It is common knowledge now that online shopping is growing in leaps and bounds. In the US, while sales in brick and mortar stores fell by 10.3% on Black Friday, ecommerce sales scorched ahead with 15% growth in the third quarter of 2015. Does this spell eternal doom for physical format stores? Experts are forecasting that Internet of Things (IoT) could be a potent disrupting factor that will eventually arrest the trend. IoT technology is predicted to help the customer with lower prices and improved convenience. It will allow the retailers increase sales through focused promotions, better inventory management and lower staff costs. A report from McKinsey predicts that IoT will drive between $410 billion and $1.2 trillion business in retail by 2025.
So how can IoT technology be leveraged to drive business growth?
The IoT will guide the shopper to the items he/she is looking for and have personalized coupons sent to his/her phone based on the shopping history with that store. The retailer can utilize the data stream using IoT technology to optimize store layout. It can also monitor inventory in real time using sensors that provide shelf weight/merchandise stack to prevent stock outs by sending automated replenishment orders.
However, the biggest benefit will be in automating checkout activities - thereby eliminating 70% of the most labor intensive part of retailing and the most frustrating part of shopping. The customer can simply walk out of the store with his/her shopping cart without queueing up to pay. An automated checkout system will scan and bill the items on the shopping cart then charge it to the customer’s mobile payment system.
The impact on retail employees and service providers will be profound. Mundane jobs will rapidly vanish, replaced by jobs that will require product knowledge, analytical and sophisticated CRM/Omni-channel skills, and oodles of empathy. But all of this won’t happen overnight. The cost of tags has to come down significantly so that they can be used on the most inexpensive of products. Integrating and analyzing IoT generated data with other data to provide tailor-made promotions, adjusting store layouts and automating stock replenishments will require painstaking developments. Resolving data privacy concerns of customers through policies and safeguards is another hurdle to overcome.
IoT technology can bring a steep change in retailing through improved convenience, deeper insights, better efficiencies and lower cost. Shoppers will be allured by the seamless experience akin to online buying. Add to that the undeniable socio-physical experience of a touch-and-feel store environment, retail customers may well flock back to the stores. Soon, IoT may be the tour de force that will rescue brick and mortar stores from complete capitulation.