What can IoT really do for retailers?
Steve Rowen
Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.
In our most recent research on the Internet of Things, we found out something pretty fascinating: the bigger a retailer is, the greater the enthusiasm is for IoT’s ability to help create a differentiated shopping experience.
But there’s a danger in that enthusiasm; without more specificity, big retailers may be viewing the potential of IoT technologies with unrealistic demands. IoT technologies hold tremendous possibility, but they are still just tools. Salvation cannot come in the form of the tool, but from a series of strategic and brand-conscious decisions and changes to innovate and adapt, all while using those tools effectively.
So what can IoT really do?
We get a much more pragmatic perspective when we asked retailers to identify the top operational challenges that IoT can help them address (see figure, below). “Winners” want to better understand the relationship between digital and physical customer shopping behaviors. Winners also rightly believe that IoT technologies can help them achieve better visibility into where available-to-sell inventory is within the enterprise and how they can best meet omnichannel demand.
The differences in the weight that winners and others put on “visibility” vs. “accuracy” is important. Real-time visibility and accuracy is essential for success in the omnichannel world. We’ve seen in other studies that winners have made real progress in improving inventory accuracy; average and under-performers evidently still have a long way to go and hope that IoT technologies will help them achieve that elusive goal.
Winners have the more nuanced viewpoint. It’s not just that they want a more reliable inventory count — they recognize the challenge to fulfill omnichannel demands immediately. It’s a key part of how they think they can differentiate from their competitors, which we also know from previous charts is at the forefront of how they are approaching all of their IoT-related initiatives.
Discussion Questions
DISCUSSION QUESTIONS: Where do you see the Internet of Things (IoT) helping retailers with their operational and inventory challenges? What do you make of the findings in the study cited in the article?
Poll
BrainTrust
Chris Petersen, PhD.
President, Integrated Marketing Solutions
Ken Morris
Managing Partner Cambridge Retail Advisors
Let’s start with the acronym IoT. Retailers have to do better than think about applying “Internet of Things.” IoT basically enables a host of different kinds of devices to collect and stream data — MOUNTAINS of data. The data can be anything from customer movement to inventory movement, any time and everywhere. The challenge is not in using IoT to collect data. The challenge is to harvest and analyze IoT data to solve problems and gain proficiency. As the survey indicates, different types and sizes of retailers will apply IoT differently to solve for different things. The best answers will start with the question “what are we solving for?”
We’ve been here before. We must begin the discussion with a standard definition of IoT. I define IoT as a web of IP-addressable, firmware-intelligent, remotely programmable devices, able to communicate with other IoT devices. IoT can help retailers with managing inventory in an omnichannel model. It enhance the customer experience and removes some of the drudgery with intelligent home devices (like refrigerators that can order your groceries and alarms and HVAC that can be turned on/off remotely) and, operationally, it can improve communications between all levels of the organization.
The biggest impact of IoT technologies will occur in inventory visibility. In the omnichannel world, with many consumers wanting to buy online and pickup in store (BOPIS), the last thing a retailer needs is to accept an order and not be able to deliver to the consumer when they show up. I experienced BOPIS from Target and Walmart over the holidays. Walmart was straightforward, painless and rewarding while the Target experience was much more complex and the products I ordered were not available in the store where the website said they existed. While I suspect both retailers use human labor to satisfy the online orders, the use of IoT technology could potentially help solve this challenge. The process of using the data must also be addressed, and my holiday experiences said to me that Walmart is better positioned with BOPIS today.
Inventory visibility is the first step in resolving the BOPIS challenge. IoT technologies must be used, as store labor is an inefficient use of resources and people are inaccurate counters. IoT-based inventory counting quickly moves from visibility to accuracy as the technology matures either using RFID or cameras connected via IoT.
I seriously doubt that IoT will do anything to improve the shopping experience for customers. We’ve learned that customer-facing IoT is rarely valuable. Even the use of IoT in consumer lives is extraordinarily limited.
IoT seems to be a potentially powerful back room and logistics management opportunity — in a controlled environment where it doesn’t have to succeed in the chaos of untrained consumers.
How much will that impact customers? Only a little. What it has far bigger potential to impact is how effectively retailers manage their operations.
I think adoption of IoT technologies will flourish in the next 12-18 months, primarily driven by the opportunity for real-time inventory visibility as more and more suppliers join the trackable ecosystem.
I am really surprised that the research shows retailers looking for IoT to solve their problems with visibility, accuracy of inventory and with customer service. Is this a lack of understanding of the IoT or just retailers hoping that some magic will happen to solve their problems?
There are IT solutions today that can solve these problems for all retailers and many of the “Winners” either have or are in the process of implementing the latest state of the art solutions to achieve this. It does not require some magic IoT development, just the simple investment in IT.
Andrew, the problem is how to collect the inventory data to make it as accurate as possible. The POS systems are only accurate to the 70-90% level (depending on the retailer) due to shrink, returned items, improper scanning of multiple similar items at the register and misplaced inventory. Asking associates to collect a more accurate inventory would require excessive expensive associate time — and people are poor counters. IoT technology is the way to gather the inventory in an automated and remote way, in near real-time.
IoT will be a huge benefit to retailers from both an inventory accuracy and visibility perspective. From the study’s findings, it was interesting that retail “winners” were much more concerned with addressing inventory visibility than accuracy. Maybe they feel that their inventory accuracy is fairly good today. However, for omni-channel fulfilment, it is imperative that the inventory available to promise is accurate, otherwise you will have some very unhappy customers. Inventory accuracy also helps eliminate the need for safety stock on the inventory available to promise. Safety stock is a really big issue for many retailers.
Specifically, the winning retailers are distinguished by their focus on leveraging IoT data to improve customer experience. Facing an onslaught of online competitors, customer experience truly represents the main distinguishing factor that can lead retailers to succeed or fail in the coming year. The best retailers will be leveraging IoT data as well as transactional, website and third-party data and sift through the data to discover opportunities to differentiate their experience in a way that leads to meaningful customer satisfaction.