The Future of the

Internet of Things (IoT)

in Retail

November 2018
 Table of Contents

Introduction 3

Building a Connected World with IoT 4

The Significance of IoT in Retail-Practical Applications 5

Smart Store 5

Inventory Management 6

Supply chain 7

Data Analytics & Loyalty Programs 8

A Futuristic Approach to Customer-centric Retailing 9

Conclusion: The Doors to Frictionless Retail is here! 11

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 Introduction
The Internet of Things (IoT) forms a mesh of interconnected digital devices used
on a daily basis. The concept of IoT mostly speaks about devices taking control
over situations for improved efficiency.

According to IDC, there will be 30 billion connected things by 2020. Furthermore,

the Internet of Things market for retail is expected to grow at a CAGR of 48.36% for
the period 2014-2019 according to MordorIntelligence. Its adoption in the Retail
industry has sent tremors of anticipation in regard with generating new revenue
channels. As per Mckinsey, more than two-thirds of IoT value is associated with
B2B applications.

This whitepaper is intended to create a comprehensive understanding of Retail IoT.

The paper discusses in detail the future of IoT in the Retail space along with its
prominent real-life applications.

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 Building a Connected World with IoT
In the past years, the emphasis has been more on online retail stores. Primarily
because a majority of the users are millennials who depend on the internet for
their shopping needs. As the internet world exploded with versatile e-commerce
and m-commerce options, the percentage of purchases made from the comfort
of one’s own home increased remarkably. And somewhere down the line,
customer-centric retailing became associated with online shopping alone.

The flexibility and simplicity of online portals compelled more retailers to divert
their time and attention on improving their online presence. The brick-and-mortar
stores were somehow neglected in the leading race towards customer-centric
retailing. But the entry of IoT into the retail world changed the dimensions.

IoT opened up a plethora of opportunities for retailers and stepped up the

omnichannel experience, understanding the importance of frictionless customer
experience. IoT enhances the scope of in-store sales day by day. In other words, it
blurs the line between physical and digital worlds. IoT merges both the physical
and digital realms into one. The rapid adoption and application of IoT have the
potential to drastically transform the way one does business. Not only will it
increase user-experience, but also boost efficiency.

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 The Significance of IoT in Retail-
Practical Applications
By 2020, retailers must have spent 2.5 Billion on IoT hardware and installation.
Earlier, the pace of IoT adoption in retail was comparatively low. But towards the
mid of 2017, it picked up momentum and more proofs-of-concept have been
introduced. So far, a steady growth has been observed in IoT-Retail adoption.

This section discusses some of the remarkable applications of IoT in retail.

Smart store

Long waiting queues and poor customer

assistance can offend a majority of
customers. Many times, the customers
often leave without making a purchase
upon facing a bad in-store experience.
This would negatively affect the brand and
hence, lead to loss of sales. Here,
employing more number of staffs will be
less profitable to the businesses. If there is
an additional (inexpensive and productive)
helping hand to manage the customers, then customers can walk into a well-
organized store and enjoy the best shopping experience.

Automated checkout systems and robot employees are the perfect smart store
solutions for retail business. With the help of a mobile app installed on the
customer’s phone, they can pick whichever products are needed and then, walk
out of the store carefree. A system to read the RFID tags on the products can be
deployed in the stores. As soon as the customer leaves the stores, the tags are
scanned and the amount for the purchase is deducted from the customer’s app
account. Robot employees, on the other hand, assist customers during their

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 purchase. This form of assistance can help them to find the requested item, get
suggestions and updates on new products.

Smart stores offer a frictionless shopping experience to customers. The additional

cost overheads required to employ more number of staffs is also reduced consid-
erably using such automated methods. McKinsey estimates automated checkout
can reduce cashier staff requirements by up to 75%, resulting in savings of $150
billion to $380 billion a year in 2025.

Inventory management

Any type of business, online or offline,

needs a flawless inventory management
system. The speed with which a product
shortage is identified, communicated, and
re-stocked defines the efficiency of a
business. On the other hand, overstocked
products lead to major losses and
frustration among the business owners. As
important as it sounds, inventory
management can be a challenge at times.

Lately, smart shelves have been the new addition to retail stores. These shelves
keep track of items on the shelves with the help of weight sensors and RFID tags.
As soon as a purchase is made, the sensors embedded in the shelves and
products communicate the information to the warehouse team. And the product is
immediately replaced. When a customer misplaces an item and keeps it on
another shelf, the sensors alert the concerned team and the product finds its way
back.

