Internet of things (IOT) is a very simplistic derivative of the concept of internet applied to devices that can talk to each other without a human intermediary. A simple example is when a car AC can be switched on using the owner’s handphone through its mobile telephony network. The whole design is based on the premise that these devices use their embedded software to communicate using the standard network thus providing services by integrating computer systems to the physical world.
The extension of Internet connectivity into physical devices and everyday objects.
IoT establishes a network between electronically smart devices and can communicate various parameters to each other, triggering pre-set actions from them. The network of these IoT connected devices is integration between smart sensing, transmitting and algorithm executing systems, like smart parking, logistics, electric grid, aeronautical systems, data collection and process manufacturing activities. IoT touches all aspects of our life such as constructing, transportation, home automation, healthcare, and agriculture to wearables The words “smart”, “e-governance” gets applied to these systems eulogising the intelligence built into these devices to substitute for human intervention.
With multiple technologies to communicate between devices starting from close range NFC to RFID, Bluetooth, Wi-Fi, Internet and even GPS systems, the IoT technology is a slight misnomer. As long as devices communicate with each other and not just through the internet they can be counted as using IoT technology. Many of these devices could be just passive signal readers, which can trigger the intelligent device, example being an RFID card used to open a door.
A Simple model of IoT
IoT network modules – an empirical idea;
- The sensor sends out data. For example; as strain gauge can send out weight data, or a temperature gauge can send out temperature data.
- This data is broadcast by the sensor to the router
- The router forwards the data along with the unique address of the sensor to an application system
- The application system recognises the data along with its source and triggers an event, or an alarm of adds it to an report as advised by its algorithm
- The trigger from the application then activates an action like reducing the temperature in a chiller or opening an outlet to reduce the weight of the product on the strain gauge.
IoT Market Size in the Retail Industry
The use of IoT in global retail market is expected to grow at a CAGR of 19.6% from USD 14.5 billion in 2020 to USD 35.5 billion by 2025. The factors driving this growth include rapidly declining cost of IoT sensors and hardware, customer demand for seamless shopping experience and increasing adoption of smart payment solutions.
Source: MarketsandMarkets Analysis
- Aruba, a consulting organisation, in a report says 79% of retail organisations will end up using IoT in one form or other by 2019, which due to the pandemic is expected to be reached by 2022.
- New devices are expected to be IoT ready as a part of the design. It is was anticipated to reach 25 billion devices by 2021 from 7 billion in 2018 as per IoT Analytics, while software is expected to grow by 40% by 2025.
- Regions like Latin America where fresh retail investment is planned will see a higher share of 10% by 2025 in IoT devices.
- IoT will be critical to their business success
- AI will form a core component of IoT solutions
- Benefits from IoT Adoption will yield
- In the US IoT is 65% of the time in security and store analytics
- In Europe store analytics (49%) and supply chain/store optimisation (43%) see higher use of IoT
The core processes which IoT as now has an impact in the retail sectore are;
- Data Gathering – As devices talk to each other capturing data becomes an automatic, no-fatigue, high-speed activity. It can capture motion, environmental data easily which human observations cannot do, helping real-time adjustments possible. For example; adjusting the store’s air-conditioning at different pockets becomes automatic and ongoing without any manual intervention savings costs, enhancing customer experience and protecting merchandise.
- Decision making becomes almost on the tap, as continuous feedback and corrections loop can be set up. It also allows for centralised control across different and remote locations reducing workload and manpower required at each point of service.
IoT in Retail
A. Stock and Asset Management
Stock availability is the key parameter which impacts sales. This is a continuous activity dependent on huge human intervention.
- Triggering new stock requests like Kroger, tried using their Smart Shelves.
- If the stock of both on-line and offline systems of a retailer are integrated a customer as well as a back office buyer can check for real time stock availability at every store the way Lululemon uses it for customer-facing inventory managers. It can also help customers check prices on their mobile devices.
- Supermarkets have large floor based refrigerators called chest / deep freezers to house frozen food products. These refrigerators have challenges like;
- How much stock should it carry?
- What is the variation in temperature at the base to the top?
- How do we ensure that the temperature is different across different product categories?
- How do we predict for equipment failures?
A chest freezer is fitted with strategically placed multiple temperature and weight gauges. Each of this device has its own unique address which is mapped in the application to trigger of responses.
If a temperature gauge set at the base of the freezer shows temperature below the set parameter the application triggers a temperature increase measure to the freezer. This communication can work in a continuous loop to ensure that the freezer maintains a consistent temperature across the body of its machine, protecting the life and quality of the products inside it.
