Internet of Things services remain among the most sought-after in various industries. For example, 76% of manufacturers are looking to invest in IoT due to economic concerns, according to Ubisense research. As much as 77% of supply chain businesses are planning to increase their IoT investments by 2025, as the 2023 State of IoT Adoption Report states. Retail industry is not an exception.
According to the Precedence Research report, IoT market share in retail will continue to increase from $72.97B in 2024 to $743.76B in 2034. And there are many reasons for that.
IoT-powered retail solutions bring various operational and business benefits, such as access to more data points for more accurate analytics, theft prevention, and supply chain optimization, to name a few. This article explores what IoT in retail can be used for, how this technology benefits various retail segments, and more.
Top retail segments to consider IoT adoption
IoT in retail can be used by grocery, fashion, luxury, and other businesses. Let's review what specific challenges this technology can tackle for each segment.
Grocery and supermarkets
Targeted issues: food waste, energy distribution, queue monitoring.
IoT solutions in food retail stores can help manage inventory more effectively. They can prevent overstocking and reduce food waste, especially for products requiring specific temperatures for storage. IoT can also assist with energy distribution across the facilities to avoid unnecessary energy consumption.
On the other hand, IoT tools can monitor product freshness and reorder items automatically to ensure fresh product availability.
Another use of IoT in the retail industry is streamlining the checkout process to prevent queues and improve customer shopping experience.
Fashion and apparel
Targeted issues: inventory management, return optimization, shipping management, garment try-ons.
For the fashion segment, IoT can enable smart fitting rooms where customers can request different sizes or colors via connected mirrors. In addition, the customers can try on clothes virtually by using smart mirrors. It helps avoid garment damage and reduce customer shopping time.
Moreover, IoT solutions support inventory management and return processes using RFID tags. IoT can also help locate items along the item cycle, simplifying supply, shipping, and return management.
Electronics and appliances
Targeted issues: theft prevention, product demonstration.
One of the applications of IoT in retail businesses selling electronics is that IoT can be used to track high-value items and prevent theft. This is especially useful for securing the items on demonstration stands.
In addition, IoT solutions help demonstrate the performance of connected devices and their integration with smart home systems.
Luxury goods
Targeted issues: real-time monitoring, personalized marketing, theft prevention.
Luxury retailers can use IoT technologies to enhance the customer experience with personalized services and offers. For example, connected devices can collect information on customer behavior, preferences, and purchase history, enabling personalized recommendations.
On top of that, IoT can also strengthen security for high-value items through real-time monitoring.
Furniture and home goods
Targeted issues: location-based AR and VR visualization, product performance demonstration.
Powered with AR and VR technologies, IoT in retail can help businesses visualize the products in a specific setting. It helps customers choose the furniture piece that fits their house faster and decreases the possibility of returns.
For home goods retailers, IoT can help with inventory management. For example, IoT-enabled sensors and smart shelves can automatically track product availability in real-time, allowing warehouse workers to read inventory data through AR glasses without the need for manual barcode scanning.
Pharmacy and health retail
Targeted issues: real-time availability monitoring, condition-specific storage.
Pharmacies can use IoT for temperature-sensitive inventory management. It helps create optimal conditions for storing medications and health products, prevent item expiration, and ensure medication safety.
IoT can also streamline supply chain operations, enhance real-time product monitoring, and provide personalized health recommendations.
Convenience stores
Targeted issues: operational cost reduction, location-based promotions, contactless checkout.
Convenience stores can use IoT and connected sensor devices to optimize utility consumption. In addition, the technology helps automate inventory management and enable contactless payments.
Also, beacon technology allows retailers to send notifications to customers' smartphones when they are close to the store. It helps retail businesses launch location-based marketing campaigns and increase revenue.
Beauty and personal care
Targeted issues: personalized care recommendations, virtual try-ons.
In beauty retail, IoT systems and connected devices like smart mirrors and skin checkers can recommend customers personalized products for their skin or hair concerns. IoT-enabled mirrors allow for virtual try-ons and help the stores offer a hygienic way of testing lipsticks and other items.
