Moving Past The Noise Around IoT
RSR has been conducting an annual benchmark covering the Internet of Things for four years. Over that time, it’s become clear that for many retailers, IoT is perceived to be the next bright shiny object that will solve all problems.
It’s time to move past the noise.
This doesn’t mean IoT is a red herring. It’s not. In fact, IoT really can bring tangible benefits to the retail enterprise. It can address problems of inventory visibility, accuracy and in-store operational inefficiencies. Those improvements in turn, will assist in improving retail forecasting, and help insure retailers have neither too much nor too little inventory available for sale at the right point of demand.
Retail Winners, in particular, see potential significant inventory management benefits. When asked to identify the single most important challenge driving their interest in IoT, 53% cited inventory accuracy and management as the biggest interest drivers. Non-winners (those whose comparable sales are at or below the industry average) focus more on achieving efficiencies and cost reductions – with 43% identifying these as their drivers.
It’s important to note that in this, as in many other situations, Retail Winners tend to look more towards the means to an end, while others focus on the end, often without clarity about the means to get to that end. We always encourage our readers and clients to think about step-wise improvements, as each step takes one closer to the goal.
In fact, this same study told us Retail Winners already have improved the accuracy of their inventory. IoT will be another step towards reaching the goal of more perfect inventory. The enormity of this task can’t be overstated. No one thing will solve the problem, but it’s an imperative for both customer satisfaction and profitability. IoT can help. And the benefits are clear.
Accurate inventory leads to accurate forecasts for future buys. Accurate forecasts lead to optimal inventory investment and fewer markdowns or shrink due to spoilage. This is a singularly critical facet of the retail enterprise. So while 69% of respondents strongly believe IoT will “drastically change the way they do business in the next three years,” the importance of inventory management is not new at all, and won’t change the way retailers do business, either. What it will do is make for a more streamlined and efficient enterprise.
Beyond inventory management, there is a hope (especially among Retail Winners) that IoT will improve customer engagement on internet-connected mobile devices. Fully 89% of Retail Winner respondents cite this as potentially providing them a lot of opportunity. It remains unclear that consumers will allow retailers into their lives until and unless those retailers have earned their trust. Our best advice is to be completely transparent about where and when shoppers are being tracked, and allow affirmative opt-ins at every step of the process.
We worry that retailers continue to under-estimate consumer privacy concerns. The data tells us so, and some of the use-cases for IoT seem to indicate the same. All we can say is that GDPR was brought into existence for a reason, and consumers are becoming more “creeped out” than ever about the way their online behaviors are tracked. The last thing we want to see as an industry is for consumers to become equally troubled about their physical movements.
The long and the short of it is that IoT is a new way to solve traditional retail problems. Some of these problems have been exacerbated by “Omnichannel fulfillment” and others have always been there. There’s no doubt that the smart phone completely changed the way retailers do business, and yet, almost 90% of sales are still consummated in stores. The path to purchase has been transformed, but stores are still central to retail. Similarly, IoT may change and improve the way retailers get to a sales forecast, but at the end of the day, retailers will buy product for the lowest possible cost, and sell it for the highest price the market will bear. We hope it also helps them improve their turn and inventory productivity.
There are no magic bullets. Just good tools.