Beyond Apple Watch, a retail strategy for the IoT

For both customers and merchants, the retail experience is going to transform dramatically over the next five to ten years as the Internet of Things moves from novelty to mainstream. With growth from 900 million units installed in 2009 to a predicted 26 billion by 2020, there are five ways the Internet of Things will drastically alter the retail industry:

Instant Checkout That Feels Like Shoplifting: A substantial effect of baking Internet connections into many current things we already use will be a breakdown of the online-offline divide. This has already begun happening, but with IoT the Internet is essentially everywhere. The technology behind familiar online checkout processes - no waiting in line and sometimes taking just one click to complete – will arrive at offline retail outlets. This will be better for customers whose smart devices will tell sensors who they are upon entering a store and will be able to attach methods of payment. IoT sensors in products will allow customers to simply take what they need and complete the purchase by walking out of the store. What would look like shoplifting today will be the mainstream method of shopping in the future. As Michael Chui of the McKinsey Global Institute says on the subject, “People have said when checkout is working really well, it will feel like stealing.

Whole New Ways to Shop: An early benefit of the melding online-offline world will be to eliminate discrepancies between website and physical store offerings. The days of “online only” deals will soon come to a close as retailers are able to gain more value from the loyalty of customers who purchase in-store. Recognition by connected devices will bring online and computerized advantages to the in-store experience, complete with greet-you-at-the-door personalized offers and assistance, and guided discovery of new items. With the location of all store inventory trackable and online, a customer’s smartphone or wearables will be able to help navigate store layouts and provide enhanced product shopping information. Retailers will be able to optimize off this product location data as well; if customers consistently have trouble finding the Pringles, they’ll be able to use that data and reconfigure the store, perhaps finding a placement beside other products that Pringles-enthusiasts tend to purchase. As the IoT grows this will lead to the kind of related product suggestions that customers currently see online entering the physical retail space, but will be backed by bigger data than ever before. Imagine instantly accessing suggestions on which wine goes with that steak, or which shoes go with that dress (even leveraging social media for near-instant crowdsourcing, as many apps are currently trying to develop solutions for). Imagine immediately knowing the correct motor oil or windshield wipers to buy for your car, or which products are kosher or vegan. Customers will be able to shop faster and smarter, with easy access to expertise and rapid comparisons, and retailers will continuously use related data to optimize the in-store experience.

Retailers Will Have New IoT Products to Sell:Already, some retailers have entered the IoT space with their own products, and in certain market segments this approach will be beneficial as it instills loyalty to a platform and creates whole suites of products that can be purchased. Home Depot has entered the home automation space with its Wink app, and the retailer groups its compatible products in-store, covering items for home energy management, lighting, security and more. Home Depot also sells Wink hubs to centralize command of its IoT products, and has announced compatibility with the popular Nest smart home thermostats, an example of the kind of platform alliances that may play a role in consumer IoT’s future. Similarly, Staples has introduced the Staples Connect Platform, an IoT hub system for app-based control of home and office systems, including lighting, climate, security and more, working with vendors to introduce services to a unified platform and promoting their suite of such products.

Supply Chain Efficiencies: Powered by real-time data that covers purchasing and the location of every physical in-store product, retailers will have the power to optimize supply chain functions like never before. This kind of back-end management includes tracking shipments throughout the supply chain, with advanced planning and total visibility into the state of inventory in the store and beyond. Never again will shelves stand empty, as sensors will automatically trigger restocking and inform supply decision-making for greater efficiency. High demand items (think newly released game consoles just before the holidays) will leave no mystery as to where the shipments are, potentially alleviating customer agitation if retailers make that supply information transparent.

Story and Promotions: The combination of Internet of Things technology and big data will create a new space for brands to tell their stories, in-store and beyond. While most social media campaigns of today are necessarily online creatures, IoT-based campaigns will allow for those same kind of brand plays in offline environments. In the same way, retailers will leverage data and find creative ways to engage shoppers in-store with custom promotions. Imagine a fitness brand encouraging running by offering a timely discount if you put on their shoes and sprint out of the store within sixty seconds (which, remember, you can now do legally because of the IoT-enabled checkout.) Achieving the many potentials of IoT among retailers may depend largely on proper execution. It’s particularly important that the technology is put to unobtrusive uses. Customers may initially balk at the idea of giving up their anonymity while shopping, especially if the experience comes off as creepy, or as simply a vehicle for unwanted advertising.

Retailers will need to usher in the IoT era wisely, with a mindset that puts assistance first rather than salesmanship, in order to realize the IoT’s potential.

Jon Nordmark is the CEO at Iterate Studio, a digital proof-of-concept lab that discovers and curates emerging technologies, then implements proof-tests for an exclusive members-only group of non-competing retailers.