COVER STORY: THE YEAR AHEAD
IoT Tech to Explode Expect widespread disruption across store ops By Dan Berthiaume
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he concept of “constant connectivity” in retail will expand beyond people equipped with mobile devices in 2020. “Everything in the store is wired and communicating,” said Ken Morris, an independent retail analyst with 40 years of industry experience. “Electronic devices, lights, freezers – but there has been no product to listen to all of these devices.” According to Morris, in 2020, retailers will start listening to their store equipment using Internet of Things (IoT) technology, at a widespread level which will cause industry disruption. “The manager at a service plant can make sure things are clean,” said Morris. “Especially in the restaurant vertical, there is a gigantic opportunity. If a fridge is about to break down, it can automatically schedule a repair call or order replacement parts. There are a lot of things a manager normally deals with that can be automated with IoT.” And IoT’s disruptive potential extends far beyond food service. Morris also described scenarios such as IoT-enabled “smart racks” that automatically notify store associates when they need a refill, or even order more merchandise. “IoT takes a message and deploys resources to fix whatever has gone wrong,” said Morris. “Whatever it is, it can be handled with technology instead of a person.” Morris also noted the growing popularity of automated stores, such as the Amazon Go cashierless model, as an example of how IoT is disrupting traditional store operations. In addition to automatically creating a more convenient and pleasant customer experience in the store, IoT can also deliver significant benefits on the back end. “IoT increases a retailer’s span of control,” said Morris. “It creates an opportunity for a single store manager to manage more than one store. Rather than have the store manager do everything, you can push tasks down to the department managers or even associates. Traditionally, you have one district man-
ager for about every five stores; now you will be able to have one district manager for about every 10 stores. It’s an opportunity to optimize headcount.” Walmart’s Test Store Walmart is live-testing varied IoT technologies at what the chain calls its “Intelligent Retail Lab” (or IRL for short). The 50,000-sq.-ft.-store, in Levittown, New York, contains more than 30,000 products. The IRL is set up to gather information about what’s happening inside the store through an array of sensors, intelligence-enabled cameras and processors. Hardware is connected by what Walmart says is enough cabling to scale Mt. Everest five times and enough processing power to download three years’ worth of music (27,000 hours) each second. Initially, Walmart is using the IRL to test how real-time information provided by artificial intelligence (AI)-equipped store systems can inform associates more precisely when to restock products, so items are avail-
able on shelves when they’re needed. “Customers can be confident about products being there, about the freshness of produce and meat,” said Mike Hanrahan, CEO of IRL. In the near future, a combination of cameras and real-time analytics will automatically trigger out-of-stock notifications to internal apps that alert Walmart associates when to re-stock. This will require AI and IoT technology enabling the store to automatically detect a product on the shelf, recognize specific products (such as discerning between a one-pound and two-pound package of ground beef), compare shelf quantities to demand forecasts, and send notifications as needed.
WINNING RETAILERS SEE THE VALUE OF IoT A recent study from Retail Systems Research, “The Internet of Things: Finally Finding a Home in Retail?” reveals that retail winners (defined as retailers with top same-store sales performance) are more likely than their lower-performing peers to recognize the value of or have already begun implementing IoT technology in their operations. For example: • 83% of retail winners see high value in using IoT to reduce wait time at checkout, compared to 58% of all other retailers. • 44% of retail winners have multiple, mature, sensor-related projects and use them to drive differentiating capabilities, compared to 30% of all other retailers. • 79% of retail winners see a lot of organizational value from IoT in the supply chain, compared to 55% of all other retailers. • 83% of retail winners see a lot of opportunity for impact of IoT in customer engagement in stores, compared to 58% of all other retailers.
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Walmart is testing new technologies at its store in Levittown, new York.
NOVEMBER/DECEMBER 2019
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11/11/19 10:17 AM
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