Much of the experimentation surrounding the Internet of Things (IoT) today is focused on security aspects and creating consumer value … but MPD CEO Karen Webster wonders if perhaps a lot of it isn’t misdirected.
Joe Jensen, VP of the Internet of Things Group (IOTG) and General Manager of the Retail Solutions Division at Intel Corporation, tends to agree.
In a recent conversation with Webster, he observed that part of the problem is that IoT — in contrast to other transformations that are taking place in payments and retail, such as mobile technology and EMV — remains such a broad topic that it’s difficult to nail down.
Intel’s perspective on IoT — and, therefore, its resultant potential value in the retail space — as Jensen shares, is that it represents an “explosion of technology that is enabled by low-cost computing, low-cost connectivity and low-cost sensors,” while the analytics technology therein allows retailers to “make autonomous actions [related to data collection and transmission] much more efficiently and affordably.”
To that end, Jensen believes that the real value of IoT is “much more about the economics of how to use data” than it is about the technology itself.
As IoT continues to gain ground in the areas of wearables and smart homes, connecting things that had never been connected before, the appeal of that connectivity “magic,” as it were, isn’t really shared by businesses in the retail space.
As Jensen notes, most modern retailers already have a network in place that can allow for the addition of more sensors to a store; they’ve got Wi-Fi and an IT department that manages it all. They know how to connect.
The challenge in retail as it relates to IoT, then, explains Jensen, is that most retailers aren’t “very data- or analytics-savvy.”
“From their perspective,” he tells Webster, “they already have more data than they know how to get value from.”
Therefore, the question facing retailers is not how they can get more data but how they can extract value from that which already exists.
Intel’s position is that, once retailers understand how “profoundly valuable that data is,” says Jensen, IoT will “really transform” the space.
He gives the example of the common occurrence in apparel stores whereby displaying items on a mannequin tends to drive consumer demand for those items. The downside of that method’s effectiveness is that said demand often leads to the item (or items) quickly selling out.
What Intel is advocating to retailers is the benefit of IoT technology allowing them to track in-store inventory in real time.
Instead of using mannequins to drive demand, apparel stores could use digital signage that — via sensor technology that determines the color palette and size of clothing that a consumer walked in wearing — promotes items that are relevant to the specific customer and are in stock at that location at that moment.
It would “create the demand for things [the retailer] could sell right now,” explains Jensen, “versus something they can’t.”
While acknowledging that, even in that circumstance, an apparel retailer would still have racks of clothing for a consumer to peruse if that were her preference, IoT technology on the site would prevent a specific store from either deeply marking down items when they didn’t have to — in the case where there are only a few of the items left in stock — or solve for the potential problem of dealing with overstock by encouraging more aggressive promoting and/or smaller markdowns in advance.
Jensen shares with Webster Intel’s research showing that when consumers encounter an out-of-stock situation in a store, only 1 percent of them — after they check for the item themselves, have a clerk check on the floor and then in the back (and doesn’t find it) and the clerk eventually offers at-home delivery — end up making the purchase.
That means the retailer, in such an instance, is losing the sale 99 percent of the time. On top of that, it’s a less-than-ideal experience for consumers — even among the 1 percent that go the distance.
“It’s an opportunity that a lot of retailers are missing because of inventory mismanagement,” a problem that — according to a recent analysis that Jensen points to — is costing retailers $1.2 trillion a year, with $200 billion of that loss resulting from selling items below cost.
It’s not just apparel retailers that are impacted by inventory management challenges (which IoT technology can potentially solve), of course.
Jensen shares that brands in the grocery and CPG space spend $300 billion a year to promote new products by means of increased visibility in stores. Presently, among those new product launches, only 8 percent succeed.
In most large grocery stores, no matter what kind of ostensibly “premium” shelf space brands pay for, they’re still competing with countless others in the aisle. Combine that with the reality that many consumers head to the store with specific brand names in mind, and new products can often become effectively invisible.
Here, again, is where Jensen believes IoT can help.
He tells Webster that the technology can serve brands by way of, for example, video promotions on small screens integrated into grocery store shelves.
“That will cause shoppers to stop and notice,” attests Jensen, citing the natural human instinct to take a closer look at moving images that first appear in one’s periphery.
The additional upside of that promotional method is that — thanks to the rapid evolution of IoT technology — retailers can implement it “really cost-effectively,” Jensen notes.
Speaking of cost … In all of the aforementioned examples, the task, of course, remains for IoT to effectively “close the loop” in retail transactions through the end result of consumer payment.
In that regard, Jensen holds up the example of what Amazon did in online payments — making the checkout process frictionless — to illustrate what IoT is capable of achieving in physical retail.
Before that can happen, however, Jensen strongly believes that the matter of security across all end points in distributed commerce must be addressed.
“Protecting customers’ data isn’t a technical problem,” he tells Webster. “It’s a business choice.”
The chance for IoT technology to reach its maximum potential in the retail space — a goal with which the security of consumers’ information is intrinsically entwined — therefore rests “on the shoulders of retailers,” concludes Jensen.