In a 2015 survey conducted by Boston-based Retail Systems Research, retailers were asked which challenges would persuade them to consider IoT solutions for their stores. Given cost, margin and growth-based challenges, retailers chose growth. They gave top value to IoT data analytics to help them manage growth-related challenges. Differentiating their brands and monitoring consumer price sensitivity were their top-rated uses for IoT. Modern technology gives us several ways to slice, dice and analyse retail data. The differences lie in data volume, the speed of analysis and where the data comes from.

Connected devices aren’t just changing the way consumers live, work and play—they’re dramatically reshaping entire industries. Adding more intelligence and more connectivity to the objects that surround us—everything from utility meters to home thermostats—will produce enormous amounts of data that companies can leverage to improve their operations, serve customers better, and create entirely new ways of doing business. The Internet of Things (IoT) is driving innovation and new opportunities by bringing every object, consumer, and activity into the digital realm. At the same time, leading businesses are making similar changes within their enterprises by digitizing every employee, process, product and service. The proliferation of connected devices coupled with improved, less-expensive technology platforms and adoption of common standards will only increase the rapid growth of IoT-enabled capabilities across industries. The IoT will be particularly disruptive to the retail industry. Already, we’re seeing retailers experimenting with ways to use intelligent, connected devices to offer new services, reshape experiences and enter new markets by creating digital ecosystems.


The IoT movement offers retailers opportunities in three critical areas: customer experience, the supply chain, and new channels and revenue streams. While the IoT may seem like science fiction, it is becoming reality faster than most of us can comprehend. Retailers that hesitate to develop and execute an IoT strategy will open the door for competitors—old and new alike—to swoop in and capture
early IoT mind share and market share.

1. Enriching the customer experience

Many companies can already mimic customer intimacy—as seen in online ads that quickly reflect your latest purchases— but the IoT promises something much more authentic and meaningful to the individual. The Internet of Things presents an opportunity for retailers to develop a vastly improved ecosystem that connects physical and digital worlds, allowing bidirectional, real-time interaction with consumers both inside and outside the store. The increasingly ubiquitous smartphone will be the hub for these interactions. Retailers are slowly evolving from fearing smartphone-toting shoppers who “showroom” (browse products in-store and then purchase online, often from competitors) to exploring new ways to connect with them to enhance the in-store experience. One way is through location-based beacon technology; which retailers can use to interact directly with customers as they enter the store. Department store brands such as Lord & Taylor and Hudson’s Bay are already using Apple’s iBeacon technology and a mobile marketing platform called Swirl to deliver personalized
promotions to customers who download the brand’s app.

Retailers can leverage the copious amounts of data produced by these interactions to improve the customer’s in-store experience. Using sensors to track customers’ paths through a store, for example, can help managers improve store layout and merchandise placement strategies. Hugo Boss has already deployed heat sensors in its clothing stores to track customer movements, which helps managers place premium products in high-traffic areas.

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.