When, back in the 90s, the web evangelists were predicting that online would change the world, even they almost certainly didn’t foresee the growth of the Internet of Things (IoT). David Adam reports

There are now 13.4 billion connected devices worldwide that fall into this category, but that number could rise to 38.5 billion by 2020, according to Juniper Research. IoT devices will be everywhere, including in the retail sector. They include wireless or Bluetooth beacons, inside stores and elsewhere, interacting with consumer devices and/or retailers’ PoS, CRM and data analytics platforms. This is an area that also encompasses supply chain technologies like RFID tags; and it is easy to envisage wearable technologies being useful tools for retailers in future, particularly in the supply chain.

Juniper Research predicts that globally, retailers could be spending $2.5 billion on IoT technologies by 2020, up from $670 million today, with 70 per cent of IoT units in use by that time being non-consumer devices. Across industry in general, when the many different use cases are taken into account, the analyst predicts the total IoT ‘opportunity’ across all industries could be worth $300 billion per year by 2020. As far as in-store IoT is concerned, beaconing technologies have attracted most attention. In 2014, the Regent Street Association in London started delivering personalised promotional content direct to consumers’ mobile devices via an app and beacons installed initially in 150 shops and restaurants along the street. The service allowed consumers to choose with which businesses they would interact; and the system was also restricted to sending consumers no more than three notifications in a five minute period. According to recent figures, there were 1,505 active app users during August (up from 1,483 in July). Total downloads of the app are now 8,909 and 782 new profiles were created in August, bringing the total to 12,852.

One of the technology companies making progress in this field is Iconeme, launched in 2013 by Jonathan Berlin and Adrian Coe, owners of window display specialist Universal Display. Iconeme’s VMBeacon solution allows customers to interact with beacons in window displays to obtain product information and/or make a purchase, then and there, or at another time of their choice. The aim is to combine in-store and online commerce in a new way – and the beacons effectively turn a shop window into a 24 hour sales channel.

Retailers using the system include Jaeger (in three London branches), Hawes and Curtis, Bentalls, Lyle & Scott, Oasis and the Richard Young Gallery (all in London); and House of Fraser stores in Aberdeen and Cambridge. Some have purchased a complete solution, others are integrating Iconeme technology into existing apps and/or in-store systems. When House of Fraser went live with the product in 2014, Andy Harding, executive director of multi-channel, told Retail Systems it had seen increased footfall, staff and customer engagement and sales as a result. Berlin says more roll-outs are imminent, involving more UK, European and US retailers, including with a major electronics retailer.

Beaconing adds most value when integrated with mobile payments – there has, of course, been significant progress in that area over the past year. Technologies that other vendors such as Powa provide could tie in here: PowaTag can incorporate QR codes and PCI-compliant payment systems, as well as beacons, to provide a complete solution from marketing messages to purchase, including via social media.

Meanwhile, in the supply chain, after years of slow progress towards the mainstream, RFID technologies are helping a growing number of retailers improve real time asset tracking, boosting efficiency and reducing costs. The Juniper Research report notes the advances already made in this area by retailers including Zara. Its parent company Inditex started rolling out RFID technologies across Zara’s store and supply chain networks in 2014, with more than half of the roughly 2,000 Zara stores, in 88 countries, set to be using RFID chips embedded in security tags by the end of 2016. Inditex procured 500 million chips prior to roll-out. The security tags are removed for reuse at the point of purchase.

Prior to the introduction of the RFID solution, store-wide inventory had been performed at Zara outlets only twice a year and took a large team of employees several hours to complete. RFID technologies allow a much smaller team, working with handheld computers, to perform the task in half the time. Other major retailers now using them on a large scale include Marks & Spencer, which is aiming to achieve 100 per cent RFID tagging across all lines by the end of 2017. By spring 2015 100 per cent of the retailer’s clothing products were already tagged, along with half its homeware items. In the US, Target has announced a full roll-out of RFID to all 1,795 of its US stores in 2016.

“FMCG and clothing retailers currently represent areas where IoT technologies have been seen to be highly beneficial in terms of real-time asset tracking,” says Steffen Sorrel, senior analyst at Juniper Research. “Greater benefits are seen when individual items can be tracked as opposed to simply cases or pallets. Retailers can rapidly identify trends, ensure improved stock control and establish more effective promotional offers. When retailers establish an ecosystem of IoT technologies – with RFID, Bluetooth and consumer devices – elements such as dynamic pricing and contextual assistance can be introduced.”

Security risks
But in all these use cases retailers must focus not just on security and privacy issues affecting consumers, but also on the security of their own systems. One of the conclusions of the Juniper Research study was that retailers would need to fundamentally alter their approaches to cyber security, focusing on identifying and mitigating “inevitable” security breaches, rather than trying to prevent breaches. “In an IoT world keeping attackers out inevitably becomes more difficult,” says Sorrel. “In our view, breaches are unavoidable even with strong encryption as vulnerabilities are introduced either through software bugs or operator error. The most pertinent questions alongside the question of encrypted communications will revolve around how to isolate attacks on the network, and minimise the potential impact of hackers.”

If retailers can do this and are able to harness the potential benefits IoT offers this will become an important part of their proposition, says Berlin. “I think it’s a very important part of what retailers will want to deliver to improve the shopping experience,” he says. “Using the IoT to build a link between bricks and mortar and e-commerce, being able to take part of the store home with you then make a purchase at home in your own time – I think that makes for a greater customer journey and experience.”

With some IoT technologies also perhaps helping to encourage shoppers to make more purchases from home, while others help to improve efficiency in the supply chain, it’s easy to see why so many in the sector are intrigued by what these technologies could offer retailers in future – provided those security risks have been managed effectively.

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