Devices are becoming more intelligent and interconnected, creating a thriving network of data and technology. Often called the Internet of Things (IoT), this phenomenon speaks to the fact that people — and businesses — are becoming more digitally empowered.
And as the years pass, this network is poised to become more complex. Cisco predicts that there will be more than 50 billion connected devices by 2020. While the definition of IoT typically encompasses technology, Cisco also spotlights the Internet of Everything (IoE), which it defines as “the orchestration of people, process, data and things to unlock new business value.”
Why is a more robust term and definition required? Because while connected devices, or “things” are important, that’s only one ingredient of a complicated recipe, according to Shaun Kirby, CTO of Cisco Consulting Services. “Being able to analyze data from the things, enable new or improved business processes, and empower the people who are the stakeholders in the business are also essential.”
Rebecca Minkoff is one brand and retailer that has brought the benefits of a connected environment front and center. Using a combination of RFID tags, mobile devices, interactive touch screens and other touch points, Rebecca Minkoff provides a high-touch shopping experience in its Soho, New York City flagship. This “smart environment” is not only fun and engaging, it also positions associates to better serve customers, and places shoppers in optimal cross-sell and up-sell situations. For example, while in one of the store’s smart fitting rooms, consumers not only try on items, they also can access interact with a touch screen. These screens serve relevant content and outfit inspiration featuring complementary clothing items and accessories.
“As a brand that’s always been considered on the forefront of the convergence between fashion and technology, we knew we needed to capture that same groundbreaking innovation when it came to building our retail stores,” said Uri Minkoff, CEO of Rebecca Minkoff. “In that vein, the goal for us was to pave the way for a new kind of retail experience that seamlessly merges the online and offline experiences.”
Overall, the benefits of IoE are substantial and two-fold, Kirby explained. “Retailers are able to understand myriad aspects of their business more clearly and in more detail than ever before, as the IoE sheds light on shopper behavior, store operations and merchandising effectiveness.”
For retailers, this leads to improved workforce efficiency and a reduction in loss, among other benefits. Consumers, meanwhile, receive a shopping experience that is more streamlined and relevant.
Retailers, overall, are ready to embrace IoE and IoT. In fact, 67% of retail decision-makers have already implemented an IoT strategy, and another 26% plan to roll one out by the end of this year, according to research from Zebra Technologies.
“There are plenty of retailers that have an IoT strategy, but there is not much evidence that retailers are talking about ‘IoT enabled’ anything,” said Randy Dunn, Director of Global Sales & Professional Services at Tyco Retail Solutions. “The most successful retailers embracing IoT are applying technology to meet customer needs or problems. A sound IoT strategy will emerge out of that rather than planned from the top down.”
IoT and IoE are undoubtedly hot topics creating ripples in the retail industry. But as excitement continues to build around beacon technology, wearables and other touch points, retailers need to ensure their investments are part of a holistic strategy that is relevant to their brand story.
“People are embracing beacons and wearables, but they’re fragmented, one-off opportunities that don’t integrate into a larger play,” noted Neil Sweeney, Founder and CEO of Freckle IoT, an ad tech company that helps companies test and activate next-generation connected devices. “The biggest problem with beacons, wearables and connected stores is that currently, there are only single use cases. You need to ask: ‘What’s the operating system that will live underneath all these technologies and power them?’”
Beacons And The Future Of In-Store Activation
Over the past few years, retail executives, analysts and solution providers have hopped on the beacon bandwagon. It’s easy to see why: Up to two billion consumers will have smartphones by 2016, according to eMarketer. With beacon technology, retailers have the opportunity to engage these smartphone users in stores by sending relevant messages and timely offers to consumers as they venture through the store.
Despite the notable benefits, there are some challenges that emerge with beacon technology. For one, most beacons only activate if a consumer has downloaded a retailer’s mobile app and opted in to receive messages.
“The typical use case is to put beacons in stores and send messages to people once people are in a store,” Sweeney said. “But that’s the worst example because there’s no way to scale. In a way, you’re reaching to the converted and only to people who have interacted with your app, which is a small percentage of your overall consumer base.”
Looking to the near future, the retail industry will “see a shift in how beacons are used,” Sweeney predicted. For example, retailers will need to start taking a customer-first approach by crafting contextual messages based on a shopper’s behaviors and current location.
“You need to make sure you’re delivering the right message to consumers and are nurturing relationships,” explained Mike McMurray, SVP of Marketing and Business Operations at Point Inside. “It’s all about context. And if you have the right data, you can provide that context. Location alone provides a great indication of what people are doing, whether they’re interacting with deals, shopping lists or moving throughout the store.”
Wearables Show Promise With Apple Watch Release
Context will become even more imperative for retailers as wearable devices such as smartwatches become more widely adopted, according to research from Boxever. Approximately one third (31%) of consumers said they would be comfortable with brands pushing offers and advertisements to their wearable devices only if the communication was extremely targeted, personalized and contextual, and done on a limited basis.
The tipping point for smartwatch adoption may come sooner rather than later. Following the April 2015 release of its smartwatch, Apple has exceeded sales expectations, generating a surplus of excitement and sales.
Thus far, Apple has sold “a lot” of watches, according to Jeff Williams, the brand’s Head of Operations, although he did not get specific. “The only number I will give you is that demand divided by supply is greater than one.” Due to this spike in demand, Apple is set to sell watches in retail stores and seven more countries by the end of this month.
Retailers also are responding favorably to Apple Watch, with companies such as Amazon, Target, Walgreens and QVC designing and releasing apps for the new hardware.
