May 4, 2023
Forward-thinking retailers can benefit from IoT technology by initiating retail software development. IoT applications allow retailers to raise productivity, improve customer experience, reduce costs, and increase sales.
Explore the concept of IoT in retail, view numerous use cases and real-life examples, and learn the main benefits and challenges from a retail business perspective.
Retail IoT technology is growing at a fast pace. Here are some notable figures and facts.
The IoT in retail market is estimated to reach $177.90 billion by 2031, growing at a CAGR of 20.3% from 2022 to 2031
Research and Markets
The economic value of retail IoT environments is expected to range from $5.5 trillion to $12.6 trillion by 2030
McKinsey
By deployment mode, the cloud segment is expected to register the highest CAGR of 23.1% from 2021-2031
Allied Market Research
Self-checkout and marketing personalization are expected to generate the highest economic value among all use cases of IoT in retail from 2020 to 2030
McKinsey
Scheme title: Retail environments. Estimated economic value by use case, 2020–30, $ billions
Data source: mckinsey.com — The Internet of Things: Catching up to an accelerating opportunity, 2021
Checkout remains one of the most labor-intensive retail operations and a tiresome process for customers. If a store is overcrowded, shoppers often decide to leave in order not to wait in checkout lines. IoT-enabled solutions can facilitate checkout automation, allowing businesses to streamline and personalize this procedure.Â
For instance, an improved checkout system can read tags on each item as customers leave and automatically charge the customer’s mobile payment app. The main advantages of self-checkout from a retail business perspective include the following:
Retail solutions empowered with IoT offer actionable insights that can uncover new opportunities for retailers and increase their ROI. Here are a few examples of how IoT can capture new revenue opportunities.
An industry leader in accessible luxury handbags, accessories, footwear, and apparel, Rebecca Minkoff has installed smart mirrors in their branded domestic retail stores. Smart mirrors located in fitting rooms read RFID tags on each item of clothing and display other sizes and colors available.
Moreover, smart mirrors demonstrate how the item can be styled with different looks and suggest other items based on what a customer is trying on. Customers can try on different clothes without leaving the fitting room, while retailers receive customer preference data for personal promotions.
Depending on the project’s type and scale, a retail IoT solution can encompass the following technologies.
Radio Frequency Identification (RFID) is a technology that allows remote identification of both living and non-living objects through radio signals. A typical RFID system consists of tags that store information about a particular object, readers that can scan the tags and process the data, and software that makes it all work together.
In the simplest scenario, RFID technology can prevent theft in physical stores. In addition, it can handle the following tasks:
The RFID tags market is expected to reach $14.69 billion in 2026, growing at a CAGR of 9.3%.
An IoT network works with the help of specific computing devices that communicate via the Internet and transmit data to other components of an IoT ecosystem. Here are examples of the most common IoT devices.
A sensor is often considered a basic unit of any IoT ecosystem. IoT sensors collect data from IoT devices and send it to a central cloud repository or a physical server for further processing and analysis. Depending on its purpose, a sensor can collect different data types to help retailers monitor products' condition and ensure the safety of the work environment.Â
Here are some popular types of sensors for the retail industry.
Scheme title: The global IoT sensor market is expected to reach $54.46 billion by 2029
Data source: Data Bridge Market Research — Global Internet of Things (IoT) Sensor Market - Industry Trends and Forecast to 2029
We use the leading cloud platforms to deploy the backend of IoT apps, gather, manage and analyze data, and maintain connectivity across IoT networks.
IoT use cases in retail enhance the brick-and-mortar experience by gathering data and adding it to customer profiles. Using data from sensors, smart devices, and wearables, retailers can better predict consumer behavior and wishes. Customers, in turn, get relevant advertising and personalized offers.
IoT use cases in retail, such as RFID tags and GPS sensors, can offer a complete picture of product movement from manufacturing to store shelves then to customers. Retailers can analyze detailed information about an item’s transit time or storage temperature in real time. IoT has proven especially useful for transporting perishable foods, allowing retailers to act fast in case of fluctuating temperatures and food spoilages and prevent substantial losses.
Another advantage of IoT in the retail sector is automation, which helps eliminate inefficiencies and reduce manual labor, leading to better service and increased competitiveness. Modern IoT devices can perform many routine tasks without human intervention - from security monitoring to inventory auditing and predictive maintenance. This, in turn, means that employees can focus on more strategic activities such as servicing and retaining customers.
With advanced connectivity provided by IoT, retailers can gather and analyze vast amounts of data related to customer behavior, physical stores, products, and inventory. This data can fuel retailers’ analytics continuously, enabling more intelligent business decisions. By fostering decision-making, IoT helps improve store performance, optimize workflows, eliminate bottlenecks, and provide more quality customer service.
With so many success stories and benefits IoT offers, many retailers still hesitate to invest in connected technology due to possible challenges. Here's how companies address the most common issues to completely and responsibly integrate IoT into their retail operations.
Challenge
Solution
One of IoT’s critical problems is security and privacy. The security issue has been especially acute with the introduction of the General Data Protection Regulation (GDPR). While access to customer data gives retailers many opportunities, it opens up opportunities for cyberattacks.
Retailers should closely collaborate with IoT software developers to ensure that devices and sensors used in retail have robust security mechanisms: end-to-end encryption, secure passwords, regular software updates, and an IT infrastructure regularly scanned for vulnerabilities.
Challenge
Solution
Most retailers need more infrastructure and network capacity to deal with vast volumes of IoT data. To complete the digital transformation of their stores, retail companies should invest significantly in robust networks, data centers, cloud computing, and customer-facing solutions like mPOS, barcode scanners, and tablets.
There’s no need to fund all the infrastructure aspects upfront while implementing a new technology. Retailers can start with minor changes, like using IoT to manage air conditioning or lighting systems. This will bring near-term ROI, after which they can implement more sophisticated IoT solutions, such as traffic analytics.
Challenge
Solution
IoT data analysis can become a challenge if a retailer lacks relevant qualifications. Ecommerce employees, including marketers and sales managers, do not always possess the necessary technical skills to gain valuable insights from IoT systems.
Retail companies can manage data by hiring experts or relying on third parties with relevant IoT qualifications, training, and skills.
Over the years, innovative digital technologies such as artificial intelligence or machine learning have played an increasingly important role in the retail industry. The Internet of Things is one more example of technology capable of optimizing essential aspects of the retail business, thus fostering digital transformation.
IoT can help retailers enhance marketing, HR management, logistics, procurement, and sales, leading to advanced performance and streamlined business growth. At Itransition, we believe that the IoT journey can be a profitable investment, and we are ready to give retailers this competitive advantage.