If organizations and decision makers get it right, the Internet of Things (IoT) could have an economic impact of between $450 billion to $1.2 trillion per year in retail by 2025, according to a recent McKinsey Global Institute report. Value may accrue through layout optimization, self-checkout and smart customer relationship management, amongst others. It’s not surprising, then, that retailers are forecasted to invest over $2.5 billion in IoT in retail over the next five years to revolutionize in-store customer engagement, create new supply chain dynamics and support the connected home – all of which will lead to new models of retailing.
Currently, the majority of IoT data is not being used meaningfully. This is because information is mainly used to detect anomalies, and not for optimization and forecasting. However, a dynamic industry is evolving where some forward-thinking retail organizations, as well as new players, are creating innovative business models using IoT. For instance, Decathlon, the French sporting goods retailer, has seen double digit increases in sales since deploying radio frequency identification (RFID) tags for inventory checks at the point of sale and at security gates.
Meanwhile Target, the omnichannel retailer, has rolled out beacons across over 50 US stores to push bespoke, hyperlocal content on product recommendations and coupons based on the user’s location. This drove massive downloads of its Cartwheel app and considerably outperformed many of its competitor’s usage stats. Another major eCommerce player, Amazon, saw orders generated from its Dash buttons go up 400% year-over-year. There is a long and prestigious list of retail organizations waiting to capitalize on IoT growth, and we have only brushed the surface.
IoT in Retail
Today’s use of IoT in retail has gained a significant foothold. Use cases are already generating billions of interaction points between connected consumers, devices and things. Accenture, somewhat conservatively, has estimated that there are over 18 unique use cases for deploying IoT and connecting with consumers in physical retail stores alone, ranging from contactless checkouts to IoT-connected digital signage, with a further 13 use cases in the connected home that will drive interactions between retailers and consumers. Additionally, the list of possible deployments of IoT in connected products like footballs, skis and fitness trackers are endless. Cumulatively, this all leads to an unprecedented increase of interactions between the consumer, their devices and connected things.
Omnichannel retail businesses have an average of 7-10 customer engagement channels, including e-commerce and mobile sites, apps, email marketing, push notifications and social channels. This new IoT landscape could increase customer engagement opportunities to over 38 unique digital touch points or channels for a retailer. The avalanche of new data this will generate can provide organizations with the ability to offer unique, bespoke customer experiences like never before.
The Value of Data
The data generated from these interactions is of extreme value to retail analysts who wish to further understand consumer habits. Businesses would have the ability to merge digital and physical shopping environments, and create frictionless product purchases while also informing supply chains on stock requirements.
However, as with any data generated through interactions with consumers, there is a very real threat of data breach. It is the responsibility of the retailers to ensure customer data is kept private and secure, not merely to comply with regulations such as the EU General Data Protection Regulation (GDPR), but to also build consumer trust and attract new customers. The new data goldmine gives retailers who are looking to deploy or strengthen their IoT developments a competitive advantage over their rivals, but if data privacy is overlooked, it could seriously harm reputations and performances.
The concept of Identity Relationship Management is critical for any IoT interactions which generate data. Consumers have identities, devices have identities and things have identities, and the desired effect of an IoT initiative is for them all to interact and provide benefit for both the retailer and the consumer. All digital identities require dynamic, multi-layered authorisation in this process, not only to unlock the value of the data, but also to provide a secure environment for data interactions to transpire.
Long gone are the days when data capture simply comprised a name, date of birth and an address. The information collected and transmitted by IoT devices goes well beyond personal identification to creating a real-time pattern of people’s everyday lives. As we continue to see this quiet IoT retail revolution move from nascent to mainstream, privacy, security and trust cannot be considered an afterthought with such valuable information at hand. Identity Relationship Management is an essential component, right from the outset of considering an IoT use case.
Doug is Global VP, Retail and Consumer Products at ForgeRock