From Rack to Tech: IoT in Retail Stores

In-store Technology
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The integration of the Internet of Things (IoT) in commerce is becoming increasingly widespread. Retail IoT technology has the potential to revolutionize brick-and-mortar with connectivity that makes any physical asset a smart data communicator. As technology continues to evolve, the use of IoT in retail is expected to grow year-over-year. 

 

Here, we explore IoT in retail stores. We examine the technology and its value, focusing on how connected merchandise, devices and channels, enhanced by AI-driven analytics and insights, are already remodeling fashion retail for everyone’s benefit. 

Decoding Customer Behavior in Retail Stores - Download Report

What is IoT?

Before we dive deeper, here’s a short intro to IoT itself.

 

IoT, short for the Internet of Things, refers to physical objects (“things”) embedded with sensors, software, and connectivity that enable them to collect and exchange data with other devices and systems via (or to) interconnected networks (“internet”). 

 

IoT opens up opportunities for a data-driven ecosystem where everything can communicate, promoting efficiency, convenience and functionality for people and businesses. Demonstrating their widespread adoption, IoT devices have surpassed the number of non-IoT devices from 2020 onward. 

 

Thanks to the versatility of IoT, there are numerous ways to apply it. Innovators and tech experts have been coming up with new IoT applications that range from modest enhancements to transformative breakthroughs. 

IoT in Retail

In the context of retail, IoT refers to the integration of connected technologies and physical assets aimed at revolutionizing aspects of the business, such as demand forecasting, store inventory control, and physical stores. 

 

As it turns out, IoT in retail stores can already create “click-and-mortar”, combining the best of online and offline retail.

 

By embracing IoT, brands can increase operational efficiency, meet expectations for omnichannel shopping, and boost sales while reducing costs and improving employee satisfaction. 

 

Innovative startups are leading the way, offering patented IoT solutions like advanced sensors and nanoBT (Bluetooth) tags for individual items. These technologies create a retail IoT network that automatically collects and streams data from every item – through readers – to the cloud. 

 

It’s easy to see how such individual-item connectivity and information gathering completely automate inventory, and that’s no small feat. Yet it does so much more. 

 

AI-driven algorithms process and analyze human-to-product data and present it on a real-time IoT dashboard that gives brands unprecedented visibility into physical stores and their shoppers, aligned to key performance indicators, and complete with corresponding insights. 

 

It’s AIoT (the Artificial Intelligence of Things) at its best: IoT devices and AI capabilities. Hardware, software, and platform communicate effortlessly to deliver visibility, data analytics and insights, adding value across the board. Now that’s transformative. 

IoT in Retail Stores

the State of ioT in Retail

Recognizing the potential of IoT to improve business operations and solutions, IoT enterprise spending has surged to approximately $235 billion in 2023. As we progress into 2024 and beyond, IoT investment and revenue are both expected to grow.

 

Zooming in, the IoT in retail market is projected to expand to an estimated $178 billion by 2031. By 2030, the economic value of retail IoT environments is expected to reach up to $12.6 trillion, much of it in B2B applications. Out of these, operations optimization is estimated to deliver the most economic value by 2030, according to insights from a McKinsey report. This report further predicts that by the same year, IoT applications in retail environment settings could generate an economic value of $0.6 trillion to $1.1 trillion.

 

The trend of IoT in retail is fueled by technological advancements and the need to stay competitive in the ultra-competitive fashion industry. Yet, despite its numerous benefits, integrating IoT in retail is not without its challenges. Hurdles include issues like the initial investment in technology, consumer privacy, and location accuracy.

 

Fortunately, innovative technologies are increasingly simple to deploy and manage. For the vast majority of IoT use cases, affordable technology enables utilization at any scale.

 

NanoBT, for example, offers a tiny tag that is battery-free and boasts long-range communication capabilities for truly automated data collection. Breakthrough hardware is matched by a cloud platform with efficient and scalable data processing capabilities. Automated machine learning and AI retail analytics provide granular customer-product insights to offer headquarters customer-based recommendations for a competitive edge.

Why ioT is Crucial for retail?

 

From automated inventory management to unprecedented operational visibility and in-store customer journey, IoT offers unparalleled advantages: 

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ioT is the new rFID

 

Wireless tracking technologies like RFID just got a lot smarter with IoT-based solutions. IoT capabilities extend far beyond those of traditional RFID technology, offering fashion brands more value. 

