Retail technology, or retail tech, has transformed the industry for both e-commerce and brick-and-mortar retailers. The Internet of Things (IoT) is one example of technology set to revolutionize how businesses interact with consumers forever.
Learning more about the current state of IoT in retail and where experts predict it will go can help your business determine how best to incorporate this technology in your everyday operations.
Understanding the IoT Revolution in Retail
Although IoT and retail are still a fairly new combination for most retailers, it’s a promising technology that is set to transform retail as we know it.
IoT is the concept behind smart retail, which is an evolving practice that uses connected technology to create a seamless shopping experience designed to meet today’s increasingly advanced customer expectations. Whether people are visiting your stores in person or shopping online, an IoT experience is significantly more memorable and convenient than a conventional one.
What Is the Internet of Things in Retail?
The Internet of Things in the retail industry is a comprehensive network that collects, monitors, and analyzes customer data in real time using a range of internet-connected devices:
- RFID tags: Radio frequency identification (RFID) tags use radio frequencies to continuously transmit signals for location tracking and identification. Unlike traditional barcodes, you can receive RFID signals over long distances, which is ideal for maximum efficiency in retail and shipping purposes.
- Cameras: Internet-connected CCTV cameras with video analytics capabilities can capture behavioral and operational data in brick-and-mortar stores for valuable insights into potential areas for process optimization.
- Sensors: Various internet-connected sensors, such as pressure sensors, accelerometers, and temperature sensors, can provide data on customer behavior, foot traffic, and store conditions to streamline operations.
- Bluetooth: Bluetooth connectivity enables you to build wireless networks of connected devices, creating seamless communication paths between each system component.
- Beacons: One of the most popular examples of IoT devices, a beacon is a device that detects when people are nearby and automatically triggers a preset action. For example, a beacon may deliver personalized marketing messages on a screen when a returning customer walks by.
The specific devices you should use in your IoT retail system depend on your specific business, the products you sell, and your preferences.
Every retailer has a unique objective. That said, the “unique” aspect is exactly why IoT is so interesting. Understanding the various challenges and goals faced by customers, then developing and applying the best solution to meet said challenges and goals is what makes it fun.
– Matt Wright, Principal Architect at Kopius
IoT Use Cases Driving Retail Experiences
While many believe brick-and-mortar business is outdated, combining IoT and the retail industry can bring in-person shopping experiences back in a new, exciting way. It can also enhance online shopping experiences through a greater potential for data collection and personalization than conventional e-commerce practices.
Here are some examples of real Internet of Things use cases:
In-Store Operations and Analytics
Using IoT data for research and analysis can help businesses make strategic decisions about operational enhancements that generate real results. Plus, automated devices free up store employees from handling time-consuming tasks like manual inventory counts and equipment checks so they can focus on value-added tasks.
Here are a few examples:
- Staffing levels: IoT cameras and sensors near store entrances and exits can track customer foot traffic over the course of a typical day, providing valuable insights for scheduling staff.
- Physical security: CCTV systems equipped with IoT capabilities can continuously monitor your store for suspicious behavior, automating surveillance and reducing your overall risk.
- Store setup: Strategically placed cameras equipped with video analytics technology can also track customer movement patterns, helping you make strategic decisions about where to place products and displays.
- Inventory: IoT-enabled devices can save your employees valuable time in manually scanning and counting items during peak hours. RFID tags and sensors attached to products can track customer purchases in real time, and an integrated notification system can alert you as soon as stock levels dip below a predetermined number.
- Self-checkout automation: RFID tags and cameras can track when items leave the store, automatically charging customers for their purchase, as in the case of Amazon Go.
- Predictive maintenance: Attaching IoT sensors to store equipment can help you save valuable time and money on preventive maintenance by monitoring equipment conditions in real time. When the sensor detects abnormalities in the equipment, it can flag your employees to perform maintenance.
In my previous experience working with Microsoft Retail Stores, we developed a custom IoT agent to capture customer engagement & product interest. Utilizing the data, my team and I designed a “Retail Experience Dashboard” to help Microsoft make informed decisions around store layout and product placement.
– Matt Wright, Principal Software Architect at Kopius
The applications for this information go well beyond managing your store in the current moment — you can also effectively prepare your business for the future using this data.
