Digital Capgemini

5 ways IoT is transforming the retail sector as we know it


David Benady

October 9, 2017

Retailers are on the brink of a new industrial revolution as the Internet of Things (IoT) unleashes an era of hyper-personalization and data-fueled innovation.

The Internet of Things is a transformative technology, one that promises to bring retailers ever-greater knowledge about the world in which they operate. Sensors are are becoming more and more embedded into items across the business’ operations; from clothing merchandise and food packaging to in-store shelving, shopping trolleys, delivery vans and even staff uniforms.

These microchips transmit a wide variety of data about the status of the objects – such as their position, location, temperature, and usage – connecting every part of the retail process to the internet.

Is your business plagued by shortages of certain stock keeping units (SKUs) and out-of-stocks? Do you lack clear knowledge about customer demand? Is there a lopsided relationship between your online and offline offerings? IoT is not about big budgets and sci-fi technology; it is about quickly deploying relatively inexpensive technology to address these above questions.

Many retailers are just beginning to grasp the huge opportunities that this upsurge of information will bring. Here are five ways IoT is transforming key areas of retail:

1. Product Design and Development

It is important to remember that the data transmitted from IoT sensors in consumer products will inform the design and creation of new products. Retailers will assume a new role in industrial strategy, feeding data into the production process about the way shoppers buy products. For instance, matching data about sales and climate can suggest how sales of different products are affected by the weather. This can aid manufacturers in planning their production runs.

Meanwhile, advances in 3D printing are opening up new routes for rapid prototyping, so designers will be able to test out insights from data by creating new experimental products with ease. The growth of virtual reality and artificial reality technologies will be another boon to innovation, as new products can be envisioned in a virtual environment as part of the testing phase before companies commit to development.

Products will increasingly be designed with the IoT in mind. This will require collaboration between retailers and manufacturers as they will use this connectivity in their merchandising and sales strategies. 

2. Distribution

Retailers need to consider how they can extend the use of Radio Frequency Identification (RFID) tags to gather more data about the distribution chain. The technology has been around for decades and, as the price of the tags has fallen, it is being more widely implemented.

The tags are attached to pallets or to individual stock keeping units (SKUs). The devices broadcast an identification code which can be scanned by a RFID reader so goods can be identified and located without requiring the line of sight needed by barcodes.

This is leading to smarter supply chains and better identification of stock. US egg suppliers Trillium and Centrum Valley Farms are using RFID-enabled pallets to track the location of stock and evaluate distance, time and other “chain of custody” data. They also use sensors to track temperature, shock and vibration.

RFID also opens up the possibility of “one in, one out” stock keeping. Global fashion chain Zara uses RFID technology to identify sales of items. Every time one is bought, another is ordered automatically from the warehouse. This improves on-shelf availability so customers have access to the most popular sizes and styles.

Capgemini has developed a system where RFID tags are recognized in a clothes retailer’s fitting room and trigger an immersive interactive display on a wall-mounted touchscreen. This features product images and information, offering opportunities for cross-selling while also collecting data on fitting patterns and sales trends to drive decision-making and analysis.

3. Customer Experience

As retailers iterate their IoT strategies, they must put the interests of the customer at the heart of their thinking. IoT can provide reams of data that aid the retailer, but customers must see that they are benefiting from the technology as they are required to opt in to sharing data.

One of the big gains for consumers from IoT will be using data to offer shoppers ever-more personalized experiences. Retailers and consumer goods companies will collect data from customers’ in-store interactions, their online behavior and the goods they buy. They will merge this information with other personal data, assuming consumers give them permission. This single customer view will help retailers and manufacturers create a “shopper genome” where each individual consumer and household has its own shopper profile. Retailers and manufacturers will be able to offer goods tailored to the needs of consumers.  

This will make shopping more convenient and will reduce the amount of irrelevant marketing directed at consumers.

Beacon technology offers a glimpse of the type of personalization that IoT makes possible. US department store Macy’s uses Shopkick Bluetooth Low Energy (BLE) beacons in many of its stores. This allows it to detect a customer’s exact location inside the store and send messages to the customer’s smartphone if they opt-in. They can send discount coupons and rewards for goods based on the customer’s location in the store.

Beacons are still at the experimental stage, but retailers need to experiment with them to get a feel for the opportunities that IoT offers.

4. Store Operations

Improved stock control is potentially a big win from IoT technology. Real-time data analysis can contribute to significant cost savings. For instance, Tesco claims it saved £100m in stock waste by analyzing historical weather data and matching it with sales patterns and geographic detail to predict what produce would sell from different stores at certain times.

Retailers are already collecting data from multiple sources, but they are struggling to connect the data together. Many are failing to combine enterprise resource planning data and product management information, data about online transactions and interactions, data from supplier management and many other sources.

Combining different data sources can create some surprising results. For instance, a European retailer connected its warehouse delivery system with traffic data to forecast the most effective schedules for sending delivery trucks so they weren’t spending hours stuck in traffic jams. Connecting these data sources has allowed the retailer to save money and time.

5. Customer Service

Today’s shoppers expect store chains to be at the forefront of digital technology and will quickly migrate towards those retailers offering a seamless shopping service. A study by Forrester Consulting of 1500 consumers in the US, France, the UK and Germany showed that 71% expect to view in-store inventory online and 69% expect staff to be “armed with a mobile device.”

IoT will boost customer service in a variety of ways. Specific goods will be easier to locate in-store using RFID tags. Staff with connected devices will be able to give shoppers in-depth information about product ranges, prices and usage information. Check-out queues could become a thing of the past if the Amazon Go model takes off.

Sensors embedded in products will allow retailers and manufacturers to track when those goods need servicing, especially for high-value brown and white goods. The industry will be able to use remote diagnostics to identify when a product is likely to breakdown, then get in touch with the consumer to suggest they have the item serviced.

Looking ahead, the race to embed the Internet of Things into retail operations requires a deep-rooted organizational transformation. Retailers must foster an entrepreneurial spirit of trial and error among managers and a willingness to collaborate with peers across the supply chain. This will pave the way for a new, more personalized and efficient form of retailing.



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