min read
June 15, 2017

The Role of IoT in Retail's Digital Transformation

Internet Of Things

Much is being made of the imminent death of retail and the coming Internet of Things (IoT) tidal wave. Both of these developments are talked about as being 'on the horizon' or in the near future, but it's important to realize that this characterization isn't accurate in either case. Retail's death will only apply to those companies that do not embrace the need for digital transformation and adapt to the changing marketplace ecosystem. People will continue to want, shop for, and buy things -- it is only the methods they use that will change. Any retailer who wants to survive must accept the inevitability of transitioning to an immersive, digitally-driven approach, so as to keep up with customers' expectations. The Internet of Things, on the other hand, has already overtaken us -- it is no longer in the future. A clever retailer will realize that networked smart devices already exist everywhere, and will strategically leverage those devices to keep the brand competitive.

The IoT as Transformative Catalyst

To delight customers and survive competition from successful disruptors, retailers must undergo a digital transformation. This is a necessary process that involves creating and incorporating, among other things, a strategy for using Things to improve the Human experience. One major way that companies accelerate this paradigm shift is by turning every individual product into "the ultimate owned digital media channel for direct, personalized consumer engagement." These ambitious words are from Evrythng, one of the new IoT companies that are generating the infrastructure to connect the growing web of smart objects. Evrythng, a platform that gives any physical product a digital identity, just scored over $24 million in Series B funding, according to May 2017 article in CrunchBase.The concept that physical products have a digital identity and that this identity can be used to better serve customers encapsulates IoT's usefulness to the retail industry. Whereas in earlier stages of digital evolution, retailers used websites, apps and social media to facilitate person-to-person communication, the IoT means that objects and devices themselves are doing the communicating.

User Experience Has Primacy

The most important part of the emerging digital environment is the concept of putting the consumer first. Digital has allowed companies to understand customer needs better than ever, and consumer expectations have risen alongside this understanding. By delighting customers and providing streamlined, enjoyable, nuanced, and targeted experiences, traditional retailers can compete with low-overhead eCommerce giants and agile disruptors. The Internet of Things, with its new offerings of smart packaging and contextualized triggers is critical to creating customer journeys and improving user experience.

Making the User's Life Easier

What do today's retail shoppers expect? As we've commented previously, their expectations are being continuously shaped by a few digitally mature industry leaders. Here's a quick list of the touchpoint consumers seek within a personalized, satisfying experience:

  • To connect with a vendor however and whenever they want
  • To find a good selection of products that are directly relevant to their lifestyle needs
  • To learn about those products
  • To place their order with a minimum of effort
  • To pay for their purchase in a streamlined, secure method.
  • To receive quick delivery of the product or service

The arrival of the IoT in retail space addresses all of these evolving consumer needs, providing an easier and more personalized shopping experience.

Analytics and Data

First and foremost, the Internet of Things is about data; a massive, continuous stream of real-time data that requires new analytics capacity for extracting actionable information. Creating a good user experience starts with understanding the user, and for these insights, retailers need data.This data stream is generated by devices as complex and expensive as automobiles where new auto-telematics are delivering data to both auto manufacturers and retailers, or products as simple as a container of milk that communicates its expiration date to a shopper's smart home refrigerator. Behavioral information can be collected from a whole array of digital devices, like phones, FitBits, or cash registers. Companies like Whole Foods have moved to iPad cash registers utilizing cloud technology. These cash registers, connected via Square, cohesively display and collect customer data in real time, making deep customer histories instantly available to retailers.

Back-End Operations

Another approach to enhancing user experience is to streamline supply chain operations, so that the right selection of products are available in the right locations and at the right time. The advantages of using individual RFID tags, Near Field Communications (NFC), QR codes and other identification technologies to move and manage inventory are obvious, and these technologies were some of the earliest integrations of IoT into retail.. While operational innovations continue to be introduced in retail (and every other industry), they now have two explicit purposes: Not only are they intended to save money for the company, but they are also part of the retailer’s overall plan to improve customer experience.

Transparent inventory

The new real-time precision possible for inventory tracking is being shared with customers via store apps, showing them an online list of products currently available in the physical store and facilitating in-store pickup for online orders. This just-in-time availability improves customer experience by sparing shoppers the frustration of going to a store for a specific item, only to find that it's out of stock.

Emergence of Smart Stores

Even with increasing automation, there's still a role for customer service representatives in physical retail locations, and giving shoppers a way to locate these helpful people is a good way to improve the overall shopping experience. Retail consultant Nicki Baird notes that the ability to track the location and function of employees also helps store managers to analyze staffing needs. Smart shopping carts similarly stream information about store traffic patterns, shaping future design and display decisions. These are only two of the evolving interconnected information webs that are defining the "smart store" that is the counterpart to today's smart home. Zebra's Smart Lens solution is just one current example of this vision: "SmartLens Sensors automatically collect data on merchandise, shoppers, store associates and assets as they move in, through and out of your store," according to their website.

Mobile Payments and Differentiation

A further improvement that IoT brings to customers is a way of simplifying the payment process. By 2021, according to a Retail Vision study by Zebra, 87 percent of retailers plan to deploy mobile point-of-sale (MPOS) devices, enabling customers to scan their credit or debit cards anywhere in the store. There are several methods for accomplishing such contactless payments: One involves using barcode technology to let consumers scan items with their mobile devices and then pay from any location within the store. Target is ahead of this curve, planning to offer an in-store payment in 2017 that allows consumers to scan their own barcodes and pay via their phone, potentially eliminating the need to stand in a register line . However, thirty-five percent of retailers currently use Apple Pay for contactless payments, believing that users do not enjoy scanning their own barcodes and will prefer a slower, but simpler experience.. These opposing payment methods highlight a critical piece of any IoT integration or digital strategy: there is no one-size-fits-all. Personalization, segmentation, and analysis is necessary to leverage digital technologies and retailers must research the solution that is appropriate for their customer community.


Another way to utilize the IoT in a company's digital transformation is to reach consumers when they want to be reached. A consumer might be ready to buy a new watch or a new jacket, but advertising to them at the wrong time could simply annoy them. The Google Home system and the newly announced Apple HomePod solve the timing problem by collecting data on when users ask for things and what their inquiries focus on. This data is then combined with retailer input to provide prompts: "It's supposed to rain, do you have an umbrella? You can buy one at your retailer down the street". Although some of the capabilities of this technology are still in future tech, Alexa can already be used to order a variety of products and services.

Deeper Personalization

The giant data stream generated by a universe of digitally talkative devices may seem depersonalizing at first glance, but it actually has the opposite effect. The Internet of Things is all about individuals: individual items interacting with individual humans. For retail shoppers, this means that a loyalty program may get activated when the person initiates contact with a store, based on that person's past shopping history. High-volume customers can be targeted with special offers, while those who need an extra incentive to purchase can be proactively encouraged.Zebra's study of 1700 retail decision-makers across six continents finds that 70 percent are ready to improve customer experience by embracing the Internet of Things. Furthermore, 78 percent of these leaders say that it's either "important" or "business-critical" to deliver an omnichannel customer experience, so that customers can interact easily with the store regardless of whether they are online or in person. The analytics and data gained from effective IoT integration can create a feedback loop that informs and crafts user journeys, driving a clear vision for a long term digital strategy.To shape a store into one that looks like AmazonGo, where everything is tagged and users can simply leave the store when their bag is full, would take an immense amount of effort. Not every retailer is positioned to get there -- and what's more, not every retailer wants to take such a hands-off approach. However, every company can find utility in the Internet of Things to accelerate their digital transformation.

Centric Digital