Internet of Things (IoT) implementations within retail would seem to be on a strong growth path. Merchants are expected to spend as much as $2.5 billion on the technology by 2020, and as many as 70% of retailers say they are ready to make the changes necessary to adopt IoT devices. Applications including smart shelves, temperature sensors, indoor light sensors and mobile scan-as-you-shop devices are already being used to enhance in-store operations.
While leading retailers including Kroger, Tesco, Target and Carrefour already are exploring IoT’s potential, however, they remain primarily in “trial mode.” These merchants, and the larger retail industry, won’t see the big benefits that IoT advocates have been promising until they scale up their implementations — and also forge greater connections between the various IoT platforms and the retailers’ enterprise databases and control systems.
According to a 2016 Retail Systems Research (RSR) Report, retailers are enthusiastic about IoT’s potential to improve numerous operations across the enterprise, including:
Customer engagement in-store (78%);
Inventory management (76%);
Customer service and support (74%);
Store operations (74%);
Marketing communications (67%); and
Customer acquisition (63%).
With these benefits in mind, retailers have plenty of incentive to scale up their current IoT trials. Here are four examples of how retailers are effectively deploying IoT technologies within their ecosystems.
Tesco, Stop & Shop Pilot Mobile ‘Scan-As-You-Shop’
Tesco, Stop & Shop and Giant enable customers to scan product barcodes as they walk around the store, and keep a tally of how much they are spending. The system is available for use at self-service and manned checkouts, so that shoppers can pay without having to unload and scan all the products at once at a POS station.
Despite the simplicity of the mobile handheld scanners, the service is only available in approximately 350 of the 6,500+ Tesco stores across the UK. Stop & Shop and Giant have scanners in approximately half of their approximately 600+ combined stores, but the technology hasn’t taken off in the U.S. despite its benefit of shortening checkout lines.
Grocers likely haven’t scaled the tech for one major reason: often, people forget to scan a particular item, and the loss prevention techniques used by stores can alienate honest customers. Some stores will randomly check shoppers’ baskets to make sure that they’ve scanned everything, which can feel invasive for the shopper.
“[Customers] fear that they will be checked and will be assumed a thief by the checkout assistant,” saidBarry Clogan, Senior VP of Business Consulting Services at MyWebGrocer in an interview with Forbes. “If you have one irregular check you are more likely to get audited again on future shopping trips.”
Smart Shelves Automate Pricing, Track Inventory For Kroger, BASF
As with self-scanning solutions, successful smart shelf technology should remain fully respectful of customers’ privacy. In a report titled: The Second Era Of Digital Retail, Intel said the best smart shelves offer sophisticated sensors, local intelligence, and better cloud connectivity and services. Sensors may include 3D cameras, microphones, proximity or touch-based technologies so that the shelf can detect the product it is holding and interact with the shopper.
Smart shelf applications offer a number of features, including:
Automated pricing changes that could save labor costs;
On-demand product display or nutritional information updates;
Closer monitoring of potential shoplifters; and
Real-time inventory updates to measure inventory life or identify when shelves are running low on product.
BASF’s Wine Cellar includes a smart wine shelf that links to tablets within the store, allowing shoppers to enter their taste preferences. The bottles that match those preferences then light up on the shelf. The company can accumulate data from these interactions, such as which wine bottles shoppers linger by most often and how long they dwell there.
Kroger is testing smart shelves in 14 locations, using sensors to offer consumers personal pricing and product suggestions through its mobile app. But the testing has rolled out at a slow pace since 2015, when Kroger introduced the shelves in an Ohio store.
“Merely reporting on-shelf availability data to a management dashboard is not enough,” said James Tenser, Principal at VSN Strategies in a RetailWire discussion. “Those out-of-stock-sensing smart shelves must be intricately interwoven with store perpetual inventory, reordering and replenishment practices in order to have a material impact. Most retailers aren’t very good at those things now. Adding a new sensor to the mix will make things harder at first, not easier.”
Target, Carrefour Engage Mobile Shoppers Via LED Lighting
Big-box retailers such as Target and Carrefour have trialed visible light communication (VLC) systems that communicate with consumers’ smartphones via LED lightwaves. The LED lights can welcome shoppers to the store and then direct them to discounts that may interest them. The system can then send data about the customer’s actions to the cloud, giving the retailer and its suppliers valuable insights on sales and shopper behavior.
Carrefour implemented a connected VLC system in one of its hypermarkets in Lille, France, enabling customers to use a mobile app to find products on promotion throughout the store. Target has deployed similar technology in an IoT trial in 100 stores. But despite the potential benefits to both the consumer and the retailer, neither company has shared how (or even if) the technology improved business results, or if there are any plans to expand the deployments.