In addition, inventory systems can ensure popular products are readily available.
Each retail business has plenty of IoT use cases in retail. Let's review a few IoT applications in retail that are popular across various sectors.
Applications of IoT in retail: Top 9 examples
IoT brings online experiences into physical stores, expanding how customers interact with products and how store administrators manage the operations and stock. Below, we'll review the most popular applications of IoT in the retail industry.
Smart shelves
IoT-powered smart shelves with sensors and RFID tags help monitor stock levels in various retail stores in real time. This solution informs the staff about low inventory and automatically places orders for running-low items. In addition, smart shelves help gain better insight into customer behavior in shops and create better sales campaigns.
Smart mirrors and fitting rooms
Smart mirror is one of the IoT applications in the retail industry, useful in beauty and fashion stores. These interactive devices allow stores to display their assortment and clients to interact with the items and try them on virtually. Moreover, these solutions can function as shopping assistants and collect valuable data about the customer experience.
Augmented glasses
This device can be used by the warehouse or store workers when they place products. With the variety of options within the same brand, there is a high chance of placing the products onto the wrong shelves/hooks, complicating further product distribution. Paired with computer vision (CV) and Augmented Reality (AR) technologies, these glasses can help merchandisers reduce errors.
In addition, customers can use these glasses to read instructions in the digitalized manuals and make informed decisions while in stores.
Read more: Retail technology trends in 2024
Smart checkout and payment solutions
Retailer enterprises adopt smart checkout solutions to elevate customer experience and decrease the workload on their employees. For example, checkout-free shopping allows store visitors to register the card at the entrance, collect the necessary items in the shopping cart, and generate the receipt when they leave the store. The amount is deducted from the checked card automatically.
In addition, there's a trend for unattended retail stores and booths. IoT solutions enable these types of shopping facilities to function. For example, their operators can offer fresh foods, beverages, and snacks, while controlled access and automatic locking decrease the chances of theft.
Energy management platforms
Another use of IoT in the retail industry concerns energy management. With sensor devices and connected applications, retail stores can use lighting, heat, ventilation, and air conditioning (HVAC) systems, and refrigeration units across the stores more efficiently. In addition, IoT can be used to set up and manage alternative energy sources. As a result, the stores will reduce energy costs and decrease their carbon footprint.
Customer behavior tracking and analytics
Internet of Things solutions in retail stores also collect more data for further customer behavior and purchase analytics. This data facilitates data-driven product placement and store layouts, leading to more sales and revenue.
Supply chain optimization
One of the most popular applications of IoT in retail revolves around optimizing supply chain processes. IoT solutions, such as connected packaging and tracking platforms, help businesses track goods from manufacturers to their stores, monitor shipping statuses, and plan for deliveries. This improves the partnerships between the business and suppliers and forms a more efficient supply chain.
Security systems
According to the 2022 National Retail Security Survey (NRSS), external theft is the major source of inventory shrink-a problem causing the industry $94.5B in losses in 2021. IoT-based security systems with smart cameras, sensors, computer vision, and on-device AI for real-time data processing allow retailers to monitor their stores and warehouses more effectively. These solutions alert the security team about unauthorized access or unusual behavior in real time, decreasing the theft risk.
Related: Use cases of computer vision in retail
Automated replenishment systems
Internet of Things technologies in retail are also used to develop automated replenishment systems for restocking optimization. When the inventory levels decrease to a defined threshold, the system alerts store employees to prevent stockouts. It also helps monitor the availability of the most popular or staple items to create a better customer experience.
These are just a few IoT applications in the retail industry. Let's see how their adoption benefits the retailers.
Benefits of IoT in retail
Properly functioning IoT solutions in retail stores create a smooth shopping experience for customers, optimize the efficiency of store employees, and power businesses with insights from the data collected by the sensor devices. Let's review a few benefits of applying IoT in retail.
