Retailers’ attitudes to the internet of things are set to change rapidly as the benefits of “connected retail” begin to be felt
Fitness trackers are flying off the shelves at Currys, while other connected devices such as Parrot camera drones, Nest thermostats and Philips Hue lighting systems are also strong sellers.
“Hardware is cool again. It’s an incredible time for consumers. Who would have thought 25 years ago you could turn off your lights from your phone?” says Dave Ward, head of new technology and innovation at Currys’ owner Dixons Carphone.
He believes the explosion in sales of connected consumer electronics, which can be controlled via a mobile phone app, is just the start of a retailing revolution that will be brought about by the internet of things (IoT).
Dixons Carphone has created a series of smart tech areas in its Currys, PC World and Carphone stores selling connected devices, with staff on hand to explain how the gadgets work. But the current crop of smart devices, such as thermostats and lighting systems, which can be controlled via smartphone, are just the start.
The real revolution will come about when connected devices collect data about the way their owners are using them, and feed it back to manufacturers and retailers
The real revolution will come about when connected devices collect data about the way their owners are using them, and feed it back to manufacturers and retailers. This will help manufacturers to make improved goods and guide consumers when they choose replacement products. For instance, a connected washing machine would be able to tell its owner how much electricity it uses each year, indicating that the owner should buy an energy efficient replacement.
“This is about trying to create products that ‘talk’ to each other in more of a holistic way,” says Mr Ward. And he adds: “What people want to do over time is to control multiple devices from one place.”
The smartphone is expected to become the central hub for monitoring connected devices. In the United States, smartphone apps such as Wink act as home hubs that control and collect data from a number of connected domestic devices. If users opt in, such apps will give retailers and manufacturers reams of information, which they will be able to use to help consumers plan their lives, perhaps enabling them to close down home functions, such as heating and lighting, from their mobiles with a single command when they go on holiday.
Although these innovations in connected devices are starting to hit the mainstream, the retail revolution brought about by the IoT is only just beginning. But retailers are gearing up for a change to the way they do business that could be as big as the arrival of e-commerce over a decade ago.
According to research by US firm Zebra Technologies, most retailers think the IoT will be the biggest technological change to the industry this decade. Nearly 96 per cent of retail decision-makers say they are ready to make changes needed to adopt the IoT, the research showed, while about a quarter of retailers are ready to deploy IoT technology over the next year.
An area where IoT is expected to make waves is in replenishment of groceries. There have been predictions that there could be a connected fridge that automatically re-orders milk, cheese or any other item that is running low. Mr Ward is sceptical that this will be a reality anytime soon, but he believes there could be a smartphone app which activates a camera in your fridge allowing you to see how much food is left.
Replenishment technology has been boosted recently with the trial of the Amazon Dash Button in the US, which you simply push to re-order a particular brand. There’s a Dash Button for Gillette, another for Huggies and buttons for various grocery brands. Press the button and another consignment of the brand will be dispatched to your home.
Andrew Long, UK retail technology lead at consultancy Accenture, points to the Poppy home system, which monitors a coffee maker, a smart infant formula machine and a pet food dispenser. These connected objects automatically order refills through Amazon when they detect stocks are running low.
“It becomes a more seamless experience. Retailers are almost locking customers into a pattern of purchase so they don’t need to think about it,” he says. “The convenience is there as there is less effort. But the customers would have to continue to check they are getting value for money and check it is not an inferior product.”
One result could be that the retailer gets cut out of the relationship if the manufacturer, or a rival such as Amazon, delivers replacement products directly. Once the relationship is established through a buy button, it could be difficult to encourage the consumer to change their preferences.
Meanwhile, another innovation could be connected goods that contain their own diagnostic services, which alert the manufacturer to any faults. There may eventually be ways of getting the devices to fix themselves or allowing the manufacturer to do so remotely, rather than having to take them back to the store or send them back to the factory.
This will transform the relationship between retailers and customers. Andy Hobsbawm, founder of Evrythng, a system for allowing devices to “talk” to each other, believes customer service will be greatly enhanced once products can interact. “We will have data to make sure the customer service relationship helps us get more out of the product,” says Mr Hobsbawn.
He believes we will move to a world of “product relationship marketing” where we will consider the relationships between products and how they can communicate with each other.
The IoT also promises to transform the back-of-house operations of retail. Many retailers are already using radio-frequency identification (RFID) tags, which are chips put into products to allow accurate tracking of stock. The chips emit a code which can be understood by an electronic reader. The tags are mostly used on pallets or cases of goods, though Marks & Spencer is putting RFID tags on all its clothing and many other items it sells.
Dominic Regan, Europe, Middle East and Africa director of supply chain applications at Oracle, says that with sensors collecting relevant data at many points along the supply chain, retailers will be able to improve their stock management.
“For example, tracking to what extent a shipment of apples might be subject to vibration, temperature and humidity fluctuations throughout its journey will allow a grocery store chain to pinpoint where the greatest risk to degradation is, and adjust its shipping strategy accordingly,” he says.
Data from individual items or pallets of goods will also help tell retailers if they have an oversupply or undersupply of goods, allowing them to run promotions when they know they have lots of a certain products in the supply chain.
In addition, RFID tags could be used to transform the in-store experience. Burberry’s flagship store on Regent Street already points the way. Many of the clothes contain RFID tags, so when you take them into a changing room, a digital mirror might respond by showing how they are worn on the catwalk.
Apple iBeacons, which can be installed by retailers to communicate with customers’ mobile phones when they enter a store, are ushering in new connectivity between retailer and customer. The iBeacons enable retailers to send coupons and promotions to customers in the store and also get data about their in-store behaviour. As with all developments in the IoT, this depends on customers opting in to the technology and allowing their smartphones to receive and transmit data.
Mr Ward at Dixons Carphone predicts the IoT could take off fast and, when it does, retailers will need to be ready. He concludes: “People’s expectations in this space will change very quickly. Uber has changed the taxi market almost overnight and we can see that happening in retail. Where retailers aren’t ready, it will hit them like an asteroid.”