The Internet of Things is a hype machine unto itself, with tales of connected coffee machines and cars, together with projections of tens of billions of devices and machines communicating over the net in as little as five years’ time. Behind the hype, however, there are real applications at work for enterprises in a host of different sectors. In some cases, the benefits are obvious, but elsewhere management is still scratching its head about getting value out of IoT. A report by Retail Systems Research (RSR) entitled “The Internet Of Things: Identifying REAL Benefits” describes the situation for the retail sector, characterized by rife confusion, but also one application that no retailer should ignore.
IoT Pie-in-the-Sky Syndrome
IoT pie in the sky is the complaint that too many retailers suffer from, according to the survey data in the RSR report. They expect IoT to solve problems ranging from competitive differentiation (the most commonly cited driver for moving to IoT) to consumer price sensitivity, problems that require other solutions than simply connected devices and enterprises. On a brighter note, relatively speaking, retailers are apparently becoming more realistic about what IoT might bring them, meaning their expectations are becoming more modest. But which of the expectations that are left will transform into business advantage the soonest?
How Retail Winners See Needs and Opportunities to Use IoT (Compared to Other Retailers)
Where is the Return on Investment?
Retailers also tend to see IoT capability as being expensive. This perception is reinforced by a spotty history of previous IoT investments, the spottiness often caused by IT departments being over-enthusiastic and pushing IoT projects ahead before identifying a clear business benefit. Now, a new driving force could force retailers to do themselves some good. As a refreshing change, costs could also be less to implement and cost savings could be greater than for previous attempts. The force is the omnichannel revolution that is now upon retailers, making it important, essential even, for retail organizations to be able to “see” inventory wherever it is and guarantee a sale of a given unit of inventory to any customer via any channel.
Inventory Challenges Old and New
If IoT can help retailers tackle the complexity of omnichannel sales, not to mention the extra complication of product returns (again, any customer, any channel), it already brings value. And if it can contribute to more cost-efficient inventory management in general, it will help cut an age-old problem down to size, bringing balm to a significant financial hurt. Retail enterprise boards systematically push for cutting operational costs, of which inventory holding and management is a major part.
Lower Costs, Better Returns via RFID
In practical terms, IoT in the form of RFID product tags and tracking systems can help retail outlets find stock in a hurry and keep accurate records of how much they have of what. And while IT systems always represent a certain level of investment, RFID tags themselves now cost only cents. This is a big step forward for high-street stores especially, as they do not have the locator systems and barcode management of distribution centers, and must rely on employees putting product shipments received in “sensible” places for in-store retrieval afterwards.
Innovation in Inventory Handling Through IoT
Looking ahead, IoT systems could be used for store display shelves to report inventory conditions for restocking, especially for example in cases of product sales promotions working better than expected and requiring immediate shelf or display replenishment. Retailers could link in with vendor inventory management systems for dynamic routing of product inventory according to demand curves. If this sounds ambitious, consider the fact that some forward-looking retail outlets already have even more exotic solutions in place, like a menswear retailer that only displays one size of any article, then automatically delivers the right size from an out-of-sight stock room to the customer to try in the fitting room.
Onwards to Better Customer Experiences
Tomorrow, in-store IoT devices like beacons could help retailers to better track a customer’s physical journey through a store. With real-time prescriptive analytics at hand, a retailer could then offer consumers suitably adapted content at critical points in the customer’s journey, concerning products and services most likely to appeal at that instant. Customers already have the ideal device literally in hand to receive such messages, meaning their mobile devices. Retailers must then link up IoT to analytics, and thence to in-store communication.
Today, Retailers Should Use IoT to Fix Inventory
For the moment however, the conclusion concerning IoT and the retail sector is clear. Retailers should look to inventory management for an immediate need to be satisfied and an opportunity to leverage the promise of IoT at reasonable levels of investment for the cost reductions to be gained. As RSR puts it, “the earliest retailer investments in IoT should focus on improving that which has become broken: namely, inventory accuracy and visibility.”