The Internet of Things (IoT) and retail

Stefan Georgsson | 02 April 2015

The Internet of Things (IoT) and retail
The Internet of Things (IoT) is a term used to describe the growing number of, smart, connected products. The IoT consists of physical things (for example sensors and devices) with the ability to collect and share data. The three distinguishing components of IoT are physical products, software and a communication layer. Predictions suggest that over 30 billion smart and connected devices will be in use in the year 2020.

Retailers are already using the Internet of Things in different ways. Some of these have been available and are widely used, while others still mostly exist on the drawing board.

Radio frequency identification (RFID)

Radio frequency identification is a system that uses electromagnetic fields to automatically identify and track tags attached to objects. The tags are also helpful because they store information. For retailers, the RFID is probably the best known application of IoT. RFID enables the retailer to have better control over the store’s inventory from end to end. Another aspect of RFID is the integration with the POS terminal as the items don’t have to be scanned in a traditional way and the POS terminal automatically identifies which items the customer has bought. The customer could even charge the items to his credit card or account using his smartphone (another connected device) before leaving the store, thus not visiting a traditional POS terminal at all. The RFID however is still too costly for most retailers so that its use has been limited to specific products.

IoT changes marketing strategy

Within the store, other examples of smart and connected devices are digital signage systems and shelf labels. These devices can connect seamlessly with the POS software, thus reducing the cost end environmental impact of traditional paper-based labels. This also allows for a more flexible marketing strategy, changing prices and promotions more frequently than otherwise possible. My smartphone has an app that shows the current and predicted weather in my location. By linking weather information to POS software and digital signage systems, a retailer could automatically trigger promotions based on weather information, display this on the digital displays and even push notifications to potential customers in the neighbourhood.

Seamless experience when ordering a pizza

My smartphone already connects to other smart devices. From the smartphone I can connect to dozens of internet-connected sensors monitoring air quality and the app from my local bus company shows me the exact location of each bus in the neighbourhood. And when I order a pizza (using an app) the smartphone tells my when the pizza goes into the oven and when I can pick it up. Thus my hospitality retailer is already using the Internet of Things to provide a more seamless experience when ordering a pizza.

Shopping experience

The Internet of Things can dramatically change the shopping experience in physical stores. Real examples include “smart and connected” vending machines and a talking refrigerator that performs a part of the selling process. Customers tend to prefer a seamless experience, where they have the same access to a wealth of information when physically in the store, just as when they´re online. A customer shopping on Amazon may expect customized offers and suggestions and want the same service when physically visiting a large bookstore. IoT can assist by connecting the store’s information system to the customer’s smart phone, showing tailored promotions based on customer preferences and where in the store the customer is standing, nutritional information and more. And when more devices become connected, the customer (or his refrigerator….) could share a shopping list with the retailer, asking for relevant promotions, suggestions for tonight’s dinner, price information etc.

The Internet of Things is already here even though we don’t always notice it. More and more devices are being connected, enabling automated processes and customized offerings. Communication is getting standardized, which makes implementation simpler, and more and more devices have a built-in connection to central systems. But not least the customers are getting used to having access to information wherever they are and they take seamless experience for granted. It may have taken a long time for RFID to become popular, but the IoT is already here in various other forms.

Don’t buy retail management software until you read this

Don’t buy retail management software until you read this

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