The retail industry is embracing the Internet of Things (IoT) at a remarkable pace. According to IoT analyst firm Berg Insight, the installed base of connected IoT devices in the retail sector is forecast to grow at aCompound Annual Growth Rate (CAGR) of 31.7% from 4.6 million devices in 2018 to reach 39.7 million devices by 2023.
Driving this growth is the tremendous value IoT creates for retailers. Connected devices, assets, and sensors generate data that provides visibility into all facets of retail operations. IoT-enabled solutions help retailers increase efficiency, reduce costs, prevent losses, and deliver exceptional shopping experiences.
The Growth of IoT in Retail
Worldwide spending on retail IoT solutions reached $14.9 billion in 2021 according to IDC. IDC predicts retail IoT spending will achieve a CAGR of 22% through 2025, reaching $35.5 billion.
Retail IoT Global Spending Forecast
| Year | Spending | Growth |
|---|---|---|
| 2021 | $14.9 billion | – |
| 2025 | $35.5 billion | 22% CAGR |
With consumers’ preferences and expectations rapidly evolving, retailers are prioritizing technology investments that allow them to better understand and serve customers. IoT implementations enhance data-driven decision making across the retail value chain.
McKinsey research shows AI-enabled stores that leverage IoT sensors and analytics have labor productivity levels 30-50% higher than traditional retailers. Connected IoT solutions provide the data foundation that makes this elevated productivity possible.
Key Benefits Driving Adoption
The benefits of IoT in retail fall into four major categories:
Operations Efficiency
- Optimized inventory and labor
- Reduced out of stocks
- Lower waste and spoilage
- Increased speed and automation
Visibility & Monitoring
- Real-time inventory tracking
- In-transit order visibility
- Equipment monitoring and diagnostics
- Analytic insights from sensor data
Customer Experience
- Faster checkouts
- Personalized promotions
- Contextualized recommendations
- Interactive experiences
Loss Prevention
- Reduced inventory shrinkage
- Asset and cart theft alerts
- Enhanced payment security
- Better fraud monitoring
While promising, IoT adoption does not come without challenges. Concerns around data security, integration complexity, investment costs, and technical skills are top barriers retailers must overcome. But the long-term benefits make IoT an increasingly essential retail strategy.
Now let‘s explore the top 12 IoT applications and use cases transforming retail operations today:
1. In-Store Traffic Monitoring
To optimize staffing, merchandising, and operations, retailers need accurate visibility into customer traffic patterns. IoT solutions enable anonymous monitoring of how people navigate stores in real-time.
Density is a pioneer in using depth-sensing cameras to anonymously count occupied shoppers based on sensor data. With 98% accuracy, Density provides real-time occupancy data and heatmaps of high-traffic areas.
Global fashion retailer TJX deployed Density across hundreds of their stores. By getting alerts when occupancy thresholds are exceeded, TJX can limit entrance access to prevent overcrowding. The FittingRoom social distancing feature directs shoppers to available fitting rooms based on Density‘s occupancy insights.
UK retailer John Lewis is also using Density to monitor traffic and maintain COVID-19 safety protocols. The granular data even helps them analyze queue times at store entrances. Density provides the actionable analytics retailers need to create better shopping experiences.
2. Smart Inventory Management
Inventory inaccuracy leads to significant retail waste and lost sales. But manually tracking inventory is labor-intensive and error-prone. IoT-enabled smart shelves and robots are automating inventory management.
Smart Shelves
Shelves embedded with RFID readers or weight sensors can identify when products are picked up or placed back. This provides real-time inventory counts. Out-of-stock alerts notify staff when shelf replenishment is needed.
Food retailer Carrefour deployed RFID-enabled smart shelves from Panasonic. The shelves automatically detect products picked by customers and update the back-end inventory system in real-time. This prevents out-of-stocks while optimizing re-stocking activities.
Inventory Robots
Robots like Tally by Simbe Robotics capture shelf imagery as they autonomously roam store aisles. Computer vision algorithms analyze the images to audit shelf inventory levels. Tally sends pick list data to associates‘ devices to optimize restocking. Its daily scans help retailers stay continually in-stock.
Ten Tally robots helped electronics retailer Dick‘s Sporting Goods reduce out-of-stocks by 21%. Tally also cut the time needed for inventory scans from two hours to just 30 minutes.
3. Asset Management and Loss Prevention
Shopping carts and other asset theft results in nearly $800 million in retail losses annually. IoT tracking solutions can remotely monitor asset locations in real-time. This curbs theft while providing data to optimize asset usage.
Cart and basket vendor CART POSATTM equips assets with wireless tags. In-store sensors detect if tagged assets exit designated areas and trigger automatic alerts. Asset controls like wheel locking also help prevent unauthorized removal.
Retailers gain valuable data on checkout conversion rates by linking tagged carts to shoppers. Cart companies like Wanzl and CART estimate conversion lift between 10-30% from cart tracking analytics.
4. Cold Chain Monitoring
Food waste costs grocery retailers over $15 billion annually. Much of this waste is preventable with improved cold chain monitoring and food quality management.