When considering traditional RFID vs. new IoT solutions in brick-and-mortar stores, it’s beneficial to look at RFID vs. IoT-based Bluetooth (BT) tags. Here’s how they stack up:

 

  • Data Transmission: BT tags automatically and continuously transmit data; RFID tags only provide snapshot data upon scanning.
  • Power source: BT tags store power automatically and locally, allowing them to operate completely battery-free; RFID tags commonly receive energy from readers and rely on manual scanning to operate.
  • Range: BT has a longer range in real-world environments compared to RFID. 
  • Interference: Unlike RFID, which uses technology susceptible to interference, BT operates on separate frequencies to provide a more reliable connection.
  • Security: An RFID system with exit gates can help prevent theft. More advanced IoT solutions can offer security that doesn’t rely on gates and adds alerts and anti-tamper capabilities. For example, AI can alert staff if high value items are moving in store. AI can also identify theft behavior trends so staff is always one step ahead. 

 

The bottom line: RFID is decades old, created with different solutions in mind, while new IoT solutions are created to meet today’s consumer needs, offering more applications and value.

Salesfloor profitability

IoT-driven salesfloor optimization can significantly increase product visibility and appeal, encouraging purchases and enhancing the overall shopping experience. 

 

To measure sales performance based on layout and design, brands can create a money map. Based on product location aligned with in-store shelves and displays, together with tracking human-product interactions and overlaying them with conversion gives you a real understanding on how your store floor works: where are the hotspots and “cold” areas in terms of sales, where you need product and shelf placements, where to add more staff.

 

Continuously exploring VM strategies (cross-merchandising, color impact, the effect of lighting and more) and conducting A/B testing, brands can measure results for increased efficiency. 

 

Utilizing data and first-of-their-kind insights from new IoT devices, stores can optimize VM display in real-time. Benefits include better salesfloor utilization, customer flow, item replenishment, addressing zero-sellers, backroom selling and more, offering visibility that cannot be created with item-level RFID technology.

 

The bottom line:   IoT tech can increase sales per square foot and empower executives to lead continuous monitoring and improvement. 

RFID vs NanotBT

Assortment localization

Which items to sell and where – determining the optimal product mix and allocation is highly complicated. After deciding on hundreds, sometimes thousands, of fashion items, brands follow them down the supply chain before allocating them across diverse locations, taking into account geographical, demographic, and cultural considerations. 

 

IoT technology allows brands to optimize store assortments by identifying localized preferences and demands in real-time. For example, Bluetooth tags attached to individual items can provide highly accurate product location and movement, which are then processed into customer behavior data.

 

Stores can track which items and sizes are taken to the fitting room and use this information to stock popular choices, while regional offices and headquarters can make informed decisions about moving merchandise between stores based on local needs. 

 

The bottom line:  IoT is reshaping store assortment and allocation, making it more localized and increasing sales with the power of data and AI-driven insights.

Inventory management

Managing fashion inventory is a complex endeavor. It involves numerous decisions and processes – from determining what and how much to manufacture or purchase (down to the sizes and colors of each item), what price to pay and for what price to sell, where and when.  

 

A brand’s inventory is one of its most expensive assets. While valuable, it can also be seen as a liability. Brands face risks of stock damage and theft, and most importantly – shifts in demand. Excess inventory not only ties resources but may result in markdowns or, even worse, dead stock. 

 

IoT-driven innovation now enables fully automated inventory. This flow of real-time data, coupled with AI-based tools, allows complete visibility, minimizing situations of broken sizes or out-of-stock items while at the same time avoiding the need to rely on safety stocks to prevent shortages. 

 

IoT-based automation also empowers the integration of in-store inventory together with online order fulfillment. Supporting omnichannel retail strategies such as BOPIS (buy-online, pick-up-in-store) and ship-from-store turns physical locations into small-scale distribution hubs, reducing shipping time and costs.

 

The bottom line: Everything inventory-related is much more efficient and accurate, reducing the reliance on safety stocks and freeing up resources.

Labor Optimization

IoT technologies systematize in-store operations in retail by automating routine tasks like stock counts. The tech supports real-time counts, with zero scanning or manual effort, with no human error, training or any other impact by store staff. 

 

Advanced solutions can also do things like largely automating product-receiving processes and detecting stock levels to alert store associates. 

 

The result: IoT significantly reduces the time and labor traditionally required for these tasks. 

 

Wireless tracking allows for outstanding customer service. Store associates can see exactly where every item is at every moment, so when a customer asks for the black shirt in size M, all they have to do is look at their device and see exactly where it is. And when an item is not on the sales floor, they don’t have to go to the back room to check if they have any more left in stock, because the system provides accurate stock levels across the store, chain and distribution centers.