Temperature Sensors Set To Take Over Grocery
Vital for the grocery business, sensors can measure the temperature of frozen foods and refrigerated goods in real time and automatically adjust to safe levels. These sensors can immediately alert managers and facilities engineers if temperature levels change unexpectedly, or if a door to the freezer was kept open. The sensors can be both a timesaver and a cost-saver for retailers that want to maintain correct temperatures without requiring employees to manually check refrigerator and freezer units.
Kroger’s monitoring system is designed to check the temperature of a store’s freezer every 30 minutes. Prior to implementing the system, Kroger employees had to manually check the thermometers twice a day. The sensor cuts down on the number of cold products that go bad and have to be thrown out, reduces labor costs and improves energy efficiency, according to Chris Hjelm, the grocer’s CIO. Nearly half of the chain’s 2,600 stores have the sensors in place.
Industry experts note that these temperature sensors are the most likely IoT devices to scale throughout the enterprise. “Whether it’s grocery, quick marts or big box, I definitely see an influx of activity around the cooler,” said Michael Colaneri, VP of Retail, Restaurant and CPG at AT&T in an interview with Retail TouchPoints. “Typically one of the biggest costs that the retailer has is the cost for labor just to go check and see the temperature. When you can connect assets and create remote aggregated visibility into an aisle or a cooler, that’s a cost reduction implicitly, because I no longer have to send somebody to go look at an asset just to see the condition of the inventory or find out what I have to restock.”
Lack Of Transformational Investment Keeps Retailers In Trial Mode
Though these various IoT trial examples reveal that retailers can gain at least some benefit from implementation, retailers aren’t confident enough in their infrastructure to implement and support “bleeding edge” technologies.
Retailers must make a transformational investment instead of maintaining the status quo, a change that comes down to budgeting, according to Tom Moore, Industry Lead of Retail and Hospitality at Zebra Technologies.
“Many retailers are conservative,” Moore said in an interview with Retail TouchPoints. “It’s not as difficult to make a one- to five-store trial, but to scale it enterprise-wide there’s a lot of backend integration activities that have to happen from a sales operations perspective. A large percentage of retailers’ IT budgets still goes to maintaining their business, while a small portion goes to looking forward. They need to flip that in order to be able to execute on these transformational technologies that fall under the IoT umbrella.”
Disparate Systems Create Concerns For IoT’s Future
Enterprise-wide IoT implementation may be a reality in the near future, but one analyst isn’t so confident that the technology will significantly improve the efficiency of the brick-and-mortar store. Gary Schwartz, Global Director of the Location Based Marketing Association and author of The Impulse Economy and Fast Shopper, Slow Store, believes that brick-and-mortar retailers may be too late to the party in developing IoT strategies.
“Ultimately, a lot of these brick-and-mortar stores are grasping at cool digital band-aid technologies, no doubt,” Schwartz said in an interview with Retail TouchPoints. “But the bottom line is, you can shove digital into brick-and-mortar, but it will never be as efficient as a pure cloud solution.”
Schwartz noted that most brick-and-mortar stores using legacy systems have to replace various solutions at different times, preventing retailers from ever achieving a truly “connected store.” He compared today’s IoT-enabled retailer to the connected home: “You have an Echo here and a Nest here and you have all these different pieces that don’t work together well. It’s very difficult to coordinate, and there’s no central standard. The home is a hodgepodge of widgets…and the retailer has the same problem. How can retailers reinvent themselves with this widgets economy?”
Talent Optimization, Backend Operations Lead The Way
If retailers are intent on reinventing their brick-and-mortar operations with IoT, then they’ll have to focus on talent optimization and assess the current technology’s ability to integrate IoT platforms. Retailers must take inventory on which of their present systems are already IoT-connected, which systems are connection-enabled and which systems can be retrofitted to connect to IoT, according to Colaneri.
This investment may be a leap of faith for many retailers, but it’s an easy one to justify. The benefits of improved customer engagement, more automated backend processes, more customer-centric employees and real-time data gathering show that IoT will be — and in many ways already is — an important commodity for retail operations.
“What e-Commerce did for omnichannel in terms of global inventory management, IoT is going to do for a retailer’s operational dashboard, addressing this new need for expedient decision making, employee productivity and electronic capture of customer loyalty,” said Colaneri. “IoT is going to move from strategy to tactics very quickly. It’s going to become a necessary evil.”