How the Internet of Things Will Impact Retail Sooner Than You Think

In the popular sci-fi film Minority Report, there’s a scene where the main character, played by Tom Cruise, walks through a mall and is bombarded by personalized greetings from digital billboards and holographic retail offers based on his previous purchases.

When Minority Report hit theaters in 2002, we were carrying around black and white feature phones and pagers–the Motorola Razr was still two years away from being released. If companies wanted to gather mobile data on consumers, they lacked the tools (or the network) to do so.

Thirteen years later, targeted, data-driven advertising is a reality, and personalized retail recommendations (at least online) are becoming increasingly sophisticated. Neither have really crossed over into the in-store environment.

How close are we to that vision of the near future? And is getting there worth the cost and effort?

I recently debated those questions onstage at San Francisco Design Week, where I sat on a panel focused on how retailers will use the Internet of Things to improve customer engagement both in-store and online. I was joined by panelists Matt Allred from Walmart.com, Scott Amyx from Amyx+McKinsey, Mariel Vargas from Macys.com and Kevin Weston from Float. Our moderator, Robert Burns Nixon, executive producer at the Retail Tech Summit, guided a wide-ranging discussion.

Highlights:

How do you define the Internet of Things/Internet of Everything in shopping?

The panelists had different definitions of IoT and IoE, based on their background, defining it as either:

  • A product or physical object that gives you information, knows you and reacts to you.
  • A networked device or object that gathers data or acts on data.
  • A body area network that connects to a connected home- or work environment, a wireless sensor network or wide-area ambient computing network.
  • Devices that are connected to the Internet that are either passive (data collectors) or active (they interact with the user).

What are the engagement opportunities for retailers who invest in IoT?

This was an area of some debate and disagreement, which made for entertaining discussion:

  • The Internet of Things can make things easy for consumers when it comes to shopping, such as the refrigerator telling me when it’s out of something, or that my shoes are wearing out. Many home electronics, such as televisions and home theater systems are already WiFi enabled; a WiFi-enabled refrigerator isn’t far off, from my point of view.
  • Inventory planning and returns for retailers, to improve production efficiencies and the demand-driven supply chain, allowing for just-in-time production and replenishment.
  • Miniaturization of sensors, to the point they can be embedded into consumer products to signal to the owner and the supply chain.
  • Consumers can get personalized experiences in the store (similar to the Minority Report example) through data collected by sensors and cameras.
  • Giving retailers the ability to measure the emotional impact of store displays through social media analytics and sensor data inside the store.
  • Addressing issues such as shopping cart abandonment in the physical store–which currently can only be done through embedded sensors.

What are retailers doing to address omnichannel and IoT?

  • A simple thing retailers can do today is making sure the merchandise buyers for their online and physical stores are the same, to maintain inventory consistency and efficiency.
  • Technology investments need to be made–either through a usage-based cloud model or through traditional licensing. Due to a retailer’s high volume of transactions, both models represent a significant investment.

What are the top challenges facing retailers in this space?

  • It’s difficult and expensive to get high-end network connectivity inside a retail store.
  • It’s expensive to produce omnichannel content (digital images, video and personalized messages).
  • There’s typically an inverse relationship with complexity–the easier that a retailer makes things for a consumer, the harder and more complex those technologies are to implement.
  • While retailers have steadily made investments and progress in online shopping and the supply chain, the technology powering in-store experiences hasn’t changed much over the past 10 years.
  • Retailers cannot afford to lag behind their peers; consumers dictate the pace of how stores and shopping will change.

Ultimately, it’s about overcoming the inertia of past practices and investing in technology that drives hard metrics: revenue-per-square-foot inside stores and better data leading to higher revenue online.

I’d like to thank the Retail Tech Summit for inviting me to speak on the panel, and my fellow panelists for a spirited and educational discussion. For more thoughts on IoT and to read posts from other Avaya executives on the subject, visit http://www.avaya.com/blogs/archives/tag/iot.

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