I was talking with a colleague who works in the telecommunications industry and she was talking 
passionately about the future of this technology in her industry. The topic hasn’t been top of mind of retail, it seemed to be one many buzz words that become in vogue as then drop out as a new wave of ideas comes along. But looking at the changes that are happening across industries and how things are becoming so connected, perhaps the buzz words are masking important activities that are happening now in retail and need to be discussed.
For the Internet of Things, I found a definition to be “the combination of sensors, actuators, distributed computing power, wireless communication on the hardware side and applications and Big Data/analytics on the software side.” This is more of a functional definition, but it shows that there are many prerequisites for the Internet of Things to exist.
Reading a few articles on the subject it has brought together some of technological trends and activities that are critical to retailers into the topic of the Internet of Things or machine-to-machine communication. It is seen by many as the next big thing in computing as semiconductors become pervasive, and mobile communications and Big Data analytics are propelled into the wider economy. We always need examples that apply to our work, and I was introduced to a project SAP is working on with some customers and the European Institute of Technology to look at the store experiences of the future, ideas based on machine-to-machine communication.
Supermarkets want to know the route we follow in the store to maximize the placement of promotions and their key lines. So having the shopping cart with a transmission device they can track that cart through its path in the store. Whilst this is anonymized data that you cannot track it to the individual customer, it does provide fascinating insight as to the paths and routes typically taken. The intelligent shelf is another project, when a customer takes an item from the shelf the stock is reduced immediately. Whilst this may sound an unnecessary overhead, it is crucial to know when stock is below a designated level at the shelf, not when the customer finally arrives at the checkout.
Finally the example that will please most customers: the intelligent checkout where every item in stock is fitted with a tag that can be read at the checkout without emptying the shopping cart.
Perhaps that will make the stores more acceptable and increase store visits to counteract the convenience of web shopping. With check-out services typically accounting for around 20% of all staff hours in a supermarket today, this innovation alone could reduce cost-to-sales ratios in the industry by about 2% of sales—a very significant savings in sector with such thin margins
The examples above cover the possibilities in the store. In a report written by Morgan Stanley they estimated that the use of radio-frequency identification (RFID) chips and precision analytics that improve inventory management could lower the cost of goods sold by 2%. For non-food retail in the UK, that would represent potential savings of £3bn/US$5bn.
This topic will continue to attract innovation as the opportunities develop. I hope you can follow the developments on this topic with me, the next will be a blog before our SAPPHIRE NOW event in early June where SAP will showcase some of the new ideas around the Internet of Things.
References: Morgan Stanley Bluepaper, The Internet of Things