This form of a systematic approach relieves the employees from the hassle of
checking the stock every now and then. Their time and energy is preserved

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 considerably and can be used for other important tasks. In such a connected
environment, there is no scope of theft or forgery and saves the businesses their
money.

Supply chain

The retail supply chain is by far the most

complicated and tricky supply chain
management system. There is always a
continuous movement of a large
magnitude of products from one point to
another. And the involvement of more
truck drivers and vendors complicates the
processes further. Then, it becomes
highlyimpossible to gather data regarding
the conditions in which the products are
kept during transit. In such a scenario, the quality of products can often get affect-
ed and result in delivering damaged products to the customers.

Retail supply chain optimization through sensors is one of the prominent applica-
tions of IoT. Consider a scenario where the temperature or movement of the prod-
uct has to be continuously monitored to prevent it from damage. Here, sensors
introduced to the retail supply chain act as the saviors. The heat or motion sensors
embedded in products can help to track and trace the temperature and vibration
of products. This information is processed and communicated to the concerned
authority.

If the need is to know the real-time location of the product, then geofencing can
be put into execution to improve visibility and operational efficiency. The practical
application of IoT in Supply Chain and Logistics is expected to deliver a savings of
$2.7 trillion through improved process efficiencies.

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 Data Analytics & Loyalty Programs

Irrelevant promotional notifications are the

last things any customer would prefer. And
customer service executives nagging
behind them with a list of questions during
a purchase is even more annoying. The
customers look forward to a personalized
experience without time-consuming
questionnaires and surveys.

By using IoT technologies, it is now possible to track the behavior of customers

during their in-store purchase. Retail IoT delivers web-type analytics data for
insight-driven decision making. The tracking technologies in shopping carts,
shelves etc., can give insights regarding the customer’s shopping pattern. These
insights can be used to understand the services and products preferred by each
type of customer. Promotional offers and price slashes on favorite products can
bring them straight to the store for purchases.

Personalized customer loyalty programs and discounts are more easily delivered
using the data extracted from IoT devices. Now, retailers no longer have to stick on
to their age-old beliefs like placing the most popular products in the middle row to
match the customer’s eye level etc. They can initiate more insight-driven practices
such as in-store optimization to be carried out smoothly with IoT in practice.
Targeted marketing and personalized interaction are the definite outcomes of
intelligent data usage.

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 A Futuristic Approach to Customer-
centric Retailing

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6
INTERNET
OF THINGS

Op
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The Internet of Things has the potential to entirely transform the Retail business
model. It can fundamentally shift the way customers interact with in-store
offerings. Forrester predicts that e-commerce will grow at a CAGR of 9.5% over the
next five years in the US, reaching $414 billion in sales and accounting for 11% of
total retail sales by 2018.

The online market is prone to high competition in the coming years. Any business
relying on online commerce alone is going to witness major competition. In these

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 aspects, retailers need to look around and understand what works best for their
customers. As stated earlier, an intuitive online portal alone is not enough for
sustainable existence in today’s market. The challenge lies in adapting to the
latest industry trends and tweaking one’s business strategy to beat the others.

These growing challenges demand an ultimate solution such as an omnichannel

experience. ‘Try offline and buy online’ are some of the popular models preferred
by the customers. The customers can try out the products in the store and validate
its quality, color, etc. Once they have confirmed the product, it can be bought
online availing the same offer. By connecting your devices and business strategies,
you can formulate a unified business model that can disrupt the market.

IoT is destined to offer ample opportunities in this context. McKinsey estimates that
the potential economic impact of IoT in retail environments will range from $410
billion to $1.2 trillion per year by 2025.

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 Conclusion: The Doors to Frictionless
Retail is here!

Fig: Impact of IoT in Retail by 2025

According to McKinsey, the potential impact of IoT in Retail will be largely seen in
automated checkouts, in-store layout optimiza tion, smart CRM, personalized
promotions, and inventory shrinkage prevention. To narrow down, we can say that

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 IoT can be used in two ways in any business environment; transform existing
business functions or build new business models.

In either case, IoT offers a wide list of benefits to businesses. In a nutshell, these
are the benefits of Retail IoT:

Primarily, personalized experiences to the customers.

Faster competency development and business growth.
Improved operational efficiency.
Better cross-team collaboration.
More productivity and effectiveness of the team.

As soon as a business realizes the importance of frictionless retail and

incorporates some element of IoT into their business, they will be entering a new
era of customer-centric commerce.

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 Fuelling Happiness

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