Can the Internet of Things breathe new life into brick and mortar retail?

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Brick and mortar is dead.  Or at least, according to some.

Naysayers have been ringing the death knell of the retail store for some time.  Online commerce is booming, with online sales totaling $341.7 billion in 2015, a 14.6% increase over the previous year, according to the US Department of Commerce.  Last year, ecommerce accounted for 60.4% of all retail sales growth.

However, a deeper examination of the numbers shows that brick and mortar is, by all accounts, not dead. Despite its strengthening share, online sales still only accounted for 7.3% of total retail sales in 2015.  This means that an overwhelming majority of sales are still taking place in stores.

Why is this?  There are some things about brick and mortar that simply cannot be replaced by free next day shipping and free returns.  There’s the instant gratification of an immediate purchase, the thrill of the impulse buy, and the experiential aspect of being able to see, touch, and smell what you’re getting.  Even Amazon, the largest online retailer in the world, is opening brick and mortar stores.  So what does this mean for retailers?

For retailers, it’s time to embrace one of the other biggest opportunities of the digital era: The Internet of Things (IoT). With IoT, retailers can combine the best of the physical store — those immediate, tactile, sensory experiences that simply cannot be replaced by next day shipping — with fully reimagined front and back of house operations to rival any online retailer.   Let’s take a look at how.

IoT for retail customer experience

Who says that personalized recommendations and fast, frictionless checkout can only be found online?  There is a huge opportunity for retailers who can bring this level of customer experience into retail stores.

By using strategically placed sensors, stores can quickly gather information about their shoppers, and then serve up personalized offers at the point of sale.  For example, let’s say you pinned some shoes through your favorite retailer website.  A week later, you make a trip to a physical store, and the shoes just happen to be in stock.  The retailer sends a push notification letting you know you can try the shoes on there, and giving you a 10% off coupon if you purchase them that day.

You try the shoes on and they fit, so you decide to get them.  Unfortunately, now you’re in a rush, because you weren’t planning to stop and try on shoes.  Not a problem!  Your retailer has NFC enabled mobile payments, so you can simply walk by an NFC reader on your way out the door and instantly, your payment is made — no waiting in line!   These are just a handful of the ways that IoT can make the shopper experience more seamless.

IoT for retail supply chain

Perhaps you’ve experienced a scenario like this before:  You walk into a store, with hopes of purchasing that 55” TV that you researched online.  The retailer showed that the item was in stock, but once you’re in the store, it’s not on the shelf and it’s nowhere to be found. Is it in the store, simply misplaced, or is there an error in the inventory management system?  Regardless, you’re walking out without a TV, and the retailer loses the sale.

With IoT, this scenario very well could be a thing of the past.  Many retailers are already using RFID tags to manage inventory, but IoT can greatly increase inventory management capabilities.  RFID can capture and send real-time data about inventory to the retailer including exact GPS location, as well as parameters like temperature (is the food in danger of spoiling?) or impact threshold (has the product be dropped and possibly damaged?)

This data also has broader implications.  In the store, stock managers could receive automatic notifications when shelves need to be restocked.  Inventory could also be automatically reordered from the warehouse based on stock levels and other dynamic parameters, including weather data (is there a storm coming?) or geo-localized retail moments (will the upcoming marathon impact sales?), allowing retailers to optimize inventory on hand.

IoT for retail store operations

Retailer profit margins are generally pretty slim, and in the ecommerce era, many retailers have come to see brick and mortar stores as an unnecessary capital expense.  However, there are many ways that IoT can be used to cut operating expenses, making stores more profitable, while improving your shopping experience in the process.

For example, food and beverage retailers are heavily dependent on the equipment that they use to prepare and/or preserve food.  If you stopped in at your favorite chain for a breakfast sandwich and a coffee, you’d be pretty upset to find out that the grill was down and no sandwiches were being made.  For the retailer, that same incident equals unplanned maintenance costs and lost revenue. But by analyzing equipment performance indicators such temperature or power consumption, retailers can predict when equipment will fail before it does, preventing lost revenue.

Reduction of energy use is another big opportunity for retailers.  For example, using sensors to monitor occupancy, that same food and beverage chain can adjust HVAC use in real time, using less energy during off peak hours.  And just as importantly, you can feel good knowing that you support a company that is working to reduce its footprint on the environment.

The future of IoT for retail

Tomorrow’s retail store may be very different than the brick and mortar stores of today.  But, when considered in the context of IoT, the future of retail looks pretty bright.

Long live brick and mortar.

Learn more

Interested to learn how Watson IoT solutions can help kick start your retail IoT journey? The Watson IoT “Give us a store” program pilots IoT solutions at a single retail location to understand how the IoT can create value for your business. Get in touch to discover use cases and to speak to our team.

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