IoT-enabled temperature loggers and sensors let grocers remotely monitor perishable goods in transit and storage. AI software platforms like Zest Labs analyze sensor data to detect and prevent potential spoilage.
Kroger saw a 50% reduction in perishable waste by using Zest Labs technology in their stores. Continuous sensor monitoring improves cold chain accountability while reducing food waste.
5. Fleet and Supply Chain Optimization
Efficient warehouse operations and delivery fleets are essential for retail supply chains. IoT tracking solutions give complete visibility into inventory movements and transportation routes.
Sensors fitted on trucks track real-time location, temperature, fuel levels, engine diagnostics and more. Retailers can ensure service quality and prevent disruptions. AI helps predict potential maintenance needs based on vehicle sensor data.
Household goods retailer Dufry uses IoT-enabled pallets and containers to monitor status throughout cargo transport. This ensures accountability across Dufry‘s global logistics network.
Autonomous robot delivery vehicles like those from Starship Technologies are also emerging. Robots make local deliveries more flexible and affordable. Grocers and restaurants are early adopters of small self-driving delivery ground vehicles.
6. Predictive Equipment Maintenance
Unplanned downtime from equipment failure disrupts retail operations. IoT sensors coupled with machine learning analytics can forecast problems before breakdowns occur.
Refrigeration, HVAC, electronic signage and other systems are monitored for abnormal performance patterns. Retailers get advance notice to resolve issues through predictive maintenance.
Intel and fashion retailer Levi‘s outfitted store equipment with IoT sensors. Data feeds real-time diagnostics plus predictive analytics. Since implementing predictive maintenance, Levi‘s has cut equipment repair costs by double digits.
7. Automated Checkout
Long queues lead to poor customer experiences and abandonment. IoT powers automated checkout systems for faster, seamless purchases.
Computer Vision Checkout
Amazon Go stores have no cashiers or checkout counters. Computer vision tracks items picked, then charges shoppers automatically upon exit. Customers save time while stores reduce labor costs.
Connected Fitting Rooms
RFID tags on apparel let smart mirrors in fitting rooms recognize items. The items can be automatically added to shoppers‘ digital carts.
AI Grab and Go
7-Eleven and other retailers now have camera-enabled apps that let customers check out by scanning a generated QR code. AI confirms the purchase items and processes payment. No waiting in line needed.
8. In-Store Personalization
Connected IoT tools help retailers tailor promotions and experiences to customer needs.
Beacon networks recognize nearby shopper apps to send targeted product offers. Digital signage displays custom ads based on detected shopper demographics. Smart mirrors in dressing rooms make context-aware clothing recommendations.
Data analytics convert IoT sensor insights into hyper-personalized retail interactions. Grocery chains like Kroger and Albertsons use IoT-driven personalization to boost sales and loyalty.
9. Energy Optimization
Energy is a massive operating expense for retailers. IoT smart meters and sensors analyze granular energy usage across facilities. This allows retailers to:
- Profile and reduce energy waste
- Shift demand to off-peak periods
- Forecast consumption needs more accurately
- Proactively address equipment inefficiencies
Data-driven IoT initiatives helped UK retailer Tesco cut energy costs by $260 million. IoT-enabled HVAC, refrigeration and lighting systems are key opportunities for efficiency gains.
10. Frictionless Payment Security
Innovative IoT payment methods boost convenience while thwarting fraud.
Host Card Emulation (HCE)
HCE enables secure contactless payments through NFC-enabled phones. Payment credentials are stored in the cloud, not on vulnerable devices.
Biometrics
Smart terminals use fingerprint and facial recognition to authenticate payments. This prevents unauthorized use.
Device Binding
IoT terminals only authorize payments made on trusted hardware with unique digital IDs. This prevents tampering.
11. Enhanced Customer Service
Today‘s consumers expect personalized engagement. IoT provides data to help retailers better understand customer needs.
In-store sensors reveal:
- Dwell time at displays
- Most frequented aisles
- Queue lengths
Staff armed with this intelligence can tailor interactions to improve satisfaction. Retail giants like Home Depot use IoT data to deploy associates where customer needs are greatest.
12. Omnichannel Operations
IoT connects physical and digital operations for unified retail experiences. Buy online, pickup in-store (BOPIS) leverages IoT capabilities:
- Orders retrieve inventory autonomously
- RFID confirms order accuracy
- Sensors notify staff upon order arrival
- Customers collect orders with no waiting
IoT automation and real-time visibility enable frictionless omnichannel fulfillment. This model is now tablestakes for leading retailers.
As these use cases demonstrate, IoT is pivotal in enabling retailers to operate smarter and deliver superior customer experiences. According to Gartner, 80% of retail IoT projects are aimed at improving the shopper journey.
Retail IoT spending is projected to surpass $35 billion annually by 2025. Early adopters are already realizing major benefits across their organizations.
The future of retail will be defined by data-driven, omnichannel experiences. IoT intelligence makes this future achievable today. Retailers that embrace IoT will be best positioned to thrive in the years ahead.