If a weight gauge starts showing underweight, the application can trigger a purchase order for the products stocked in the machine.
If the freezer shows large variations in temperature over a period of time, the application can trigger an alarm to the maintenance team, or could also set a pre-emptive maintenance call.
- Assets like shopping carts which cost around USD 75 to USD 250 each, can be tracked by placing sensors on them to their exact location and receive status updates and alerts if they’re damaged.
- Electronic shelf labels help track inventory as well as the process of stock taking, inventory shrinkage and pricing.How is Wireless Power Impacting the Retail Industry?
B. Stock movement and replenishment
Supply Chain is one of the biggest contributors to retail efficiency. Managing multiple suppliers, good receipts, handling points and storage has the maximum impact on availability, shrinkage and product life. IoT can impact revenues, according to a TATA Consultancy Survey and Business Insider, whose study in 2014 showed that IoT solutions saw an average 28.5% increase in revenues.
- Kroger, the supermarket chain tested over 2016 tested Smart Shelves fitted with weight sensors and RFID tags. These shelves can be used to scan the products on display and re-stock shelves. It can trigger alarms when items are running low or are incorrectly placed on a shelf. Smart Shelves are able to detect in-store theft as RFID tags can beep at exits. with the highest revenue in Route tracking using GPS, the temperature at which the item is being stored and shipped. Analytics can help by experimenting with the transit temperature and time of transport to reduce losses incurred during shipment.
- Drones can monitor shelf level inventory at the store and warehouses. It can read barcodes and send back data for inventory management reducing manual labour. MIT Drone Inventory System
- Feneberg Lebensmittel uses IoT technology to get visibility on its goods and employees’ movements, both within the warehouse and in transit.
C. Personalised Customer Communication & offers
- Trigger reminders with/out offer to customers based on their buying cycle of selective products. Apple introduced Beacons in 2013, which are small Bluetooth devices that send alerts to smartphones based on location proximity. Over 70% of shoppers say beacon-triggered content and offers increased their likelihood to purchase in-store as per a study by Swirl Networks Inc.
- Recognise customers with active bluetooth and personalise offers within the store, reward loyal customers. Passing by Starbucks IoT beacons, people would get notifications about new coffee brews or promotions and were invited to visit.
- Complementary rewards for shoppers was an idea Avery Dennison managed. Their cloth tags had RFID VIP passes which offered bonuses to their buyers by alerting them to promotions when they were near stores that had personalised offers for Avery Dennison buyers.
- Heat Maps can help decongest aisles and understand categories which get higher traffic.
- Send links and product reviews based on products scanned by the customer on-line and send that customer a personalised discount when in-store.
- Apps designed to offer hyper-personalised content like Target.
- Smart Shelf – Microsoft’s Azure is a cloud based IoT solution product which can be used to activate a stocker to stock merchandise wherein the cell phone will vibrate in case a needed product is on the shelf nearby.
- Track items a customer has been looking at online, and
D. Reducing wait time at Cash Counter
While customers can spend hours browsing and selecting merchandise they do not like to stand in long billing queues. IoT can reduce this friction by various techniques;
- Scanning for long queues at counters can trigger alarms to open additional cash counters. This helps in optimising staff allocation.
- Using apps to pre-load items onto a bill application
- An automated checkout system should be able to read RFID tags on each item when a customer leaves the store and automatically deduce that cost from the customers’ mobile payment app.
- Loyalty and customer identification can be done by linking with wearable wristbands. It is a non-invasive way to track customers without intruding.
McKinsey estimates automated checkout can reduce cashier staff requirements by up to 75%, resulting in savings of $150 billion to $380 billion a year in 2025.
E. Evolve In-store experiences
As technology evolves in-store experiences can be heightened by mixing intelligent personalised customer information with human service.
- Fitting rooms with technology can help customers review their buys even without wearing them. Memory Mirror that shows you a 360-degree view of yourself along with your outfit and allows you to compare outfits simultaneously. You can also snap photos of yourself to share with your friends on social media by asking for their opinion before you make your purchase
- Amazon Go is, without a doubt, the most famous and successful example of large-scale IoT implementation for revolutionising the in-store experience.
The biggest gainer of IoT has been e-commerce as its core backbone is driven by technology. Digitisation has made, both merchandise and customers trackable in a way physical stores never could. Applying all the techniques like Machine Learning, Artificial Intelligence, Blockchain and Big Data, the Internet of Things is the core technology influencing the reshaping of e-Commerce solutions.
