IoT and its increasing role in retail

Retail IoT

Driven by the rise of the internet and the improved capability of wireless networks, the Internet of Things involves devices, sensors and software that communicate with each other.

In retail, it’s used for things like smart shelves and smart mirrors, asset management, customer experience management, geomarketing and even payments through mPOS, payment processing and digital wallets.

As research firm MarketsandMarkets notes, retail IoT was valued at US$14.5 billion in 2020 and is expected to increase to US$35.5 billion by 2025, at a compound annual growth rate (CAGR) of 19.6 percent.

How IoT impacts retail

Retail Insider explains it best when they state the ‘Internet of Things’ is a system of objects that are connected by electronics, software and sensors in order to exchange information.

“In retail, it provides an efficient way of accessing useful information that can help retailers cut costs, and make the provision of goods to customers a much simpler process,” they continue.

“IoT is the creative combination of technology with the physical world, that provides shoppers with a shopping experience that is much less frustrating than the normal experience of standing in long queues waiting to be served.”

A brief history of retail IoT

In many ways, retail IoT had its genesis in Cloud computing and the rise of mobile Point of Sale over a decade ago.

Where once each cash register in a retail organisation separately held information, mPOS transformed the traditional checkout, allowing access to store analytics and insight across an organisation in real-time, from anywhere.

Near field communication helped transform the industry further, allowing for contactless retail payments and also beacon marketing.

IoT applications in retail

Applications of IoT in retail span several distinct areas, including asset management, marketing, customer experience and payment processing.

• Asset management and inventory tracking

The sensors and communication that drive the Internet of Things have proved essential to retail asset management in recent years.

Through tools like RFID, retailers can now track their inventory right through the supply chain and onto the retail floor.

This asset tracking has proved critical to mitigating traditional retail challenges like loss, while also offering real-time insight into what stock is at hand.

• Marketing

Beacons and geo-marketing are one of the first tools that come to mind when you consider IoT’s role in retail marketing.

These beacons communicate with a customer’s mobile phone using near-field technology and can be programmed to alert customers to specials and incentives.

The marketing potential of IoT also extends further however, including features like smart displays that inform customers about a product when they scan a QR code or even lift an item from a shelf.

IoT also then plays a role in the apps retailers use to market products, encourage loyalty and inspire purchasing.

• Customer experience

A major catalyst of the rise of retail IoT is an improved customer experience. This is where tools like smart mirrors, shelves, and AI come into play.

Connected by IoT technology, mirrors and shelves can offer further purchasing options to the customer, such as complementary clothing items, and alternate colours or sizes.

AI allows consumers to envisage how something might look on them without trying it on, or how a product might look within their home environment.

• Analytics

All this connectivity allows for greater insight into store operations – from stock at hand to customer interest in products, and up-to-the-minute sales reports.

Smart shelves and displays inform a retailer how often a product is lifted then put back, smart keys relay how often and when a cabinet or drawer is opened, while further tools like EAS and traffic counting allow a retailer to understand foot traffic in real-time.

• Payment processing

Another area where IoT is transforming retail is through payment processing. It’s given rise to contactless payments, digital wallets, and mobile sales transactions through mPOS.

This allows retailers to conduct transactions anywhere, anytime, using the customers’ payment method of choice.

IoT is also the basis of checkout-free retail for retailers like Amazon Go, as Retail Insider explains.

“One of the innovative new concepts that make this store different is that it uses an app to keep track of the items that consumers wish to purchase, and debits their account with the total amount by using payment and security technology that protects consumers’ information,” they note.

The final word

IoT is behind increasingly smart retail where devices, software and electronics all communicate with each other to provide greater retail insight and an improved customer experience.

While its potential is already being explored, its rapid rollout is set to continue as retailers enjoy the benefits and find new and innovative ways to deploy smart technology in-store.

You can learn more about smart retail here, or view our range of smart retail tools, including mPOS, smart keys, and analytics.