 

Better yet, eliminating the most mundane tasks frees staff to devote more time to personalized customer interactions and other value-added activities.

 

The bottom line:  IoT eliminates the most hated tasks and allows employees to serve customers better, easily and efficiently. 

Exceptional Customer Experiences

At the heart of IoT’s value proposition in retail is elevating the customer experience. Bluetooth based IoT solutions can work with any mobile device, placing the control in your customers’ hands. From smart assistance in finding products to real-time personalization, customer relationship management, and mobile self-checkout solutions, IoT creates a seamless, integrated shopping that bridges the gap between the physical and digital realms. 



Here are some of the ways IoT improves the in-store customer experience:

  • The right item in the right place – It’s easy to see why shoppers like it better when they easily find what they want or have a store associate quickly point it out to them. The success of this approach relies on inventory optimization, where there are fewer incidents of broken sizes or out-of-stock scenarios.
  • The personalization difference – Accelerated by Gen-Z consumers, more customers value the personalization of their shopping experience. Here are two significant numbers: 71% of consumers expect personalized interactions, and 76% feel frustrated when brands show or recommend things that are not relevant to them. In-store digital marketing can offer location-based recommendations or personalized promotions with relevant discounts directly to the customer’s mobile device (or staff handheld devices).IoT can be applied to drive personalization in creative ways, creating memorable experiences and increasing customer satisfaction, loyalty and in-store spending. 
  • Contactless and frictionless checkout –  IoT-based tools can eliminate queues and provide mobile self-checkout that’s easy, intuitive and secure. Returns are just as quick and contactless. This IoT-based environment provides digital convenience (no bulky tags, customer-labor kiosks, or cashiers) within the immersive in-store experience. 

 

The bottom line:  IoT-based innovations set new standards for convenience, personalization, and engagement in the retail sector.

 

Omnichannel your brand

Retailers have recognized the need for an effective omnichannel strategy to engage consumers in “phygital” shopping. Fully connected commerce is based on an omnichannel model, integrating physical and digital channels. Omnichannel is about immediate satisfaction and convenience, but it’s also about putting the customer at the center with a personalized and frictionless path to purchase. To make this a reality, omnichannel solutions focus on issues like experiential stores, cross-channel inventory, and store-based fulfillment. 

Integrating the customer’s digital and physical engagement, for example, a store app can point customers who walk into a store to items that were left in their online shopping carts for them to see, touch, and try on.


The bottom line:  Digital is all-connected, but this is not the case with physical stores. With IoT, brands can create the perfect mix of bricks and clicks. 

Examples of iot in retail stores

Integrating IoT technologies – from IoT sensors to IoT devices and IoT apps – into physical stores drives online-offline synergy and reshapes retail. 

 

Here are some examples of IoT technologies in retail:

 

  • RFID (Radio-Frequency Identification) Technology 
  • NFC (Near-field Communication) Technology
  • BLE-based Tracking – Low Energy Bluetooth wireless asset tracking tech
  • Ambient IoT 
  • Visual Imaging with RFID
  • IoT cameras and sensors 
  • Computer Vision in IoT
  • AR (augmented reality) and VR (virtual reality)

Smart is connected

The integration of the Internet of Things (IoT) into brick-and-mortar stores offers businesses opportunities that maximize profitability and capture new revenue streams. 

 

IoT is not just about putting innovative tags so brands can tell where stuff is. It’s about making merchandise do more. In-store technologies (such as NanoBT tags connected to the cloud) empower fashion items to tell you how customers interact with them, shelves alert you when items are missing or before they go empty, and heatmaps show which displays attract more customers and which items pair best together. 

 

With everything connected, stores can tailor to perfection almost every aspect of fashion: inventory management, the first truly omnichannel shopping experience, frictionless checkout and returns, customer behavior tracking, shopping sales funnel, personalization, and even shrinkage and loss prevention

 

As brands embrace these advancements they stand to gain even more value. They can customize in-store alerts and notifications, while an ML- and AI-driven dashboard reveals a world of tailored analytics, actionable insights and solutions. 

 

The adoption of the right IoT tech in retail promotes a new model of connected commerce. Opening up opportunities for breakthrough retailing, it empowers brands of all sizes to enhance physical stores in ways that were never possible before, improving everything and, ultimately, the bottom line. 

Decoding Customer Behavior in Retail Stores - Download Report