It’s Not Just About Selling Channels
August 16, 2016
An August 2015 survey by Retail Systems Research found that 72% of 138 global retailers surveyed already had IoT projects of some type under way and according to research and advisory firm Gartner, the retail industry is poised to spend $193 billion on IT capex in 2017, yielding a five-year CAGR of 3.2%. However, as a percentage of total revenues, the level of IT spending in the retail industry still lags that of other sectors. Retail weighs in at 4th from the bottom of industry spending on IoT as a percentage of revenue. (from Fung Global Retail & Technology April 2016)
What do other industries know that retail doesn’t?
They know that six years ago, for the first time, the number of things connected to the Internet surpassed the number of people connected to it. The US Federal Trade Commission estimates that there will be 25 billion connected devices by the end of 2016, and 50 billion by the end of 2020.
So why are retailers not reacting the same way?
If you talk to many of today’s retail executives, you will likely find that omni-channel is still their top of mind issue. Yes, they are focused on and investing in technology to address the demands of their customers however many of them are not thinking forward enough. Many retailers still put IoT into that next emerging channel and they have too much else on their plates.
So let’s step back and take a look at what IoT really is. Take a product, a truck and some type of mobile connectivity. With sensors, the product can detect when a truck is nearby or has interacted with it. Similarly, if the truck is tagged, the location, name of the truck and other relevant information can be known anywhere in the world. Replace the word Truck with person and the same result.
Now think about what this can mean to your supply chain? With this type of technology, retailers can better coordinate products and consumers needs in the increasingly complex supply chain brought on by multiple digital channels and more demanding customers. Get a handle on inventory and you take a big bite out of out-of-stocks, over-stocks and the risk of losing customers. RFID should be a pre-requisite.
Think about a ‘smart store’ that can take inventory and monitor traffic and demand with little human intervention. Or a ‘smart shelf’s’ impact on time management and labor savings. A manager may know that a pallet of goods is in the store, but have no way of knowing how they are distributed throughout the space. How many are on the shelves? How many are in the back room? This can all happen with connectivity and that is what IoT provides.
Yes, IoT does have a place in providing new selling channels and enhancing the customer experience. Think about the sensors in a store that can tell store associates that you have entered, giving them a chance to better serve you. If you are familiar with HP’s ‘Instant Ink’ program, you know that for a small monthly fee, HP will monitor your ink usage and send you ink just when you need it. Thus opening a whole new selling channel.
Bottom line is, cost savings alone is enough to put IoT initiatives back on the table. And once you do, the true power of IoT, with its opportunities to create new selling channels and generate new revenue streams will become apparent.