Comment: The true value of the Internet of Things for retail

There are great expectations amongst UK retailers with regard to the Internet of Things (IoT), according to recent Quocirca research, “The many guises of the IoT” (sponsored by Neustar). Half of retailers already see IoT as having major impact on the industry, whilst only 15% are sceptical about the whole concept. For comparison just 25% of manufacturers shared this enthusiasm, while another 25% were sceptics. As it happens, both may – to some extent – be missing an important point.

Retailers already see the potential number of IoT-related devices reaching the many tens of thousands, in some cases millions – higher than any other sector. And 60% of retailers say they already have a dedicated budget for IoT. The only sector that surpassed retail in its enthusiasm was distribution, logistics and transport (DLT), which is, of course, highly relevant to the retail sector.

There are two main IoT opportunities for retail: first is working with DLT partners on broader supply chain efficiency, second is inventory management; in-warehouse, in-store, and aftersales. How this is addressed will vary depending on where a retailer sits on the spectrum from pure online sales to just a bricks and mortar presence, but the ultimate aim is to serve customers better and get more back from them in return.

More than any other industry, retailers expect IoT to deliver top-line business value. This can be discrete applications, for example, smart-shelves linked to backroom stock management and smart trollies to monitor and improve in-store flow. However, 40% of retailers say ad-hoc IoT use is ‘already happening’; as customers are encouraged to actively or passively make use of their mobile devices to enhance the in-store experience.

Retailers will increasingly succeed, not because they stock the best products, but because they make smart use of IoT-generated data to improve the customer experience. Smartphones can be linked with loyalty schemes and in-store offers made using proximity and inventory data. Customers can be led to relevant products, dynamic video displays personalised and on-the-spot checkout enabled.

However, there is a catch. Manufacturers may be behind retailers in the adoption of IoT, in part because they often leave customer service to their supply chains. However, as more consumer goods become IoT-enabled, manufacturers themselves can establish ever closer links with consumers and provide post-sale services, such as software updates, spare part management and product recall. The technology industry has done this for years, but it will start to apply to many more general electronic goods and has already taken root in the automotive sector. In an increasing number of areas manufacturers are likely to compete with their supply chains for the high value services promised by IoT.

One concern that has been expressed about IoT is the availability of IP addresses and the need to move rapidly to IPv6 to replace IPv4. However, Quocirca’s research shows this to be a limited concern especially amongst retailers. This is mainly because hub and spoke infrastructure is being used to implement IoT applications. This means most things exist on IP subnets with their own address spaces rather than every single thing needing a unique address.

The use of hubs also helps enable better IoT security, reducing the addressable IoT attack surface and making it easier to protect against cyber threats. As Quocirca’s report discusses, security needs to be top of mind when it comes to the IoT; customer privacy is a top concern and retailers need to be very aware of this as they rush headlong in the future of IoT.

Quocirca’s report, 'The many guises of the IoT', is free to download.

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