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‘Things’ are Revolutionizing Retail

Connected devices aren’t just changing the way consumers live, work, and play — they are dramatically reshaping entire industries. Adding intelligence and connectivity to everything from utility meters to home thermostats produces enormous amounts of data that companies can leverage to improve their operations, better serve customers, and create new ways of doing business.

The proliferation of connected devices coupled with improved, less-expensive technology platforms and the adoption of common standards will only increase the rapid growth of IoT-enabled capabilities across industries.

The IoT is expected to be particularly disruptive to the retail industry. Currently, retailers are experimenting with ways to use intelligent, connected devices to offer new services and reshape experiences, as well as develop better supply chains and new channels and revenue streams. While the IoT may seem like science fiction, it is becoming reality faster than most of us can comprehend. Retailers that hesitate to develop and execute an IoT strategy are opening the door for current and new competitors to swoop in and capture early market share for the IoT.

‘Things’ are Revolutionizing Retail 01

Improving Customer Experience

Nowadays, every experience is digital, as ordinary ‘things’ become intelligent devices. These experiences are coalescing into what some are calling the ‘Internet of Me,’ which describes an interconnected environment in which businesses are building products and services to be specifically designed and created for the individual.

Consumer adoption of IoT devices is expected to rise quickly. The ‘State of the Internet of Things’ study from Accenture Interactive, a leading provider of digital transformation capabilities, found that nearly two-thirds of consumers intend to purchase a connected home device by 2019, while ownership of wearable technology is expected to double in 2016.

The IoT provides retailers with an opportunity to develop an ecosystem that connects the physical and digital worlds, allowing bi-directional, real-time interaction with consumers inside and outside the store. The smartphone is the hub for these interactions, so instead of fearing smartphone-toting shoppers who ‘showroom’ (browse products in-store and then purchase online — often from competitors), retailers are now exploring ways to connect with them to enhance the in-store experience.

One way is via location-based beacon technology, which retailers can use to interact directly with customers as they enter the store. Department store brands, such as Lord & Taylor and Hudson’s Bay are already using Apple’s iBeacon technology and a mobile marketing platform called ‘Swirl’ to deliver personalized promotions to customers who download branded Apps.

Using sensors to track customers’ paths through a store can help managers improve store layout and merchandise placement strategies. The German fashion house Hugo Boss has already deployed heat sensors in its clothing stores to track customer movements to help managers place premium products in high-traffic areas.

Optimizing Operations

The Industrial Internet describes how companies leverage cloud, mobile, Big Data, and other technologies to improve operational efficiencies and foster innovation. The combination of the Industrial Internet and IoT devices could add more than USD 14 trillion to the global economy by 2030.

Connected devices and products help retailers optimize operations. Radio-Frequency Identification (RFID) technologies, for example, improve the precision of inventory tracking. Data visualization technologies make it easier for employees to track products across the supply chain and could even be extended to customers by allowing them to track the location of a custom order in the production and distribution process.

Managers using Internet-enabled smart tags could lower prices on promotional or low-turnover items or increase prices on higher-demand items. To verify that prices are consistent between online and brick-and-mortar stores, a fully integrated pricing system would improve synchronization of prices between the shelves and registers.

New Channels and Revenue Streams

Household appliances, home security, and health and wellness products are all becoming part of the IoT ecosystem. Home improvement and consumer electronics not only drive sales of these connected devices but also tap into the data they obtain to extend into customers’ homes.

Some retailers are taking further advantage of the array of connected products by becoming an integration ‘platform’ to make it easier for customers to make all of their in-home devices talk to one another.

Lowe’s, for example, has launched the Iris platform, a ‘smart home hub’ that communicates with any device using networking technologies like Wi-Fi, ZigBee, or Z-Wave. The hub has an open interface so manufacturers can integrate their products. Iris directly competes with telecommunication providers like AT&T and Verizon, while providing opportunities to join with manufacturers to integrate their products with Iris.

Other retail sectors, such as grocery, could also build or partner with these platforms. Connected platforms afford retailers with another direct channel to customers — generating household information, from utility usage to consumption trends — helping them drive more targeted offers and services, such as automated product replacement based on expiration dates or customer consumption.

‘Things’ are Revolutionizing Retail 02

Making the IoT a Reality

Leadership teams may be hard-pressed to accommodate entirely new classes of devices into their already complex IT infrastructures, but it’s important for them to consider taking steps now to lay a foundation for IoT support later. Specifically, they’ll need to think about building a new culture and management strategy:

  • Culture

  • Confirm that IoT-enabled solutions are consistent with the business strategy
  • Prioritize the impact and potential benefits of IoT investments on customer needs
  • Align IT, operations, and other business stake-holders to confirm that IoT-enabled solutions are implemented with business needs in mind
  • Test to find the right mix of solutions and capabilities
  • Governance

  • Build cross-functional project teams comprising IT, marketing, operations, and supply chain to reduce silos between IoT business and IT initiatives
  • Reduce internal competition for resources and experience
  • Prioritize IoT revenue enhancement versus cost reduction opportunities; for example, use cost reduction benefits to fund revenue enhancement initiatives
  • Adopt agile development techniques to improve deployment times for new IoT-related functions
  • Create new privacy policies to accommodate the new relationships that businesses will have with consumers

IT teams must build off key technology areas, such as Big Data analytics, in-store technology infrastructures, and internal and customer-facing applications, to take advantage of the data generated by IoT devices, while ensuring that the proper connectivity and security foundations are in place to support IoT-enabled initiatives.

  • Big Data Analytics

  • Compatibility and use of existing data warehouses and database solutions for IoT applications
  • On-premise and proprietary data management versus cloud solutions to support IoT analytics
  • Middleware solutions and data interchanges that optimize speed of queries for real-time analytics
  • In-memory computing
  • Infrastructure

  • Bluetooth LE Beacons that identify and send messages to registered consumers and unregistered devices that respond when the customer enters a store
  • RFID for inventory management
  • Network security policies and services to ensure customer data is secure across the entire supply chain
  • Applications

  • Web services and APIs that define how devices send, receive, and process information
  • API management strategy to provide the business with API monitoring and visibility capabilities
  • App factories
  • Development and debugging tools
  • Embedded operating systems

IoT State of Mind

The IoT is still in the very early stages of implementation but is likely to mirror the proliferation of other recent digital technology revolutions, such as the Internet and the rapid-fire rise of mobile, eCommerce, and social media. Changing customer expectations and industry competition may require retailers to look at the IoT more aggressively. Waiting is not an option for retailers that want to protect market share and position themselves for future growth. Below is a strategy worth considering.

60-days Plan:

  • Identify an executive sponsor and key business and technology stakeholders
  • Pinpoint existing products and channels that can easily be connected to IoT platforms or devices
  • Develop a short- and long-term IoT strategy and business case for garnering organizational support
  • Evaluate the existing organization, culture, and technology
  • Investigate and understand associated privacy and customer data security implications
  • Build and execute a plan to prototype two or three key opportunities that can be piloted in a limited footprint of stores

Retailers that take the lead in this space stand to gain an important advantage in an already competitive environment. Early adopters will be positioned to more quickly deliver IoT-enabled capabilities that can increase revenue, reduce costs, and drive a differentiated brand experience. The IoT will be a disruptive force in retail operations. As companies begin to form an IoT strategy, one question must be at the forefront: Do you want to be the disrupter or the disrupted?

By Jonathan Gregory

Managing Director, Accenture Strategy