Re-Imagining What IoT Can Do for Retail
Retailers are facing an increased competition by e-commerce. Amazon and other large online retailers continue to rapidly expand their market share. In 2018, an estimated 1.8 billion people worldwide purchase goods online. During the same year, global e-retail sales amounted to 2.8 trillion U.S. dollars and projections show a growth of up to 4.8 trillion U.S. dollars by 2021. The need for an adaption towards a more digital and convenient model is imminent.
In order to compete against those online giants, traditional retailers will need to improve their value proposition, customer experience, and internal operations.
As a prime example of an innovative solution, Tescos subsidiary Homeplus has delivered a role model for innovative IoT solutions in the retail environment based on their big-data engine. The company has created “virtual stores”, where South Korean commuters can buy groceries from displayed products on the walls of metro stations and bus stops and deliver them immediately to their homes. The value created for the company by saving expensive and inexistent retail space, as for the customer who can use his waiting time for shopping, was a double benefit and huge success. The example shows that IoT solutions offer a wide range of new possibilities to engage in new business models and customer journeys. According to a well-known consulting company:
- 77% of retailers see IoT as a tool to change the customer’s experience
- 89% of early adopters in retail benefited from the insights about customer preferences and behaviors from the Internet of Things solutions.
- 77% of early adopters of IoT in retail offered better opportunities to interact with new partners in delivering products and services for their customers.
In what ways can retailers implement IoT into their business and where are the loopholes?
Ideally, the store experience is a point of differentiation. IoT enables local industries and small shops to create enhanced experiences and new business models. Customers willing to buy in a shop give something up; the time, money and effort to travel to the shop for an interaction. In return, they expect a good customer experience. Products that are available in stock, clean and bright stores and access to personal assistance in the buying process. If customers are expecting personal attention, Sensors such as Service on Demand Buttons can support staff to provide a hands-on experience and thus differentiate themselves from online stores. This increases the Smart Living experience for the population and local shops can offer their services and develop new ones. IoT enables local industries and small shops to create new business models.
Offering an omnichannel experience
Increasingly, the customer journey starts online. Retailers need to realign their proposition including digital solutions. The focus is on omnichannel customer experience and customer relationship management.
As an example, in a wine store in Germany, shoppers are guided by their taste preferences. When they enter their preferences on mobile devices, the bottles matching those preferences will light up on the shelf when in the store.
By 2021, 79 percent of retailers will be able to personalize in-store shopping experiences for customers, because they’ll be able to know when they’re in the store and have advanced knowledge on their preferences off- and online.
Improving internal operations
A way to improve the service without personally identifying the customers is to track their footpaths with movement sensors. This enables an in-depth analysis of hotspots for point of sales and special offers and also improves the operation tasks of personnel. Automatization of stock, storage and inventory tasks, can free up personnel for customer-oriented work.
The potential of IoT and automation in the traditional retail business is huge and the technology available. Traditional retailers should embrace the possibilities given in order to survive the competition of pure online sales channels. The topic should be addressed as an important factor in the company strategy and receive the necessary funding.
Cautious use of advertisement
By using sensors and smart beacon technologies in-store and using the individual preferences out of the omnichannel approach, retailers can now directly connect with shoppers in a very personal way, tailoring their experience with discounts on relevant products for the customer.
The mannequin in your window display could be equipped with a sensor that communicates with the smartphones of customers passing by, enabling the retailers to send them personalized adverts or offers. Smart screens using facial recognition identify the customer and change the display to something tailored to them based on customer data.
Over 4,000 beacons are currently installed across 700 shops of an American fashion chain. Push notifications are sent to customers, depending on their shopping behavior and location in the shop.
Such solutions might work to a certain level, but only if retailers don’t overload consumers, they might actually succeed in using such solutions to create an engaging and individual experience. This also means that the adverts must be individually based on the specific customer preference not on a broader target group.