Network World's Forecast 2019

Retail IoT is still coming into its own in 2019

The use of IoT tech in the retail sector is growing fast, but where’s the killer app?

Cash register with sale illuminated
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Retailers see some tantalizing possibilities for using IoT technology in their businesses, and 2019 seems likely to be a year for pilot programs and small-scale testing.

Bridging the gap between online and in-person shopping, increased automation, and new ways to engage with customers (mostly by showing them ads) are all concepts with major upside for retailers, but the technology has only recently started to take hold.

Some of IoT’s presence in the retail world isn’t retail-specific. Companies use asset-management systems, integrated HVAC and other smart-building tech just like many other industries, according to analysts, but physical retailers have been having a tough time across the board lately, and investments in new technology can quickly fall down priority lists.

Nevertheless, IoT is slowly slipping into the mainstream of the retail world, and one of the biggest players in the room, unsurprisingly, is leading the way.

The empty register

Retail titan Amazon has been a user of IoT technology for a long time – the complexity and automation used in its vast web of supply chain and logistics functions are already well-documented and aimed squarely at efficiency. Armies of robots wrangle packages in huge warehouses, and centralized planning and development software determines the most efficient possible way to ship Amazon’s myriad products around the globe.

Interestingly, some of the most cutting-edge IoT tech isn’t really relevant to such an operation, according to Sucharita Kodali, vice president and principal analyst at Forrester.

“IoT is very expensive and is used for monitoring high value shipments like medical supplies, often that need temperature control, not for toys or lower-value holiday purchases, many of which are sent through the cheapest shipment method possible to save costs,” she said.

But the Amazon retail division’s designs for the future are larger still than its online shopping empire. In addition to its new wave of traditional brick and mortar stores, currently operating in 22 states and the District of Columbia, the company’s Amazon Go stores are pioneering a completely automated shopping experience.

It works like this: Shoppers scan a barcode upon entering the store to “sign in.” They simply grab whatever they want from the store’s shelves, leave, and the app automatically adds up their bill and charges their Amazon account.

Obviously, there’s a lot going on behind the scenes of a store like this, according to Gartner research vice president Mark Hung. Central to the whole concept is smart vision technology, which uses cameras to track individual shoppers and their physical positions in the store, but there’s more to it than that, and the company hasn’t publicized the exact details of how the system works.

Nevertheless, there are hints, and Hung thinks some of it has to do with sensors in the shelves themselves.

“Amazon’s never disclosed what they’re using for Amazon Go stores, but if you do some searching online, you’ll find they’ve filed patents for that kind of smart shelving technology,” he said.

That, at least, is how a startup called Zippin, which is pursuing a similar type of fully automated retail experience, is going about the process. Weight sensors built into store shelves supplement the smart vision technology to provide more accurate tracking. Zippin founder Krishna Motukuri told Fast Company in August that a 1,000 square foot bodega-style mini-mart could be covered by just 15 cameras – Amazon Go uses hundreds for one of its (albeit larger) stores.

Zippin currently operates a flagship store in San Francisco, mostly as a way to showcase its technology. Amazon Go has six locations – three in Seattle, two in Chicago, and one in San Francisco – but plans to open as many as 3,000 stores by 2021.

“Wanna buy a [$item]?”

Retailers love knowing about their consumers, and it should surprise nobody to learn that they’re using IoT technology both to learn more about us, and to translate that knowledge into bigger potential sales.

Online retailers have long had an advantage in this area, as tracking cookies follow us across a wide range of shopping sites, listing our demographic information, preferences, general location and much (much) more. But retail stores are, increasingly, using the IoT to catch up.

Leslie Hand is a vice president of retail insights for IDC. When she asks retailers what their most important innovation areas for future technology are, the top answer is most often contextualized, real-time engagement with customers.

“That’s where they’re using their mobile phone and interacting with that based on their location, trying to drive a more personalized, contextualized relationship with them through 1-to-1 engagement, as they traverse their shopping experience,” Hand said.

What that means in practice is, essentially, beacon technology. Retailers have been interested in beacons for a long time, as the ability to serve up heavily personalized, location-relevant information (generally speaking, ads) is an attractive one.

Also being worked on by more than 30% of retailers, she added, are things like real-time shelf interaction – weights and measures and smart cameras (not unlike the automatic stores described above) can combine to offer a fairly clear picture of which customers are putting which items in their carts. The idea here is to offer tailored sales to specific consumers, or at least highlight specific products to them.

Wal-Mart has even filed patents for biometrics mounted on shopping cart handles. “Supposedly, [it’s] to help the consumer understand their current health,” Hand said. “But Wal-Mart also wants to understand where the customer is inside a physical store.”

All of this technology, according to Mark Hung, is still being figured out, and it’s not something that 2018 holiday shoppers are going to see at every retailer. Beacon technology is more widespread in locations like sports arenas and airports, for example. As mentioned, brick-and-mortar retailers still face serious economic challenges, so spending on groundbreaking new technology might not be an option for the rank-and-file of stores.

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