Beep, Beep, Boop: A Practical Look at Retail and the Internet of Things

Nothing techy ever seems to turn out as cool as it looked when it was first presented on a show like The Jetsons. When the Internet of Things (IoT) was first introduced, the retail world envisioned a future where it would allow shoppers, merchants, and smart devices to join forces to create a world that blended smart data and consumption.

The introduction of the IoT and its new technology was set to take the retail world by storm. In a white paper that same year, the National Retail Federation (NRF) reported that IoT would consist of “nearly 50 billion objects” by 2020.

“IoT as a solution is boundless while at the same time grounded in examples that exist today which can be capitalized upon right now to achieve greater efficiency, create new ways to differentiate over the competition and realize new lines of business,” wrote the NRF in its 2017 white paper. In the paper, the merits of IoT technology and how it would revolutionize the industry are touted on repeat.

Meanwhile, the statistic maven website Statista noted in a report, “By 2025, forecasts suggest that there will be more than 75 billion IoT-connected devices in use,” also predicting in 2019 that by 2023, global spending on IoT could reach $1.1 trillion.

While IoT has seen success in other fields, such as healthcare, where initiatives assist with things like the remote monitoring of patients and medical devices, and energy, where smart grids can assist with energy savings, it hasn’t materialized in the smart shopping and connected retail experience as predicted.

So, what happened?

The Backstory

At its start, the IoT was set to enter the retail space by implementing technology that allowed devices on the same nearby networks to “talk” both with one another and approved outside networks such as a cloud to make smart decisions, such as buying or tracking an item. From a pragmatic standpoint, retail is an obvious place to implement and deploy such services because consumer brand loyalty alongside a bit of product exploration and curiosity often thrive in the sector. One example of this system at play comes courtesy of Amazon’s Alexa feature, which allows a consumer to talk to a speaker system and order specific items.

IoT technology also seemed set to pave the way for easy and seamless automated purchasing. Automated purchasing occurs when an item with a sensor reaches a preset threshold that then signals a need for replenishment. A good example of this comes courtesy of printer toner. Consumers who opt in consent to their printer talking to other smart devices that include a merchant. When the toner cartridge reaches a low-enough level, the printer then “orders” a refill cartridge through a merchant affiliated with the item and smart device that notifies the consumer about the order, cost, and shipping data. The new item then arrives as agreed upon – and based on the consumer’s printing habits, before they run out of toner.

Within automated purchasing, designers also envisioned a system for more devices like Alexa that could memorize and analyze consumer needs and behaviors for items like groceries. With enough pattern understanding, they could predict when a consumer would run out of something and either offer to replenish it via ordering on a smart device or simply order it and have it show up on the consumer’s doorstep, thanks to pre-order or ever popular subscriptions. Such technology is found in appliances such as a refrigerator that tells the consumer they need to reorder orange juice.

Partnerships with specialized merchants, such as pet suppliers, have also given some idea how harnessing this knowledge can work, with pet food and other goods arriving just when Fido and Snowball need them based on past ordering patterns. Prompts via email, text, or from a shopping-enabled device allow the consumer to order before Snowball’s need for more litter becomes a catastrophe.

“There was so much hype over two [or] three years and we were starting to see this new era,” says Ian Clayton, chief product officer of Redpoint Global, which offers services and solutions that engage with customers and manage data. That new era included an account attached to a payment method that knows the consumer and allows them to walk into a store, pick up an item, and at times to leave the shop without taking out a card to tap or swipe. “It knows who you are,” he says. “It’s manageable, right?”

A Pandemic-Induced Pivot

The consumer’s broader interest in automated toner replacements, a reminder of what perishables to replace, and the ability to walk in and out of a shop with a cashless beep of a transaction courtesy of smart tech barely had a chance to get off the ground before things came crashing to a halt. In 2020, both businesses that might have been keen to explore and implement these systems and consumers eager to use them faced unforeseen challenges that put everyone’s mettle to the test courtesy of COVID-19.

IoT tech was a costly investment that required understanding around what to use to harness consumer data. “When you think about it, [there are] all of these devices, chips, and complicated electronics,” says Clayton. “The investment required was sizeable and the components were expensive to begin with. With a low-margin industry like retail, there’s got to be a real good value opportunity there.”

Once harnessed, IoT initiatives also require anyone utilizing them and their services to actively collect, store, and mine the collected consumer data. “If you think about a website, all that data gets collected,” says Clayton. When considering clicks, page loads, abandoned carts, and other data that goes into online shopping and browsing, “there’s software that surrounds that to reduce the amount of data that you need to store and be efficient about how quickly you can act with the IoT.”

But the new and the practical found themselves at odds in 2020. “Everybody was pushed back into digital,” says Clayton of that time period. This ubiquitous shift in direction also meant that the retailers who might have jumped on the IoT bandwagon with their investment resources made decisions that cut it out slightly or entirely. Many retailers with interest in going more futuristic with operations realized fairly quickly that they would need to put customer-facing IoT investments on hold. They instead allocated those resources toward immediate, practical services such as curbside pickup and delivery, or buy now, pick up in store.

A New Use for the New Technology

Although IoT technology stalled in the customer interaction space, it didn’t exactly die on the vine in retail. With retailers embracing survival techniques that didn’t involve smart shopping, IoT, too, made the decision to pivot. Rather than be part of the front of the store and serve as the bridge between consumer and merchant, IoT made its way to the back of the store where it served as the bridge between item and merchant. Think: supply chain management or warehouse delivery. "That’s where all these devices ended up,” says Clayton. “You could attach them to delivery trucks and things like that.”

According to Clayton, back-of-store usage made the most sense at that time because, “[items] can be tracked in a warehouse, knowing what you have, and knowing your stock.”

So, while IoT isn’t found in every store tracking your every move and reminding you to order new groceries, it is helping your favorite merchant keep track of what is in stock, what inventories are low, and what needs to be reordered.

The post-COVID reopen has made it abundantly clear that consumers have missed and  continue to enjoy the in-person experience. Perhaps even related somewhat to the pent-up nature of purchasing that occurred during COVID-19 related closures, there is motivation to show up in-person to browse and buy. During this year’s Thanksgiving holiday shopping period alone, which begins that Thanksgiving Thursday, and extends into Black Friday while concluding on Cyber Monday, the NRF reported that retailers saw record foot traffic. Some196.7 million shoppers poured into stores, topping the NRF estimate of 166.3 million shoppers.

According to Clayton, because so many merchants have invested heavily in their online infrastructure over the past two or so years, it will be a while before the “new” technology that thinks for customers will become a generalized reality. However, there are other issues.

“There’s a big obstacle there in how do you as a brand embrace a technology that really is about spying on customers?” he asks. A brand must show that there will be a value exchange – a better, more personalized experience in exchange for access to more of a consumer’s information. “I think there’s going to be certain stores that are going to embrace IoT it and it’s initially going to be a novelty.”

As it becomes less novelty and more necessity, IoT looks poised to reclaim its once-intended position as a bridge between customer and merchant, especially with younger customers who’ve grown up handing over their data.

In late 2022, Field Nation, an online platform that connects service professionals with companies, published an article which predicted that in 2023, younger consumers will be at the forefront. Their comfort with data sharing is just one of several factors that support more IoT style with this demographic. "Young consumers are comfortable with this data collection––indeed, they’ve come to expect it,” writes Field Nation. “IoT technology helps retailers stay up-to-date with shifting consumer demand.” With 2023 just weeks underway, we still have time to see if young consumers will lead the way or if IOT will make another pivot.