We hear the phrase “Internet of Things” (IoT) and we immediately conjure up images of automated personalized advertisements and smart machines straight out of a futuristic sci-fi movie. But movie magic aside, research conducted over the past few years shows that in the not-so-distant future, everyday objects or things will indeed be connected to the Internet — creating a mechanized world that inherently knows our every need and desire based on Big Data.
A recent survey and study conducted by Pew Research Internet Project revealed a large majority of technology experts and engaged Internet users — 83 percent — agree that IoT and its related devices and systems will have widespread and beneficial effects by 2025. Similarly, a Retail Systems Research (RSR) report found that the majority of retail industry stakeholders agree that IoT will drastically change the way companies do business in the next three years.
While IoT has implications for a wide variety of different industries, the retail industry represents one of the largest opportunities for process improvement through connected devices. The “intelligent store” will theoretically count its own inventory and serve the shopper with little human intervention. A person’s ability to interact with objects could be altered remotely based on their immediate needs (after the customer has opted in, of course). Simply stated, highly personalized and optimized shopping experiences that go beyond omnichannel are on the horizon, which means now is the time for careful examination of this opportunity.
How much will the retail supply chain change?
Like the current adoption of item-level radio frequency identification (RFID) for inventory visibility, bringing IoT to life will require changing our way of thinking — and will not rely solely on any single technology. Industry analysts predict RFID will be a necessary part of the foundation for IoT and a key enabler of this new highly-connected environment. The IoT ecosystem includes sensors, device management, professional and managed services, advertising, digital signage, energy optimization, security systems, smart shelves and doors, and so much more. All of these moving parts will be connected by additional technologies including Wi-Fi® and Bluetooth, to name just a few.
The ability to have continuous visibility into product movement and availability will be foundational to developing any IoT operation. The channel integration already being achieved through item-level RFID will be considered an IoT prerequisite. What is currently being implemented as a result of omnichannel trends will in many ways remain to be leveraged and extended even further. The major difference is that the consumer experience will be even more elevated and prioritized in an IoT world, and communication between “things” as well as supply chain partners will become just as critical to retailer and brand success.
IoT is a potential competitive differentiator, and is considered more valuable to enhancing consumer satisfaction than moving product, according to RSR’s data. Retailers will look to IoT technologies to compete with online marketplaces and leverage the power of location. Brands will use IoT as an extension of out-of-home marketing. All supply chain partners will need both speed and flexibility to excel in this environment.
How can we enable better speed and flexibility?
For IoT to function smoothly, a multitude of devices will need to report data in real time for fast, interactive business decisions. There lies a huge opportunity to help deliver more efficient and transparent supply chains today, before IoT becomes commonplace.
Standards development will play an important role in enabling the movement and sharing of data through many disparate systems. Without standards to ensure all supply chain partners are communicating based on a common language, IoT development will become chaotic. GS1 Standards —such as the Electronic Product Code (EPC) that works in tandem with the passive UHF RFID tags used in retail today — enable better interoperability and have been proven (over the past decade) to deliver consistent and reliable inventory visibility.
Unique identification through EPC-enabled RFID will likely evolve to include EPCIS (Electronic Product Code Information Service), as it provides a way to share data about visibility events and objects within and across corporate software systems, representing the true bridge between the physical and digital worlds. It shows the exact context of the data captured — the “what,” “when,” “where” and “why”—and provides an extended trail of “digital breadcrumbs” that assists retailers with both speed and accuracy. EPCIS already has broad adoption in the healthcare and retail grocery industries, helping to keep consumers safe from potentially harmful counterfeit goods.
What are retailers and brands already doing?
Rather surprisingly, the recent RSR report found that 72 percent of retailers who were surveyed reported that they have IoT-related projects already underway. Retailers also mostly feel prepared and optimistic to meet the challenge of IoT. This is perhaps because the IoT trend will likely follow attitude patterns similar to omnichannel retailing. Forty-nine (49) percent of industry stakeholders stated the biggest opportunity for IoT was to maintain inventory accuracy throughout the store. Another 40 percent cited system-wide inventory accuracy as another opportunity. From an industry awareness standpoint, omnichannel opportunities have always aligned closely with business growth challenges — retail industry analysts believe this will also be the case as IoT develops.
We are seeing examples of this play out right now. Retailers such as Target are staying at the forefront of technological developments to achieve omnichannel success, with a clear interest in longevity too. In 2015, it implemented an item-level RFID program and also opened an IoT concept store showcasing a home that stages 35 Internet-connected devices, including door locks, thermostats and music players. One Levi’s store in San Francisco has also become a brick-and-mortar IoT proof-of-concept. With RFID tags on every single item on the shopping floor, Intel devices feed data through cloud-based analytics engines. Levi’s and Intel are creating an IoT-like environment, where merchants track inventory status, item popularity and even shopper movement in this innovative store.
Ultimately, IoT is still very much in its infancy. The next few years will undoubtedly be filled with pilots and demonstrations as well as with the maturation of software, hardware and standards to help bring the industry closer to IoT reality. For many leading companies, IoT is on their radar with innovations already in the works. These companies recognize that failing to examine IoT’s valuable opportunities will mean risking their own future relevance. Maintaining a healthy knowledge base on the development of IoT, and the technologies that will power it, is the key to success and longevity.
Melanie Nuce is Vice President of Apparel and General Merchandise, GS1 US.