2. Optimizing supply chain
The “Industrial Internet” has emerged as a term to describe how companies are leveraging cloud, mobile, big data and other technologies to improve operational efficiencies and foster innovation by tightly integrating the digital and physical worlds. The combination of the Industrial Internet and IoT devices could add more than $14 trillion to the global economy by 2030.4 Connected devices and products provide retailers with the opportunity to help optimize operations in the face of a more complex supply chain, increasingly important digital channels, and a more demanding customer. RFID technologies, for example, can improve the precision of inventory tracking. Data visualization technologies make it easier for employees to track products across the supply chain. This service could even be extended to customers— allowing them to track, for example, where a custom order is in the production and distribution process. Managers could begin to adjust pricing in real-time, using Internet-enabled smart tags to lower prices on promotional or low-turnover items or increase pricing on higher-demand items. A fully integrated pricing system would help retailers improve synchronization of prices between the shelves and the registers and also across channels, to verify prices are consistent between online and brick and mortar stores. Other IoT devices can be integrated within the supply chain to further improve store operations and help reduce cost. For example, IoT-enabled sensors confirm store managers to monitor lighting and temperature control and adjust settings to improve customer comfort and support more cost-effective energy usage. Using sensors to automate many of the functions that employees currently have to perform manually, such as tracking inventory or changing prices on individual items, gives sales associates more time to spend interacting with customers—further improving the in-store experience.
3. Creating new revenue streams
The true power of the Internet of Things lies in the opportunities it presents to retailers to create new revenue streams or, in some cases, build entirely new channels. We’re already seeing examples of incremental revenues retailers can help achieve by expanding into new channels or creating new, high-margin product categories for the emerging “connected home.” Household appliances, home security and comfort products, even health and wellness products are all becoming part of the Internet of Things ecosystem. Retailers in home improvement or consumer electronics sectors not only can drive more sales of these connected devices—Home Depot already stocks more than 600 “smart” products in its stores5—they can also tap into the data they provide to extend their touch into customers’ homes. Some retailers are taking further advantage of the wide array of connected products by becoming an integration “platform.” The concept behind these platforms is 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 can communicate with any device using networking technologies like Wi-Fi, ZigBee, or Z-Wave. The hub was designed with an open interface so that manufacturers could integrate their products with the platform. Iris puts Lowe’s in direct competition with telecommunications providers such as AT&T and Verizon while opening up new opportunities for teaming with manufacturers to integrate their products with Iris.6 Other platform examples include Home Depot’s Wink and Staples’ Connect. Retailers in other retail sectors, such as grocery, could potentially build or partner with these platforms as well.Connected platforms would give retailers another direct channel to customers, generating a potential gold mine of customer data—information associated with almost every aspect of the household, from utility usage to consumption trends. This information could help retailers to drive more targeted offers or, by integrating connected platforms with existing e-commerce channels, offer new services such as automated replacement of products based on the customer’s consumption or by monitoring perishable dates.