Recently there has been a rising trend of retail businesses adopting IoT technology to improve a variety of products and services — from warehousing and equipment maintenance to supply chain management and, of course, the shopping experience itself. Our previous blog has already covered the many IoT use cases within the manufacturing floor and warehousing. This blog will primarily focus on IoT use cases within the customer-facing stores and cover how IoT has transformed everyday operations, improved overall efficiency, reduced costs, and introduced innovative ways for retailers to engage with their customers.
IoT applications allow retailers to reduce costs like labor.
1. AI startup Vistry recently launched a new voice bot that automates order processing at drive-thru restaurants. It works in conjunction with a device composed of integrated sensors and a digital menu board that provides real-time feedback and personalized meal suggestions. More importantly, it uses AI to convert what the customer is saying (speech) to compare their order (text) in the restaurant’s menu, thus working as an automated order taking platform. Just last year, 10 McDonald’s locations in Chicago tested automated drive-thru ordering using similar technology, taking 80% of orders with a 85% accuracy rate. This is in comparison with McDonald’s standard 84.8% human-manned drive thru accuracy rate. The voice-based ordering technology being used is able to understand multiple languages and accents. Because many fast-food restaurants have experienced challenges due to labor shortages and the coronavirus pandemic, automated drive-thru ordering is likely to see wider adoption.
IoT in retail enables inventory (or customer) monitoring at bricks and mortar stores to improve inventory management.
2. IoT devices help to improve inventory management by allowing businesses to easily keep track of items’ precise location and access granular data on stock quantities. For example, in 2019, Walmart unveiled an AI-powered store to monitor inventory at its 50,000 square-foot location in Levittown, New York. The store featured thousands of cameras, powered by computer vision and an AI platform to monitor in-store inventory in real time. Additionally, it featured various sensors on the shelves, which can also measure weight and detect when an item is low in stock so workers can replace the item. This smart shelf technology also uses RFID tags to scan products to reduce inventory error. 3D depth-sensing cameras installed at the store detect spills and see when shopping carts are running low and alert workers to rectify the situation via their phones. While this smart store is not likely to be duplicated exactly across all Walmart stores, it is more likely “its best findings and developments” will be applied across Walmart’s 4,800 existing locations.
3. Kroger, another US supermarket chain giant, has installed 2,200 smart shelves in its supermarkets. Equipped with RFID tags, the smart shelves are able to read items and send data to an IoT system where it can adaptively roll out product information. These digital price tags not only eliminate the need for printed price tags but also allow the retailer to run promotions and discounts. This allows Kroger to better manage its inventory. Kroger has also taken it a step further by allowing this technology to communicate with customers’ smartphones. It uses emoji-like icons to highlight products on their shopping lists as they walk down store aisles and shows them where to find the next product on their list. More recently, in 2021, Kroger, has incorporated Shelf Engine, a technology that uses advanced statistical models, neural networks and machine learning, to manage orders, boost order accuracy, and reduce waste. Its order prediction engine works by analyzing the retailer’s historical order and sales data and makes recommendations about how much the retailer should order.
IoT in retail enables personalized shopping experiences and helps retailers understand the customer experience better.
4. One way retailers can collect “foot” (customer) traffic data is through smart beacons. Smart beacons are IoT devices that use wireless signals like Bluetooth or Wi-Fi to connect to customer’s smartphones that are in close proximity. If deployed throughout a store, retailers can learn more than just their location but also learn what products customers look at, how they move throughout the store, and more. First opened in 2014, Levi’s Stadium is considered one of the most technologically enabled entertainment venues in the world. It has installed 1,700 smart beacons which has made it easier for customers to find their seat locations or have drinks and foods delivered to them through the use of the app, thereby optimizing the way people move around the venue. The app also recommends bathrooms or concession stands closest to them with the shortest queues.
5. Alternatively, smart beacons can also be used to send push notifications to customers when they approach a retail store. For example, over 4,000 beacons are currently installed across 700 Macy’s stores. In 2015, Macy’s successfully maximized in-store traffic across its stores on Black Friday with the use of smart beacons. Prior to Black Friday, Macy’s prompted customers to download their app. Those who downloaded the app were sent push notifications if they entered a store on the holiday and encouraged them to play a game that unlocked $1 million dollars worth of gift codes, giveaways, and other prizes.
6. Target is also leveraging smart beacon technology and offers users different, personalized content based on their location when they are in-store. Similar to Macy’s, app users are notified of product recommendations and department-wide offers.
