Afraid of Amazon? IoT to the Rescue
Retailers may be enthusiastic about the Internet of Things (IoT), but are they actually implementing the technology and can they use it to out-innovate Amazon.com? To further investigate this topic, Software AG partnered with Retail Systems Research (RSR) in an IoT retail study to uncover the exact challenges retailers face when it comes to IoT and what strategies they can implement to be more successful.
According to the study, 65 percent of retailers said there's much to gain from IoT, yet 51 percent don’t believe their infrastructure can sustain bleeding-edge technologies. Not only that, but 47 percent of executive leadership can’t grasp the possibilities IoT holds. Additionally, the report uncovered that while 70 percent of retailers acknowledge IoT will drastically change the way they do business in the next three years, a mere 15 percent of winning retailers have mature sensor-based projects that they feel differentiate themselves from their competitors.
Despite retailers increasing awareness of IoT’s impact on customer engagement and competitive advantage, it's clear they're hesitant to dive in. The first step retailers need to take is to build a strategy for implementing the technology, then they need to execute on it. Amazon’s success isn’t slowing down, and it's time retailers embraced the tools and technologies needed to properly compete. The research suggests that the technology barriers fall into two broad groups. The first is connectivity and integration — i.e., being able to connect IoT data sources together and to existing infrastructure. The second area is analytics and response — i.e., interpreting the data attained and responding accordingly. This requires not only the ability to digest and interpret data sources in real time, but also the machine learning and artificial intelligence to provide an appropriate response in the right time frame. This suggests from a technology perspective these two areas are where retailers should first focus.
IoT technology provides retailers visibility into consumers’ physical shopping behaviors, inventory accuracy and speed of fulfillment to meet consumer demand. A key benefit of IoT technologies is the ability to increase customer satisfaction, which ultimately leads to customer retention — a retailer’s No. 1 goal. Using IoT data, retailers can better understand exactly what a customer wants. In fact, 68 percent of respondents believe IoT will boost profits by deepening customer engagement through monetizing data. Providing customers with the personalization they desire in-store and online can make all the difference and be as simple as offering interactive mirrors, which can make personalized apparel recommendations to customers. It’s this type of offering that can make the customer feel valued and important, which equates to loyalty.
Though retailers see the value in IoT, most are hesitant to invest. However, given the climate of the retail industry, with more and more store closings being announced, none should delay in taking advantage of this technology. The best way to gain an understanding of the possibilities of IoT is to experiment. It’s important for retailers to create a strategy and take small steps to achieve their goals. Trying early experiments that have a well-defined scope and clear success criteria will enable retailers to reap the many benefits this technology provides. In fact, respondents of the study that have implemented IoT said they're satisfied with their investment thus far, with 50 percent crediting strong results with security sensors and 33 percent for inventory tracking sensors. Though these results may seem minor, it shows that even the smallest steps to implement IoT can make an impact.
Overall, it's evident retailers need to fully grasp the need for and potential application of innovative technologies like IoT. The RSR report shows that those taking the steps to implement and invest in IoT will gain the competitive edge they need to beat out their competitors. In the fast-paced, quickly evolving retail industry, retailers cannot afford to be afraid of failure. The time is now to realize the value of IoT. Otherwise, the opportunity to compete with Amazon will quickly pass.
Oliver Guy is global industry director, retail, at Software AG, a digital business platform provider.
Oliver Guy is the global industry director, retail at Software AG, specializing in retail digital transformation and omnichannel technology strategy.
Oliver advises retailers across the globe on their technology strategy and decisions. With more than 20 years focused in technology, Oliver has worked with major names in global retail helping them improve their business through the use of innovative technology. Prior to joining Software AG, Oliver was part of the European Management team at Oracle Retail, his team being responsible for Retail focused Solution Consulting across Europe. Oliver started his career in technology implementing Supply Chain Planning and Optimisation solutions for customers across multiple industries in both Europe and Asia Pacific with Manugistics (JDA).