Retail environments have undergone significant change over the past two decades due to the introduction of information technologies, including the rise of online shopping. The Internet of Things has the potential to cause even greater disruption, but IoT can also provide traditional retailers with the tools to compete—and coexist—with the online retail world as “omni-channel” shopping erases the distinction between online and offline shops. The Internet of Things, for example, can guide the shopper to the item she has been looking at online when she enters the store and text her a personalized coupon to make the purchase in-store that day. IoT technology can also provide data to optimize store layouts, enable fully automated checkout, and fine-tune inventory management. These and other innovations could enable new business models and allow retailers to improve productivity, reduce costs, and raise sales. We estimate that these uses of IoT could have an economic impact of $410 billion to $1.2 trillion per year in 2025.
Widespread IoT adoption would affect players across the value chain, including employees and consumers. It has the potential to reduce the need for labor on the selling floor and at checkout, while raising the amount of revenue per customer (increasing the “shopping basket”) through customization and cross-channel (online/offline) selling. Consumers would gain more value through convenience, time saving, and more attractive customized promotions. To remain competitive, companies would need to master new ways of operating and learn to collaborate closely with technology and data vendors.
By adopting Internet of Things technologies, retailers can improve their economics by reducing shrinkage (losses due to theft by customers and employees), lowering inventory costs, raising productivity, and improving the customer experience.