An integrated, AI-powered analytics solution can extract powerful insights from historical data, identifying trends and shifts in consumer behavior over time. Monitoring these trends will help inform your decisions about future-proofing your business, allowing you to create a retail experience that stays relevant for years to come.
Retail CDP and Personalized Marketing
When it comes to marketing, taking a one-size-fits-all approach is a surefire way to reach no one. Personalization, or tailoring your messaging to your customers’ individual preferences, is essential for connecting with them in a way that inspires loyalty and enhances your reputation.
Tapping into retail IoT capabilities can help you create hyper-personalized omnichannel advertising and marketing campaigns for maximum effectiveness. For example, the data your in-store IoT devices collect can provide valuable insight into customer behaviors such as:
- How often someone visits your store
- Which items a customer typically purchases
- What time of day customers are most likely to make a purchase
While in-store IoT devices can efficiently capture massive amounts of customer data, you need some way to activate that data to ensure a strong return on investment.
An integrated customer data platform (CDP) provides a centralized database for all the behavioral and demographic data your IoT devices collect. You can also combine your in-store data with information from your e-commerce channels for a 360-degree view of all your customers and their preferences.
Data analytics software can then extract valuable insights from that information for:
- Better market segmentation
- More accurate targeting
- Enhanced messaging
These insights will help you identify where the best potential growth areas are in your business. For example, the audience you typically target in marketing may not be the same audience that shops from you — and good data collection and analytics will help you determine whether this is the case so you can adjust your strategy.
Enhancing Customer Experiences Through IoT
When properly implemented, IoT networks can significantly improve both in-person and online shopping experiences with capabilities such as:
- Better inventory management: Attaching RFID tags to products or product packaging helps you accurately track stock movement and quantities in your warehouses, making it easier to ensure you always have enough product to meet customer demand without the risk of dead stock.
- Memorable product demos: Connected systems create more memorable in-person product demonstrations by bridging the gap between the real and the digital. Customers can interact with your products in new and exciting ways, significantly boosting your chances of making a sale.
- In-store marketing: IoT solutions like beacon technology enable retailers to offer customers tailored promotions and real-time discounts based on their preferences and previous purchasing behavior. It is important to seize opportunities that present a more pleasant experience through technology. The companies that utilize IoT and other retail technologies to improve the accessibility of their customers or their employees are the ones pathing a new way within their industries.
- Eye-catching displays: Internet-connected lights, screens, and smart shelves come together to create memorable displays that capture customers’ attention — and change in real time to keep them looking.
- Order tracking: When customers purchase products online, they want to ensure their order arrives on time and in good condition. RFID tags and sensors, combined with integrated shipping management software, give customers greater visibility into the status of their orders, providing peace of mind.
Ultimately, the best approach your business can take to IoT and the customer experience is understanding your customers first. Knowing who they are and what they look for in a shopping experience is critical for designing experiences they will love.
Addressing Data and Security in IoT-Enabled Retail
As with any technology that captures personal data, customers have concerns over whether companies that use IoT devices to collect their data will take the proper measures to protect it.
Safeguarding Customer Data
This is always an important topic with customers when implementing IoT solutions. Often times, the “edge” devices generating data are field deployed and outside physical boundaries controlled by the customer. Sometimes the devices have no way to prevent anyone from physically accessing the devices, which poses an obvious risk to data security and integrity. Luckily, there are numerous mechanisms within IoT to address some of these concerns – things like Public Key Infrastructure (PKI), data encryption, and physical mechanisms such as Trusted Platform Modules (TPM) can all be implemented to mitigate data risks.
– Matt Wright, Principal Software Architect at Kopius
Before and throughout implementation, your business should follow best practices for protecting customer information within an IoT framework:
- Segment your IoT network: Network segmentation breaks up your primary IoT network into multiple smaller networks, which enables you to quarantine and resolve security threats as soon as one appears.
- Run frequent updates: Hackers often take advantage of known system vulnerabilities, and regularly updating and patching your network helps protect against these risks by remediating them.
- Use advanced authentication technologies: Identity and access management, multi-factor authentication, and similar technologies prevent unauthorized users from accessing your data by requiring additional forms of authentication at login.
- Test regularly: Regularly testing your system is essential for discovering potential vulnerabilities, helping you determine the best course of action to eliminate them.
- Monitor all endpoints: The more devices you add to your IoT network, the larger your attack surface — and the greater your risk. A centralized software system that provides comprehensive visibility into each device in your network is critical for effectively protecting your customer data.