Improved inventory management
IoT solutions such as smart shelves, RFID tags, and others allow retailers to increase visibility into their stock and store shelves. It helps them optimize and plan supplies, avoid stockouts and overstocking, and enhance marketing campaigns for the most popular items.
Enhanced customer experience
IoT in retail improves customer experience as it helps businesses create seamless, fast, and uninterrupted shopping. Moreover, the Internet of Things allows retailers to personalize purchasing by enabling location-based tailored recommendations and promotions.
In addition, IoT solutions help retail enterprises adopt simplified checkouts and interactive experiences, making shopping more entertaining and increasing sales in physical stores.
Improved operational efficiency
With IoT solutions, retail stores can monitor and control lighting, HVAC, and refrigeration systems in real time. It helps businesses optimize energy consumption and save operational costs.
Another operational benefit of the Internet of Things in the retail sector is that it streamlines logistics and supply chain operations. Connected devices and sensors help reduce delays and improve collaboration with suppliers and logistics companies.
Data-driven decision making
IoT collects plenty of data that can be analyzed to gain insights into sales, operational performance, and customer behavior. Paired with technologies like Big Data, AI, and ML to process this data will help retail businesses make informed decisions.
IoT in the retail industry also helps companies monitor equipment conditions and predict maintenance. It reduces downtime, prevents unexpected budget spending, and prolongs asset life.
Explore more: Big Data in retail: Use cases that bring the most value
Theft and loss prevention
With IoT solutions, the retail staff and security personnel have more asset and facility monitoring tools. It helps prevent theft and detect suspicious activity, ensuring the safety of the workers and merchandise.
In addition, IoT in retail allows for the tracking of assets, helping employees locate the necessary items faster and avoid unnecessary repurchases.
Increased sales and revenue
IoT device data allows retailers to design targeted promotions and offers to different segments. Since IoT solutions improve shopping experience and personalize services, they can increase customer loyalty, drive more sales, and boost lifetime value.
Enhanced product management
IoT devices generate data that help store administrators and merchandisers understand how customers interact with various products. It provides more insights into product placement that can be used for creating effective merchandising strategies and replacing or upgrading products to meet customer demand.
Sustainability and waste reduction
IoT can be used for smart product transportation, reducing spoilage and waste in the food and beverage sectors. In addition, IoT can help retail stores reach their sustainability goals by optimizing energy, water, and gas usage.
Alongside these benefits, IoT applications in retail pose a few challenges that businesses should consider when implementing IoT solutions.
Challenges of IoT in retail (and how to deal with them)
The most common challenges of IoT in the retail sector usually revolve around IoT solution adoption, data processing, and scaling. These concerns keep many businesses from transforming their retail operation with IoT tools. The good news is that with a knowledgeable tech expert like N-iX by your side, you can avoid these issues by applying the best practices of IoT software development. Before starting an IoT project in retail, let's review what you should keep in mind.
Data security and privacy
IoT devices can become easy targets for data breaches and cyberattacks if not properly secured. IoT devices collect various customer data, including sensitive information, such as user names, address, voice sample, video footage, credit card data, and so on. Unauthorized access to this data can compromise customer privacy and the retailer's reputation.
Solution: Ensure that you use end-to-end encryption, follow secure authentication protocols, and undergo regular security audits as a part of your data security and privacy measures. If you partner with an external tech vendor, make sure they comply with data protection regulations like GDPR and CCPA. This way, you'll know your customers' data is handled securely and transparently.
Data overload
According to Statista, the number of IoT connections worldwide is expected to increase from 18B in 2024 to 39.6B in 2033. In the European Union alone, the number of active IoT connections in retail is expected to double and reach the 3.09M mark by 2025. The rapid increase in IoT connections and devices will force retailers to create strategies on how to handle the increasing volumes of data these devices produce. Without proper management, this information can lead to data overload rather than actionable insights.
