IoT in Retail — Benefits and Challenges

Internet of Things or IoT is a term that refers to a network of connected devices and technology. It enables the communication between such devices and the cloud over the internet. The network of things or objects is embedded with sensors, software & other technologies to connect and exchange data with other devices and systems using the internet.

As per GSMA, there will be over 25 billion IoT connections by 2025.

Significance and Benefits of IoT in Retail

IoT is one of the critical technologies of the 21st century, connecting everyday items or objects like kitchen appliances, cars, TVs, watches & more to the internet using embedded devices, making seamless communication possible between people and these objects. In 2022, IoT spending was expected to be at USD 1 trillion and increase to USD 1.1 trillion by 2023.

● Personalized shopping — IoT devices are used to personalize the shopping experience. IoT beacons send real-time alerts to customers’ mobile devices within the beacon range of an aisle or a store. Alerts prompt customers to check out the offers in the store or stroll around the aisle area to take advantage of the discounts and other offers. IoT beacons can offer hyper-personalized content to customers and collect user data. The consumer media and interconnected device revenue will reach USD 203.1 billion in 2030.

● Smart shelves — Smart shelves are examples of innovative IoT ideas. Shelf refilling and ensuring that relevant items are placed on the designated shelves is time-consuming and requires an extra workforce. Weight sensors fitted to these shelves and RFID tags scan the products on displays and shelves. These tags send alerts for refilling based on criteria set for replenishment.

● Asset tracking — IoT helps in tracking assets like shopping carts and baskets. Sensors fitted in baskets and carts continuously send location signals, quickly retrieving such items. The coaches can be remotely locked if removed from a demarcated area. The asset tracking and monitoring revenue was approximately USD 17.2 billion in 2022 and is expected to reach USD 37.7 billion by 2030.

● Tracking customer preferences — IoT devices can be used to track customer preferences and share relevant information with the marketing team. Analytics can help analyze customer buying habits and help in improving the product or the brand features. These devices can help in improving the overall customer experience significantly with automated checkouts, integrating messaging platforms and order systems. IoT sensors can provide data on the in-store traffic patterns including time spent in any particular area in the store. Such information can help retailers plan and manage product placement strategies, effective display setups, and space layouts.

● Facility management — Retailers can ensure that retail premises are clean, attractive, safe & stocked adequately by placing IoT sensors in strategic locations. These devices help ensure that routine tasks like these are streamlined and also help reduce the costs and stress associated with it. Energy management becomes easy with IoT sensors by monitoring temperature, lighting, ventilation and refrigeration. These sensors enable viewing consumption patterns, and overuse to reduce wastage. Every year an estimated USD 70 million worth of products go to waste due to a lack of storage optimization.

● Traffic control — IoT devices can help track the number of persons entering a retail store. It is beneficial when it becomes necessary to limit the number of people in a particular area, as it happened during the pandemic, where it becomes crucial to ensure that no overcrowding takes place and that distancing was maintained within the premises.

Challenges Faced in Implementing IoT

1. Security — Security is a key concern for implementing IoT in retail. Retailers collect and store voluminous data and since all IoT devices and sensors are connected to the internet, they are at risk for potentially damaging cyber attacks. The introduction of the GDPR act (General Data Protection Regulation). Retailers must ensure the IoT devices and networks are secure to protect this data. It is estimated that over a quarter of all cyberattacks against businesses will be IoT based by the year 2025.
2. Integration with existing systems: Many retailers have already invested heavily in legacy systems and infrastructure, which can be difficult to integrate with new IoT technologies. This can make it challenging to extract value from IoT data and systems.
3. Interoperability: The lack of interoperability between IoT devices and platforms can significantly challenge retailers. Retailers must ensure their IoT systems work seamlessly, regardless of the devices or media used.
4. Infrastructure — Most retailers lack the infrastructure and network components needed to manage the enormous volumes of data. Digitizing retail stores requires robust networks, cloud solutions & IoT infrastructure like scanners, tablets, and mPOS. Such infrastructure requires significant investments that not all retailers can afford to make.
5. Data management — Using data to make informed decisions requires access to real-time data analytics, which can present a challenge for most retailers. Processing data needs a technical workforce that may be impossible for all retailers to hire.

In conclusion, IoT technology has revolutionized the retail sector in new and better ways and encourages a digital culture. Digital transformation or digitization of retail is not a new concept, and implementing IoT solutions can help deliver valuable insights to retailers while helping improve services and facilities. To better utilize this revolutionary digital technology, partnering with an experienced software company can help figure out the implementation strategy for IoT in retail sector.