The Internet of Retail

What You Think It Will Look Like

When people talk about the Internet of Things, there are two examples that come to most peoples' minds: big corporate logistics and smart homes.  Those seem obvious.  The first is all about how large corporations keep track of their inventory, automate their supply chain, and cut costs around their energy use (and keep track of their employees via key cards and GPS).  There are easy benefits for all of us to understand: if these large corporations can cut costs, then the products or services that they provide will also be cheaper.  The smart home is similar: easy benefits in convenience, energy savings and security.

However, there is another place where the IoT is taking off: retail.  Here's an example of where they will want to go:

(Minority Report, courtesy of DreamworksSKG and 20th Century Fox)

Minority Report was released in 2002 and we're still a long way off from having that level of (intrusive) personalized, targeted advertising.  But we're getting closer.


To be clear, targeted advertising has been around for at least five years, but has been confined to your browser and smart phone.  With the advent of small, integrated sensors, that targeting may be coming to the physical world.  But I doubt it.

What It Will Actually Look Like

Retail is an industry focused on two things and neither of them are offering the lowest price on a highly competitive product.  What a retailer really wants to do is:

1. Maximize Shopper Visits - This is broken out into several metrics depending on the retail segment and the culture of the retailer, but it comes down to "How do we get someone who actually walks through our door to buy the more of the more profitable stuff?"  On top of this, they want to find ways to keep you in the store longer.  An axiom of big box consumer electronics retail is that for every five minutes that you are in a store, you are twice as likely to buy something.
2. Reduce Payroll - Inventory and theft are not the biggest costs to a retailer.  It will always be their payroll.  Anything that they can do to reduce their headcount without hurting their 'customer experience' (which will keep the store from Maximizing Shopper Visits), is worth exploring.  For instance, it might make sense to drop the number of sales associates in a store because that means people are in the store for a longer period of time.  However, there is a difference frustrated time and engaged time.  The later is what gets people to buy.

The Minority Report clip above is focused on the first of these two concentrations: how do we maximize Tom Cruise's visit to the gap?  How do we keep him engaged and thinking about how the Gap can fulfill his wardrobe needs.  However, most retailers are going to focus on the payroll reduction side of this first.  Reductions in payroll equal cost reductions which look good on shareholder reports.  

What It Already Looks Like

The fact is that many retailers are already doing this and you are already used to it.

• Self-Check out is all about the IoT - it is a connected scale hooked up to an inventory management and checkout system: the POS.  This is perfect IoT that reduces costs and enhances the customer experience in select retail environments (no one wants self check out at a high-end clothing store).
• Loyalty Cards are all about the IoT - They log every sale that you make and allow the physical retailer to manage their purchase decisions and make suggestions for your next visit.
  

What It Will Look Like When They Get Around To It

The part of the IoT that retailers are not doing well with is the data management.  As anyone who has messed with IoT knows, it generates a ton of data.  Data that needs to be sifted and sorted and then used to make decisions.  Often second-by-second decisions.  Who just walked through the door?  What did they buy last time?  How does that inform us on what they might buy this time?  What discounts can we offer them that make them feel special without impacting our profitability?

The answers to all of those should happen the way it does in Minority Report, but right now retails are not investing in expert systems to manage their data in real time.  This partly due to the absence of a way to reliably (or legally) identify each body that steps through the door.  It is also partly due to their marketing being focused on driving feet through their doors and not on loyalty.  Outside of the grocery and Mass Merchant (Wal-Mart, Target) sectors, loyalty programs are a shareholder need-to-have, but not a revisit driver.

Once retailers are able to tackle reliably identifying you as you walk in they will be able to change their marketing to better loyalty drivers.

When that happens, be sure to invest in Corneal Privacy Implants.