Solution: You can handle IoT data more effectively with advanced ML algorithms and data analytics tools to filter, aggregate, and analyze IoT data efficiently. In addition, you should use cloud and edge computing capabilities to manage historical and real-time data. Cloud-based platforms can also help manage large datasets by providing scalable storage and processing power.
Read more: Applications of generative AI in retail
Integration with existing systems
Integrating IoT systems with existing IT infrastructure and legacy systems of a retail business can be complex and costly, especially if the infrastructure hasn't undergone any digital transformations. Incompatibility between new IoT tools and outdated technologies can lead to operational disruptions and inefficiencies.
Solution: Before IoT adoption, explore what technologies you currently use and whether they are compatible with what you're planning to integrate. For one of our clients, a logistics company, this analysis helped design a connectivity gateway that was seamlessly integrated with their existing solutions and allowed the further launch of new mobile applications.
Also, consider your short and long-term tech transformation strategy to choose the solution that would support further tech upgrades. Moreover, if you team up with an experienced vendor like N-iX, you can also benefit from their partnerships with hyperscalers like AWS, Microsoft Azure, and Google Cloud Platform. For example, you may receive special offers and terms for using their products.
Scalability issues
If the retail chain wants to expand its operation, it should also increase the number of IoT devices and the resources to manage them. It may become challenging for businesses whose tech infrastructure wasn't designed for such a workload.
Solution: You should analyze your existing infrastructure and the to-be scenario to find the optimal way to scale IoT solutions without shutting down the operations. One of the most popular solutions could be using cloud computing for scalable data storage and processing and implementing automated device management tools. A skilled tech company like N-iX can consult you on the most effective way to expand the IoT network, keep the operations running, and prepare the business for further transformations.
Customer acceptance and trust
Since IoT components, such as sensors and smart cameras, interact with personal information, customers may be wary of IoT technologies in retail, especially regarding data privacy and usage. Not following required data privacy and processing protocols and open communication about data usage can lead to a lack of trust and hinder the adoption and effectiveness of IoT solutions.
Solution: Create transparent data collection, storage, and usage policies and inform customers about them. Ensure you have permission to use their data before IoT devices capture it. Building trust through transparency and secure practices will foster customer acceptance and increase engagement with IoT-enabled services.
Data quality
Poor calibration, faulty sensors, and environmental factors can negatively influence data quality. It may lead to erroneous insights and wrong decisions.
Solution: Regularly calibrate and maintain IoT devices to ensure data accuracy. Implement data validation processes and use analytics tools that can detect and correct errors or anomalies in the data. Establish protocols for handling and verifying data before it is used in decision-making processes.
Skill gap and training
Deploying, managing, and maintaining IoT solutions in retail require strong technical expertise that may not be available within existing IT departments. Increasing the workload and putting the tech team under pressure could result in burnout, poor performance, project failure, and increased budget spending.
Solution: Consult with your team on what option would suit you better: outsource the IoT project completely or hire a few IoT experts. The decision will help you bring the tech team on the same page, create the most optimal cooperation model, and ensure uninterrupted tech operations.
Explore further: 15 leading retail software development companies
What makes N-iX a reliable IoT partner for retail businesses?
N-iX will help you see what's possible with IoT for your business in a specific retail sector. We have developed IoT solutions for assets and fleet tracking to be used by logistics, supply chain, and manufacturing enterprises. We also have extensive experience delivering solutions for the retail industry and its global players such as Inditex, PrettyLittleThing, Saks Fifth Avenue, OfficeDepot, and others. Our software experts create tailored software for enterprises and help businesses transform their operations by adopting cloud, Computer Vision, Data Analytics, AI, ML, cybersecurity, Business Intelligence, edge computing, and other technologies.
With vast tech expertise, market knowledge, and experience in developing solutions for the related industries, we have all we need to create custom retail IoT solutions to solve your business challenges. Contact our team if you want to know how to use IoT in retail most effectively in your segment. Let's discuss how N-iX's tech expertise can help your business provide better service and improve internal operations!
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