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How The IoT Unlocks Value For Retailers

  • Written by  Rob Mesirow, PwC

0aaaRobMesirow PwCFew industries have faced greater disruption than retail. Consumers use smartphones, apps, image and voice searches, augmented reality, GPS and other tech tools to find and buy all kinds of products. And thanks to sophisticated supply chain and logistics systems, retailers can quickly give customers the items they crave.

Adapting to this new retailing world can be challenging, but it presents opportunities that shouldn’t be ignored. I’m working with a number of retail executives who understand how to catapult their business to a competitive advantage by using digital technologies that are woven into business practices to generate greater value for customers, business partners, and employees.

At the center of this equation is the Internet of things (IoT), which presents benefits that extend from warehouses and supply chains to store designs and customer interactions. The right mix of sensors, devices, software and systems can make a lot of dumb objects smart by introducing a level of intelligence that was unimaginable in the past.

Registering Change

The IoT represents an opportunity to reduce friction and create value for both consumers and retailers in a variety of ways. For example, it can make it easier to track a product across a supply chain and ensure that it is properly stored on route to the store shelf. Image recognition can help retailers learn when customers enter a store and then serve up age- or gender-appropriate promotions via the consumers’ smartphones. The IoT also can make it possible to develop different types of payment systems.

For example, some retailers have eliminated point-of-sale (POS) terminals. Instead, their employees use handheld devices to ring up transactions at any spot in a store. This approach frees up valuable space in stores and allows a retailer to use the space differently, such as adding merchandise — particularly in high-value areas such as the front of the store — and arranging displays in interesting new ways.

Taking this concept to the next level with autonomous checkout, Amazon Go stores scrap the need to have workers process payments. Instead, these stores are filled with sensors that let shoppers peruse aisles, pick up items, place them in a bag and walk out. The connected system — using a variety of technologies, including image recognition — processes payments automatically. With a smart checkout system like this, there’s no need for customers to wait online and pay for purchases, and employees can spend more time helping customers find the products they seek.

IoT technologies also can help retailers link their online and store operations. One example is fashion retailer Ssense, which opened a store that works in concert with its web site. Shoppers can select from the more than 20,000 products featured in a special section of the Ssense site, and any items they want to try on are shipped from the warehouse to the store within an hour.

IKEA is another retailer that’s using IoT-based solutions to marry online and in-store customer experiences. The company is testing an app that will let customers point their smartphones at furniture on the showroom floor and see variations — different colors and textures, etc. — that may not be in stock at that specific location. The app includes IKEA’s full inventory of products, but customers can add items to a virtual shopping list only while they’re in the store.

The IoT also can use data aggregation and analytics to give retailers in-depth insights into business trends. These insights could include who buys what and when they buy it. Is the weather affecting consumer shopping? Are traffic patterns? What other environmental issues are coming into play?

When these types of analytics are combined with facial recognition and other sensing systems, retailers might even be able to determine the mood of shoppers and respond appropriately in order to drive customer satisfaction. In fact, recent PwC research found that 72% of retail companies plan to use advanced data analytics to boost the customer experience and build a more customer-focused supply chain.

One foremost example is Walmart. It recently opened a new store, referred to as an “intelligent retail laboratory,” that uses IoT, AI and analytics technologies. With more than 30,000 items, the store uses sensors, cameras and processors to gather information in real time so it can keep shelves filled with the products customers want.

Of course, not all retailers are ready to make such a major investment in the IoT. Many want to start on a small scale with practical solutions that include occupancy sensors, remote climate controls and smart lighting to reduce energy usage and meet sustainability goals in their stores and storage facilities.

Others may choose an IoT geolocation tool so they know precisely where their physical assets — all types of equipment — are at all times, while some retailers are looking into IoT-based predictive maintenance to ensure that their machines are repaired before they break down. In addition, connected monitoring sensors can let retailers know when it’s time to empty their stores’ trash receptacles, providing a cleaner, safer environment for customers and employees.

A New Vision

Ultimately, the task for retailers is to develop new ways to generate greater value for their customers and their business. As the IoT and related digital technologies mature, the art of what’s possible continues to grow. For example, augmented reality represent innovative ways to use the IoT for reimagining retail, including by offering different models for interacting with customers.

In one of those models, retailers have experimented with smart , which allow people at home to see how a retailer’s clothes would look if they were actually wearing them. And some cosmetics companies have created AR apps that show consumers how specific types of makeup would look on their face. Still other retailers are exploring apps that let customers scan a product with a smartphone and view data and specs about it.

Virtual reality, while in the early stages as a business tool, offers opportunities for retailers to present products in new ways, taking customer experience to a higher level. For example, several automobile manufacturers offer VR apps that let people who are sitting in a car at a dealership (or on their sofa at home) strap on a head-mounted display and experience what it’s like to drive that car.

The takeaway is that the IoT requires individuals and businesses to view the retail industry through a different lens. Consumers continue to research products both online and in stores by using multiple channels and different devices. A customer might begin a product search on a phone, switch to a laptop, and then decide to order the item through a smart speaker — or at a store.

IoT sensors in homes, stores, businesses and other places create more sophisticated ways for companies to interact with consumers and extend their existing products and services. Retailers must begin adopting these connected technologies, or risk being left behind by their competitors.

Buying Into The IoT

Embracing this next phase of retailing requires a well-conceived strategy, a flexible IT platform, an IoT framework, and the right systems and software. It may also require new investments in indoor GPS systems, specialized sensors, cellular technology (including emerging 5G), cloud computing services, facial or image recognition, voice assistants and other forms of artificial intelligence (AI) and machine learning. Retailers also may need to interact with wearables, particularly smart watches.

What’s promising about IoT initiatives is that they can start small and grow as needed — running the gamut from simple point solutions to huge supply chain ecosystems. They can include open innovation frameworks, incubators, and new and sometimes unconventional partnerships.

The good news is that IoT technology is now mature enough and inexpensive enough to drive impressive business results. Many sensors are available for pennies apiece, and retailers can build out a framework and incorporate business partners for a reasonable investment in time and money. At the same time, IoT components, such as motion sensors, can reduce operating and energy costs while improving security.

Consumers are clearly ready for an IoT-enabled future, and retailers that want to succeed must embrace this technology — along with the security and privacy that’s required to build trust with customers, partners, and employees. A PwC study, “Smart Home, Seamless Life,” found that 81% of the public is familiar with the concept of smart devices. It also noted that convenience and the ability to save time and be more productive were persuasive factors in customers’ decisions to use these devices.

That means it’s time for retailers to take their business to a higher level with IoT-enabled connected systems that can help them compete effectively in today’s demanding and ever-changing marketplace.


Rob Mesirow, leader of the PwC Connected Solutions/IoT practice, is a partner in the Technology, Media, and Telecom (TMT) Risk and Regulatory practice. Based in Washington, D.C., he helps clients plan and execute their mobile and business strategies, and advises them about regulatory and market complexity and operational and financial risks. 

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