IoT in Retail: Get Ready for Convergence 2.0

Retail leaders are deploying IoT in a big way. Retail laggards must catch up. But both need to achieve technology and cultural convergence.

IoT in Retail
Retailers will spend four times as much on the Internet of Things (IoT) in 2020 as they spent in 2016.1 But they’ll need to start thinking about IoT in a completely new way if they hope to achieve return on all that investment, says Will Winn, CompuCom® senior vice president of IoT Solutions.

IoT promises to transform the way retailers track inventory, manage facilities, manage sales and losses, and deliver an omnichannel experience. Retail leaders recognize this potential and have invested large sums in deploying IoT sensors and in internet-connecting devices. Retail laggards are already at a competitive disadvantage.

But neither the leaders nor the laggards have been thinking adequately about how to effectively integrate both IT-focused data (customer records, sales transactions) and facilities-focused data (digital signage, space utilization, cameras, lighting) as part of their IoT initiatives. “By failing to combine this data, retailers are missing the opportunity to use IoT to optimize the customer experience and maximize sales,” Winn says.

Likewise, retailers will have to bring together IT and facilities expertise. “Your network administrators know IP networks, but they probably don’t know a lot about managing real estate,” Winn points out. “Your facilities people know the physical plant, but they don’t necessarily know much about managing IT.”

Convergence 1.0 combined IT systems with telecom for more effective networks and tremendous cost savings. “Convergence 2.0 is about the integration of IoT data,” Winn says, “and it will be just as transformational.”

Internet of Promise

Retailers will spend $2.5 billion on IoT hardware and installation in 2020, a fourfold increase over an estimated $670 million in 2016.2

"There's a lot more data to capture in a store than just transactions." - Will Winn Senior Vice President IoT Solutions CompuCom
Much IoT spend is on Bluetooth® beacons that, for example, push relevant information to consumers’ smartphones, and on RFID tags that enable real-time asset tracking and even dynamic pricing based on stock levels. These new capabilities are allowing retailers to track inventory, understand customer behavior and deliver an omnichannel experience.

But a significant amount of that investment is focused on the IoT enabling of facilities equipment, from cameras and lighting to security alarms and heating, ventilation and air-conditioning (HVAC). In fact, retailers and others are moving to the next phase of their IoT implementations. Across industries, “the market is pivoting away from proof-of-concept projects to scalable [IoT] deployments that are incorporating cloud, analytics and security,” according to IDCTM.3 

Figure 1: Retail IoT Data Sources

But to achieve those goals, retailers will need to start focusing more on the outcomes of the data and who will be consuming it. In other words, they’ll need to take a life cycle approach to managing IoT data. (See Figure 1.)

Retail IoT Comes Together

Retailers have always lived and died by data. In the past that data came largely from point-of-sale (POS) transactions. “But there’s a lot more data to capture in a store than just transactions,” Winn points out.

Today retailers can use IoT technology to measure how many people visit the store, how they move through the store, which products they interact with on the shelves and which products they buy. Likewise, retailers can use IoT sensors and controllers to manage space utilization and environmental issues, all remotely. They can also cross-reference that data with customer activity to understand how those factors affect buying behavior.

But to deliver the most value, all that data needs to be combined in a common platform where it can be harmonized, analyzed and made available in a way that’s relevant to the people who need it. Those people include sales associates, store managers, back-office end users and even customers.

“Your physical-plant sensors will never understand customer behavior,” Winn says. “Your CRM system will never figure out that you’re not using your space effectively. You need to combine them to get a clear picture of your operations.”

IoT Under Lock and Key

An additional challenge is security. In October 2016, attackers used internet-connected cameras to launch a distributed denial-of-service (DDoS) attack that temporarily downed the websites of Twitter®, Etsy®, the New York Times® and other organizations. Security experts say this is only the beginning of a new focus on IoT by cybercriminals.

One problem, Winn says, is that many IoT devices are made by vendors that haven’t had to understand network security. Another problem is that many companies have deployed IoT devices without thinking about security.

For instance, CompuCom worked with a large bank that had installed IoT devices in thousands of its branches. “When the facilities people asked IT about deploying the devices, the IT people raised security issues like authentication and VPN access,” Winn relates. “The facilities people didn’t understand those security requirements, so they simply went outside to a cable provider and got direct — and unsecure — internet connections.”

The promise of IoT for retailers is significant. Industry leaders have already made great strides in deploying IoT capabilities. But to realize the full potential of IoT to improve operations, lower costs and deliver an omnichannel customer experience, retailers will have to embrace Convergence 2.0.

1, 2 “The Internet of Things: Consumer, Industrial and Public Services, 2016 – 2021,” Juniper Research, December 2016
3 “IDC’s 2016 Global IoT Decision-Maker Survey Finds Organizations Moving Past Pilot Projects Toward Scalable Deployments,” IDC, September 2016

CompuCom® is a registered trademark of CompuCom Systems, Inc. Bluetooth® is a registered trademark of Bluetooth SIG, Inc. Etsy® is a registered trademark of Etsy, Inc. IDC® is a registered trademark of International Data Group, Inc. The New York Times® is a registered trademark of The New York Times Co. Twitter® is a registered trademark of Twitter, Inc.

All data cited in this article is used by permission.

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