7. Other personalized experiences include the use of IoT gadgets like smart mirrors. Fashion retailer H&M Group, for example, has rolled out smart mirrors across its COS stores in the US that offer personalized styling recommendations and virtual try-on. Smart mirrors work by featuring a digital display behind the glass which connects to smartphones via Bluetooth or Wi-Fi. In 2018, at the flagship store in Times Square, New York, H&M trialed a smart mirror that combined voice and facial recognition in order to communicate with customers. Customers were able to use voice commands to take selfies that were virtually integrated with the H&M catalog.
8. H&M’s competitor, Zara, also opened a store in East London that includes interactive mirrors equipped with RFID. It can detect the garment a customer is holding and make outfit suggestions, enabling customers to see what a complete outfit will look like in the mirror. This technology allows customers to see if their size is available in-store, view different color options, and explore additional recommendations based on what they brought into the changing room, thereby offering customers a unique shopping experience like never before.
9. Similarly, Rebecca Minkoff has created smart dressing rooms and smart mirrors using RFID tags. By touching the mirror, shoppers can order drinks and get real-time suggestions based on the clothing they brought into the dressing room.
IoT in retail helps customers checkout faster through cashierless payment systems.
10. PoS systems, or terminals, are a critical component of every retail business to process transactions. IoT enables retailers to connect PoS systems devices to the cloud so that inventory can be updated in real-time. Smart retail PoS systems also enable retailers to track customer behavior and make transactions anywhere in the store. Amazon Go is an automated grocery store and is an example of a retailer that has scrapped the traditional concept of the PoS all together. Instead, customers simply walk in, collect their purchases from the shelves and walk out — all without ever needing to line up at a checkout, be it at cashiers or self-service checkouts. Customers are later charged using connected mobile payment apps.
In order for this to work, customers must have an Amazon account, a supported smartphone, and the free app. Amazon uses a combination of artificial intelligence, computer vision, and data pulled from multiple sensors and RFID readers to ensure customers are only charged for the items they pick up. Cameras are used to track items the moment a customer takes them off the shelves. Currently, there are over 25 Amazon Go stores in the US, and outside of the US, there are 17 Amazon Fresh stores across London.
IoT enables retailers to securely aggregate data and proactively identify problems with their devices.
11. In 2019, Microsoft worked with Starbucks to develop an external device called a “guardian module” to connect the company’s various pieces of equipment to Azure Sphere, an IoT device security platform, which securely connects the devices in the cloud. The IoT-enabled Starbucks machines now collect more than a dozen data points for every shot of espresso including the type of beans used and the coffee’s temperature and water quality, “generating more than 5 megabytes of data in an eight-hour shift.” Because of the sheer amount of data being collected, a centralized IoT system was needed. Primarily, it has helped Starbucks to proactively identify problems with the machines. It has also enabled Starbucks to send new coffee recipes from the cloud directly to Azure Sphere-enabled machines, which in the past was done by manually delivering the recipes to stores via USB sticks. Thus, the incorporation of IoT has enabled Starbucks to become more efficient by being able to collect and act on data at any time. The company is also adding the use of its internal AI engine platform called Deep Brew to personalize offers and automate daily inventory orders across hundreds of US stores.
Conclusion
IoT in retail gets a lot of attention for being a flashy and interesting use of new technology. Customers can play and interact with products in ways that are new and exciting, like the implementation of smart mirrors in clothing retail. However, the real power in IoT for retail often lies behind the scenes. Nothing loses a sale faster than low or missing inventory. When combined with sensor-based manufacturing, people management, and warehouse digital transformation, IoT in retail is an incredibly powerful tool that can totally transform the way that supply chains react and predict events. In the wake of rolling supply blackouts from the covid pandemic and more recently the threat of railway strikes, it is helpful for consumers to know what they can or can not order or purchase in-store.
Facility management, asset monitoring, traffic control, consumer behavior tracking, smart shelves, and personalized shopping are just some of the IoT use cases in retail. However, the steady rise of the “connected consumer” means endless opportunities for the retailers to more firmly establish their brand and acquire even greater customer loyalty — but only when data and insights provided by IoT are used effectively. All in all, retailers should focus on utilizing IoT applications to develop better backend processes and work with manufacturers to create value so customers keep coming back. Follow the SDT blog to continue learning about the best IoT best practices and solutions!
Other resources on IoT in manufacturing and digital transformation can be found on SDT Naver blog or our SDT LinkedIn.
About the Author: Karen is a passionate B2B technology blogger. While studying at Georgia Tech, Karen first grew interested in cybersecurity and has since worked for several security and cloud companies as a global marketer. When she’s not freelance writing, Karen loves to explore new food trends.