- Train your employees: Over 70% of all data breaches involve the human element, and uninformed employees are often the reason why. Effective training is necessary to ensure everyone in your business knows how to securely use your IoT devices.
For retailers without extensive IT departments, developing an IoT cybersecurity solution in partnership with a reliable technology consulting firm is a cost-effective way to create a comprehensive solution that complies with all relevant cybersecurity standards. Your consultant will work closely with you to determine your business’s specific security needs so you can address all the potential gaps in your system.
The Future of IoT Security in Retail
One of the biggest developments in IoT security across all industries is the need for standardization and regulation.
The federal IoT Cybersecurity Improvement Act of 2020 bars the United States federal government from purchasing and/or using IoT devices that do not comply with standards set by the National Institute of Standards and Technology after December 2022.
Although the law only affects the public sector, stricter regulations for IoT devices are likely to impact the private sector in the coming years. The state of California, for example, has taken steps to legislate IoT security with the passing of Senate Bill 327 — also known as the California IoT Security Act — in late 2018. This law requires IoT device manufacturers to equip their products with unique first-time passwords as well as other appropriate security features, such as:
- Data encryption
- Regular software updates or patches
- Secure APIs
Because SB-327 is a state law, it only applies to device manufacturers selling their products in California. However, as IoT implementation expands, other states may follow suit.
The Benefits of IoT in Retail
Some of the most significant benefits of implementing IoT solutions in a retail business include:
- Cost savings: Automated IoT devices can help you reduce your operational expenses by identifying issues and adjusting your conditions to keep costs low. For example, smart lighting networks connected to motion sensors can raise store lights during peak hours and dim them when the store is quiet, lowering your energy usage.
- Greater customer loyalty: Hyper-personalized marketing and memorable experiences improve customer satisfaction, inspiring customers to return frequently.
- More accurate inventory: Tracking inventory movement in real time helps you ensure you have enough product available when customers want it.
- Better customer service: Automating routine, time-consuming tasks like inventory counting and maintenance frees up your employees to handle more pressing tasks on the floor, such as assisting customers in finding products.
- Gaining a competitive edge: Although many companies are starting to see the value in IoT for the retail industry, this technology is still in its early stages. Investing now can help you get a leg up over your competitors and plan a future strategy.
- Data-driven decision-making: The data you collect from your IoT devices provides invaluable information about your customers’ preferences, purchasing habits, and shopping behaviors, which can help you make more informed decisions to grow your business.
It’s important to note that simply purchasing and deploying IoT devices is not the end of the story. Your IoT network should be seamlessly integrated with a robust digital infrastructure to support the high volumes of incoming data your devices will collect daily.
A Fortune 500 company worked with Kopius to develop a Sound Pressure Level proof-of-concept, which is a terrific example of a company gaining a competitive edge in the market by blending accessibility initiatives with IoT technology. Using microphones and real-time SPL data, we were able to better understand the soundscape of the store environment, while isolating specific sound sources that may cause discomfort to hearing aid users. This, in turn, provided usable insights for layout designers to make decisions about sound insulation and improve the accessibility of their stores for individuals with hearing disabilities.
– Spencer McCluskey Director, Delivery at Kopius
Preparing for What’s Next: IoT in Retail
The economic future for IoT technology is bright. Projections estimate that the global IoT retail market will grow at a compound annual growth rate of 28.4% from 2023 to 2030.
That said, new technologies come and go at an overwhelming pace. Companies need to adopt a forward-thinking mindset when adopting the latest IoT tech. Working with an experienced, knowledgeable team of consultants can help you develop a streamlined IoT system that will help your business adapt to rapid changes in retail technology.
Contact Us to JumpStart Your Retail Technology Success
Investing in IoT and other emerging retail technologies helps your business stay competitive and resilient amid the constant shifts in the retail tech landscape — and partnering with the right organization is key to getting the most out of your investment.
With 600 expert team members dedicated to delivering excellence in digital strategy, development, and future growth, Kopius can provide our clients with custom, industry-leading solutions tailored to their unique requirements.
Thanks to our extensive experience designing solutions for retailers in various countries, you can count on the team at Kopius to unlock flexible, scalable digital possibilities for your business. Contact us today to learn more about our retail technology services or schedule a consultation.