Although the form factor is new and requires retailers to design for a significantly smaller screen, it is not necessarily a new channel, according to McMurray. “Wearables and smartwatches are always present and they allow you to do things from a hands-free perspective.”
It’s easy to see how smartwatches can act as a natural extension of the smartphone. Sometimes, consumers place their smartphones in their pocket or purse, so a smartwatch easily can deliver an alert. However, ongoing adoption of wearables may encourage retailers to rethink their marketing operations and strategies.
“It’s going to require expansive thinking,” McMurray noted. “Do you have someone dedicated to watch marketing within your organization?”
Prior to Apple Watch’s release, the wearable market struggled to make a significant impact. That is, outside of Fitbit, which has acquired a large share within the fitness category.
“Non-Apple smartwatches aren’t selling very well,” said Elliot Klein, CMO of Bluvision. “However, what Apple is introducing is an entirely new interface and way to work with mobile apps. In fact, many retailers are aligning their apps to work seamlessly with Apple Watch, and I assume there will be clever market tests planned or will be implemented that will be exciting.”
Another key differentiator is Apple’s focus on creating a thriving network of developers to design and release apps for the watch. This move may encourage Motorola, Samsung and other players to create the same opportunities for developers.
“In general, we expect wearables to create a pivotal shift and significant opportunity for all app developers,” said Christian Gaiser, Chief Executive at Retale. Shortly following the launch of Apple Watch, Retale announced the release of its dedicated app, which provides location-based features, retailer ads and “store finder” functionality onto Apple Watch screens. Users also can sync preferences, favorites, lists and actions across the Apple Watch app, as well as the iPhone and iPad iterations, to create a comprehensive, multi-platform shopping experience.
Thus far, there “hasn’t been support from the developer community for other wearables,” Gaiser said. “But from the get-go, Apple had 3,500 apps available, which creates a fabulous user experience. That’s what really counts in the end.”
Improving Back-End Operations With Connected Devices
Although there is exciting customer-facing movement in the IoT arena, implementing smart and connected devices on the enterprise side of the equation provides significant benefits.
“Many IoT technologies will ultimately be able to support the customer experience and serve customers,” Dunn of Tyco Retail Solutions said. “But many will start out in improving how retailers operate on the back end, helping them learn and understand the usefulness and limits of the technology before pointing to customers. It will have an impact on both sides eventually, but I see the early benefit on the enterprise side.”
In the case of wearables, for example, associates can use smartwatches to improve communication and accelerate task completion.
“Operational efficiencies are the next-generation benefits of wearables,” Klein of Bluvision said. “Imagine you’re picking up an order in-store. As you walk into the store, the Bluetooth beacon in a watch or wearable can tell an associate you have entered the store and reserved an item for pick-up. As a result, they can quickly pick the item and leave it for you at the designated pick-up area. It’s a very good customer experience and you’re in and out quite quickly.”
These benefits are not limited to smartwatches. Other wearable devices, like Google Glass, even have potential. “You can beam the order to someone on the floor and send messages through Google Glass so you don’t have to use any other technology,” noted Jim Ambrosini, a technologist and Managing Director at CohnReznick. “Imagine it being part of the pick, pack and ship experience. Employees can receive turn-by-turn directions of where the product is in a store, pick it, scan it, put it in a box and fulfill the order.”
There are other interesting use cases showing how connected devices can improve operational efficiencies and even decrease overall costs. Smart technology can provide team members with information on stock levels, produce freshness, shopper density and more, which “enables retailers to optimize product availability, assortment and workforce deployment,” Kirby of Cisco explained.
Del Papa Distributing, a family-owned beer distribution company, has embraced IoE to simplify operations and create a more streamlined system for its deliveries, which can total up to 10 million cases per year from 30 suppliers.
Del Papa implemented a series of shipping, service and security solutions from Cisco in its 27-acre headquarters in Texas, resulting in an 18% boost in warehouse productivity.
“We wanted to bring in technology that would improve our day-to-day processes and improve the employee experience as well as the retail experience,” said Steve Holtsclaw, Director of Information Systems at Del Papa.
Rather than having separate networks for voice, data, video and physical security, Del Papa has a more comprehensive solution that allows the distributor to address multiple needs across the business. The implementation included a Cisco IP platform that connected video surveillance cameras, physical access controls for gates and doors, wired and wireless IP phones, digital signage for employee communication and temperature sensors in the warehouse and keg vaults.
“We now support more than 2,000-plus connected devices and sensors,” Holtsclaw reported, “that monitor everything from liquid temperature and air temperature, to on/off schedules and GPS of our vehicles.”
Connected devices are especially valuable for grocery retailers that are constantly trying to lower operational costs and energy use, and decrease overall waste. Verisae is one company helping retailers such as Tesco and Fresh & Easy achieve these goals by leveraging data on buildings, equipment, service, energy and environmental factors. With these insights, the company is empowered to make more efficient decisions that impact both the associate and consumer experience.
“Maintaining your facility at the lowest possible price is very important,” said Jerry Dolinsky, CEO of Verisae. “Especially in grocery and convenience, where margins are not that large. These retailers are always looking for solutions to lower costs and become more efficient.”
Although it is still early days for IoT and IoE, there are a select number of rollouts that clearly indicate the benefits of connecting devices and data. As the years pass, there will be more tests and implementations pointing to the bottom-line impact of embracing new technologies and touch points that create a more fluid experience across the entire enterprise.