According to a recent McKinsey Global Institute report, the Internet of Things (IoT) could have an annual economic impact ranging between $450 billion and $1.2 trillion in retail by 2025. It’s not surprising, then, that retailers are forecasted to invest over $2.5 billion in IoT in retail over the next five years to revolutionize in-store customer engagement, create new supply chain dynamics and support the connected home – all of which will lead to new models of retailing.
Currently, the majority of IoT data is being used ineffectively – to detect anomalies rather than for forecasting and optimization. However, dynamic industry players are ushering in a new era of connected commerce by creating innovative business models using IoT.
Decathlon, the French sporting goods retailer, has seen double-digit increases in sales since deploying radio frequency identification (RFID) tags for inventory checks at the point of sale and at security gates. While another major eCommerce player, Amazon, saw orders generated from its Dash Buttons go up 400 percent year-over-year. There is a long and prestigious list of retail organizations waiting to capitalize on IoT growth, and we have only scratched the surface.
IoT in retail
Today’s use of IoT in retail is already generating billions of interaction points between connected consumers, devices and things. Accenture, somewhat conservatively, has estimated that there are over 18 unique use cases for deploying IoT and connecting with consumers in physical retail stores alone, ranging from contactless checkouts to IoT-connected digital signage, with a further 13 use cases in the connected home.
Omnichannel retail businesses have an average of 7-10 customer engagement channels, including e-commerce and mobile sites, apps, email marketing, push notifications and social channels. Cumulatively, this all leads to an unprecedented increase of interactions between the consumer, their devices and connected things.
The value of data
The data generated from these interactions would allow retail analysts to truly understand consumer habits – merging digital and physical shopping environments to create frictionless product purchases, while also informing supply chains on stock requirements.
However, as with any data generated through interactions with consumers, there is a very real threat of data breach. It is the responsibility of the retailers to ensure customer data is kept private and secure. It’s not enough to merely to comply with regulations such as the EU General Data Protection Regulation (GDPR), but to also build consumer trust and attract new customers. The new data goldmine gives retailers who are looking to deploy or strengthen their IoT developments a competitive advantage over their rivals. However, if data privacy is overlooked, it could seriously harm reputations and performances.
The concept of Identity Relationship Management is critical for any IoT interactions which generate data. Consumers have identities, devices have identities and things have identities. The desired effect of an IoT initiative is for them all to interact and provide benefit for both the retailer and the consumer. All digital identities require dynamic, multi-layered authorization in this process, not only to unlock the value of the data, but also to provide a secure environment for data interactions to transpire.
The GDPR will be a transformative watershed event that dramatically reshapes consumer expectations around privacy and personal data management globally. Smart organizations understand the emerging regulatory environment as a business opportunity, and not simply an onerous barrier to business success. There is enormous opportunity here. It’s a chance for companies – especially retailers – to distinguish themselves in the marketplace as responsible stewards of sensitive personal data.