1. The simplest application of IoT in e-commerce has been in constantly keeping the customer updated on product deliveries. While the application has been picked up from courier companies, but applied to products which customers eagerly wait for has enhanced the customer shopping experience. ParcelLive — a delivery service — allows users to track parcels in real time.
2. Usage of robots in item pickup and shipping from e-commerce warehouses has been the second area seeing deployment of IoT in e-commerce companies. While it is a high capex item e-commerce companies do see benefits of robots to zero fatigue, low error work.
Image courtesy of STLToday.com
G. Robot Employees
Robot employees are widely used at Target use robots to roam the store and take note of misplaced items, or products running out of stock. OSHBot, Lowe’s newest robot employee, helps customers find specific products and provides information on promotions and inventory is bilingual and can answer both English and Spanish questions. This is a tricky space of IoT as robots seem to be a threat to human work force and has been seeing pushbacks from conservative and socialist ideologues. But robots should ideally relieve humans of mundane and routine tasks for higher order intellectual work. Robots could be the final frontier of IoT when a computer could actually start executing from the time an order is placed to the product finally reaching the customer with close to zero human intervention.
IoT benefits in summary
- Product Availability – IoT can eliemante the biggest reason of sales loss, which is lack of product availability at the store shelves. Stock planning through machine learning, automatic ordering, integrated supply chain and final stock placements can be real time and precise. Pan Macmillan chatbot is a chatbot solution that talks to customers like a human and helps them choose and order books online via conversational interface.
- Inventory Efficiency – Can reduce both unavailability and excess stock by triggering alarms for intervention and future planning
- Reduce shrinkage by tracking items through both RFID tags and traceability during shipment.
- Integrate both the online and offline spaces by seamlessly linking the customer’s online browsing habits, with physical in-store shopping.
- Efficiency of in-store operations like identify hot-spots, reduce crowding at cash counters, maintain store ambient temperature and ease customer service information
- There’s been a 27% increase in IoT startups and related businesses on Crunchbase in just a year, growing from 26,792 in 2019 to 34,120 today.
- IoT startup funding achieved a 15% year-over-year increase from Q1, 2019 to Q1, 2020, reaching $4.7B for the latest calendar quarter according to Venture Scanner’s IoT Q1 Funding Update.
Since this is a completely new business like the internet was thirty years ago, there are variety of startups dotting the whole spectrum from basic technology which would go inside the devices, hardwares, which would act as data collection, storage and routing points, softwares to analyse the data and activate events and finally a whole system architect and integrator. Some of the examples of startups are listed below. For a large list visit; The Top 20 IoT Startups To Watch In 2020.
The IoT in retail market has interesting offerings from companies which provide hardware like beacons, RFID tags and shelf talkers. We will look at some of them based on the types of offering. For a larger list visit 15 IOT IN RETAIL.
Size of Internet of Things (IoT) hardware in the US retail market from 2014 to 2025 (in billion US dollars)
Companies of interest
- Telit helps retailers to get real-time insight into customer buying behaviour.
2. C3 offers solutions for prevention of machine failure through their AI and machine learning dynamic algorithms which combines data from sensors, SCADA data, asset management systems, manual technician notes and weather.
3. Cognizant’s is a service provider which helps retailer move from non-digital tech to digital technology by helping them build customised retail solutions.
4. Tokinomo provides robotic displays, which detect passing customers. When a customer walks by, a product will talk, dance on the shelf, and go about selling itself.
5. CONEX creates smart shelves and platforms for prestige brands, providing customers with eye-catching displays and accessible information about the products on sale.
6. Finger Food helps retail create IoT centred solutions specifically for retailers. They integrate various technologies across the IoT space to help retailers increase efficiencies.
IoT is a vast space and there are going to be technological unicorns of the future arising out of this sector. It is highly technological driven and hence both entry of non-technical people and non-technical applications are going to be limited. Any investor taking a bet on these companies has to have a technological view of the future. My prediction is that when the market is growing most of the players will grow and hence investments will deliver early results. But similar to other technical hardware products where differences between competitors remain marginal, the hardware and standard software applications will not generate large market dominance for companies in this space. The bet hence should be on solution providers like Finger Food or integrators like Cognizant. This is a high B2B offering and hence companies that can work with retailers to help them customise solutions for them will be able to build large revenue bases for the future, similar to an IBM or Accenture.
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