data on a scale never seen before.

“We can take the router that we’d previously used in branch offices, miniaturize it, put it into fleet vehicles, and then run a virtual container within these routers,” Cisco’s Barton says. “Then it’s collecting sensor information within that truck. If you’re delivering produce, or perishable foods, we’ll have temperature sensors and humidity sensors. You know if the temperature is too high for particular product. Then you can send a signal to a mobile device and let them know. A lot of information is being gathered—even while the truck is in motion.”

‘It’s A Digital Transformation’

As with any technological revolution, the IoT has been a long time coming. And as its expansion continues, it won’t be without its challenges—everything from privacy, to communication (some devices utilize WiFi, others Bluetooth, others Zigbee and Z-Wave), to managing the substantial amount of data that’s being generated. Infrastructure will have to expand. Skill-sets will have to change. And in terms of both affordability and accessibility, there’s still room for growth.

“It has to be easier moving forward,” Barton admits. “For the smaller Momand-Pop shop that doesn’t know a lot about analytics, we need services that are more accessible, that are easy to deploy. And when that happens, I think the penetration rate is just going to skyrocket. We just have to make it easier for the world in general to do this. That’s certainly the direction we’re going.”

That said, both Barton and Moneta agree that retailers will eventually have no choice but to join in, not just for sales, but for survival. With more and more customers going digital, the ability to use technology to enhance the brickand-mortar experience—whether that be in logistics, manufacturing, or in-store— is going to become increasingly crucial in the years to come. The technology has arrived. All that remains is for retailers to embrace the revolution.

Auto-ID tags helping to transform the retail supply chain.

“When you look at retail, and the number of people who are moving to online shopping, retailers are losing their customers,” Barton concludes. “So, we have to make that in-store experience better for consumers—it has to be easier to find the product they’re looking for, to get through the line-ups, to have an overall better experience. This is what we have to do if we’re going to turn the tide. It’s IoT, but it’s more than that. It’s a digital transformation. It’s thinking: ‘How can I use digital to make the experience better for our consumers?’”

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