How to Take a Balanced Approach to IoT in Retail

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How to Take a Balanced Approach to IoT in Retail

By Andrew Timm and Ken Silay - 06/01/2015
The Internet of Things (IoT) buzz has accelerated in recent months, specifically in retail. NRF was packed with booths showcasing beacons and talking about how retailers can be more “connected,” “intelligent,” and “smart.” Here’s our advice for rising above the noise, identifying real business value, understanding the opportunity, and finding your unique starting point.

A few key themes are emerging:
• IoT means something different to everyone, and that ambiguity confuses the conversation.
• No one has this figured out. Some retailers are doing amazing things, but there is no step-by-step guide to success.
• There is significant value to be realized — in an enhanced customer experience, and in improved financial and operational efficiencies.
• Doing nothing is not an option. The competition is investing, and you need to as well.

Regardless of what anyone says about the “intelligent refrigerator” being the center of the IoT universe, for retailers it’s about connecting devices, data and systems like never before. Recent and rapid advances in technology allow customers to forge their own ways of connecting, communicating and shopping.

One end goal here is certainly to enhance the consumer experience, and IoT will enable that in futuristic, fantastic ways. But this cannot be your sole focus, and shouldn’t be your initial focus.

IoT should be a strategic initiative with short, iterative wins that build to a long-term vision. We think success hinges on doing the “boring” stuff first, and making sure this critical work isn’t overshadowed by futuristic attention grabbers. A robust infrastructure and highly connected architecture will provide a solid foundation for what is sexy both today and tomorrow.

Dare to be boring
A major challenge stands in the way of the exciting promises of IoT. Retailers are collecting “beaucoupbytes” of data — and this will only increase as new sources of information are brought online. At the same time, retailers have built siloed enterprise systems and thousands of spreadsheets to meet individual department needs, just as they have created separate channels to accommodate in-store, online and call center customers.

It may seem like a lackluster way to start, but retailers should first use IoT to ensure their financial and operational systems are effectively connected. In the moment of a transaction, you can then spend far less time aggregating and analyzing data and more time making high-value decisions with actionable information.

IoT can also help ensure that inventory is accurate. You can’t successfully blend channels without a centrally-managed inventory. In-store pickup of an online purchase only works if there is something in-store to pick up. Full visibility into inventory — where everything is, or will be — allows you to make sales that might otherwise have been lost. Something is only out of stock if it’s unavailable everywhere.

Retailers will never have enough people or technology to meet constantly changing customer needs. But those that take the time to connect the dots to squeeze every last dime out of the systems currently in place can drive revenue and margin to levels that will fund the type of technological adaptability that is required to remain a leader.

Add some spice
Once the foundation is in place, identify practical ways to build on this existing environment, striking a healthy balance between foundational necessities and exciting applications that enhance customer experience. Here are some examples.

Minimize down time by monitoring store health
Future connected capabilities will require more and more systems and devices to work properly. A broken beacon is a missed opportunity to interact with your customers. If your internet connection is down, you will immediately lose revenue and negatively impact customer satisfaction. With IoT, all of these components of store health can be connected and monitored in real-time.  

More up-time means a more positive customer experience. Smart, connected devices can warn of pending failure, allowing you to break the decades-old break/fix cycle. Historical information from all stores can be stored and analyzed for patterns that indicate trouble, and take appropriate action automatically.  

Lift sales with an endless endcap
The mind map exercise can help identify which existing systems will provide immediate value when connected. Let’s build out an example of an Endless Endcap.



















A retailer has a digital sign that plays a welcome video in a loop. Adding a motion sensor could signal the sign to display a welcome image when someone is approaching. If we arm our customers with a loyalty application and tie the sign to a beacon, we know who is approaching, and can display a welcome message unique to that consumer. Further integration to a Customer Relationship Management (CRM) system would allow the sign to list recent purchases, and an analytics tool could provide suggestions for similar items. The result is a personalized, targeted shopping experience for the consumer, and more revenue for the retailer.  

There’s a famous quote from department store merchant John Wanamaker: “Half my advertising is wasted; the trouble is, I don’t know which half.” IoT can connect information that helps us track metrics — such as recommendation effectiveness (how often is a recommendation accepted) and customer revenue enhancement (what is the increase in spend from customers who receive targeted recommendations) — that provide real insight into what works and what doesn’t.

Build loyalty through a luxury customer experience
For many luxury brands, the way to enhanced customer experience is through a great relationship with the store associate. Retailers can enhance that relationship by connecting in-store associate applications with a customer loyalty application. When a high-value shopper enters the store, associates know who has arrived, what they’ve purchased recently, and their typical spending habits.

Perhaps there is a product that shopper has been looking at online that the associate can pull off of the shelf for when they greet the shopper. Maybe there is a matching accessory that can be suggested. Connecting these systems better enables a personalized shopping experience, and helps associates increase the units per transaction.

Long-term success requires finding the balance between boring and exciting
The endless endcap example is a pragmatic solution designed to provide immediate and incremental return on your IoT investment by balancing enhanced customer experience with important connections to financial and operational systems.

Early tactical wins not only add value and provide a solid foundation, but should earn the support of business leadership — allowing you to build bigger, more futuristic ideas into your roadmap. One such goal is a seamless shopping experience across channels. The ultimate goal is to eliminate channels, not connect them. This means making the experience so homogenous that channels blur. The consumer interacts the same way whether they are online, in a store, or looking at a catalogue. This requires the ultimate level of connectivity.

Connecting back-end systems may not provide immediate, visible value for the consumer — but you’re building a framework for the future. When you eliminate channels that operate separately, you improve operational efficiency, enable a more agile supply chain, and gain the ability to react to whatever technological advance comes next.

Don’t forget about long-term strategy
Being practical in IoT means having the discipline to undertake and complete connections that act as the building blocks for where you want to go. Retailers know that it’s hard to be disciplined and strategic when success is measured one year — or one season — at a time. It’s hard to have a long-term view. It’s critical though, to not view IoT as a standalone initiative, but as a tool to help achieve existing business goals.

Keep discipline in place by starting small: drive near-term value by connecting systems or devices already in the ecosystem. Put appropriate measurement metrics, and a way to capture them, in place. Have a long-term goal in mind, a high-level road map to get there, and deliver in small increments. After each incremental delivery, reassess the longer-term strategy using the information and insights gained.

There are business-transforming IoT opportunities out there. But don’t forget to do the boring stuff. You can’t do the fun stuff without it. 

Andrew Timm is IoT Business Value Strategist at Kalypso. As an innovation business strategist, Andy consults with business leaders to determine how to best leverage disruptive innovation like the Internet of Things (IoT). From business case development to rapid prototyping and executive alignment, Andy works to deliver real business value at every step.

Ken Silay is Leader in Retail Innovation and Technology. Ken is a problem solver and recognized thought leader, skilled at fusing analytic and creative thinking to deliver innovative solutions. Ken has held director roles at Chico’s, and was selected as a 2015 Top Innovator by Retail Touch Points and Chairperson for the 2015 RIS News Technology Conference.

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