The internet has forever altered the way we connect with each other but more interestingly it has also changed the way we shop, with 2016 UK online sales up 16% on 2015. Traditional retailers now have the opportunity to tackle online shopping head on by bringing the Internet of Things (IoT) into physical stores, changing the way that customers connect with retailers and products, and the way retailers connect with their products, enhancing customer experience, loyalty, revenue and efficiency.
Capgemini has recently published a report titled ‘IoT for the Consumer Goods and Retail Businesses: What are the benefits and where should one start?’ and it demonstrates that this technology is already available; it just needs to be creatively put to use, so let’s discuss how this can be done…
Increased connectivity through the IoT
The IoT refers to the connection of everyday objects via the internet which has been made possible by implanting tiny computers, sensing and transmitting systems within them. Having already shaken up traditional retail by becoming a market leader online, Amazon has recently opened Amazon Go in beta mode. This is a brick and mortar store to reform the physical retail space.
Connected through the IoT, there are no checkouts and no queues. Customers ‘tap in’ with their smartphone, select their products, put them straight into a bag, and simply ‘tap out’, with their accounts being automatically debited and as well as the retailer’s inventory. This advanced technology requires significant testing before full ‘go live’, however, the technology is available, scalable and adaptable for other organisations to use to address their own business outcomes and ensure they are not left behind.
Connecting customers to stores with applied ‘filters’
One attraction of online shopping is the ease with which products can be compared and product range can be narrowed down through filters to make better informed choices. By applying the IoT, this is now possible in store.
Say, for example, I am having a vegan friend over for dinner and am overwhelmed with the dessert selection in my supermarket. What if I were able to log in to an application, apply filters, and view the shelves through the camera on my phone, with my filters applied to highlight the most suitable products for me rather than having to check every label? I would still be able to look at any product on the shelves, but for ease of shopping I could quickly choose the best options. The same would be possible for low fat, gluten free, or any other requirement or preference, and not just in food retail – this is transferrable to any product range where customers may want to make comparisons to inform purchases.
Precise location services and object recognition software exists to make such connectivity between the customer and the store possible. The benefit to retailers is increased customer experience and shopping efficiency, and the reduced likelihood of an undecided customer leaving empty handed and carrying out research online, to potentially purchase elsewhere.
Connecting customers to products with ‘smart’ fitting rooms
Capgemini has already applied the IoT to introduce smart fitting rooms to retailers in Europe. Items have radio frequency identification (RFID) tags built into their security tags and wall mounted touchscreens are installed in the fitting rooms. When a customer brings an item into the fitting room, the tag triggers the company website to display on the touchscreen, providing product images, outfit inspiration, linking sales, and displaying key product information. Customers could even ‘tap in’ to the changing room to link a record of what they have tried on to their own personal profile. It could also store data on buying history and fitting patterns to better suggest products that the customer will like and will fit well. The retailer can then use the same information to inform buying and strategy.
Again, this is a scalable technology that can be translated into different markets, for example, scanning beauty products to display complimentary products and ‘lookbooks’, or linking food products to recipes. This personalisation drives customer loyalty and turns shopping into an interactive experience fit for the digital age.
Connecting retailers to stock with sensors
Retailers are currently very good at knowing what they sell, when, how much and who to. This informs ordering, merchandising, and promotions which all drive revenue. But what is difficult to measure in traditional physical stores is what they nearly sell – which products just need slightly more promotion or tweaks to the packaging to become attractive enough for a committed purchase.
Sensors installed on shelves have multiple applications and insight potential, one of which is sensing which products are picked up and then replaced, rather than purchased. Something about that product caught the customer’s eye, but on further consideration they wouldn’t commit. Collecting this data would better inform merchandising, product design, and packaging to increase sales, or understand what to avoid. The retailer can also discover precisely which shelves or areas of the store are the most profitable, and analyse the conditions of these to replicate elsewhere in the store to increase overall conversion and profitability.
Alternatively, using location services on smartphones, or analysing images captured through existing security cameras, it is possible to map a customer’s route through the store and reveal that they had been lingering indecisively in front of the biscuit selection for longer than usual, comparing items before deciding to walk away. With this insight, gained through the application of the IoT, they could be offered a personalised discount to attempt to convert this sale, and merchandising in this area could be optimised to enable customers to make faster purchasing decisions.
With all this technology already available, the potential applications for IoT are vast. It is now ever so important for UK retailers to understand their distinct business challenge and consider quick wins and long term strategies to employ IoT and keep up with the digital age. One thing is certain, the online retail market is highly competitive, but IoT may give physical stores a new advantage.