How The Internet of Things Will Shake Up Retail In 2015

Oracle Guest , Oracle

By David Dorf

Just as there’s no pause button or adjustment period between one year and the next, technology doesn’t wait for laggards to catch up. That’s why, as we barrel into 2015, smart retailers are rapidly adopting one or more of a half-dozen technological breakthroughs that are beginning to permanently change how businesses and consumers interact.

In a nutshell, these half-dozen technologies are part of what is called the Internet of Things (IoT), which is characterized by the automated transmission of information over a network, without need for human interaction.

Each of these technologies relies on IoT in a different way, and clearly provides a competitive advantage or differentiator.

In the context of retail, RFID is the most well-known example of IoT. According to Bill Hardgrave of Auburn University, tagging products so they can be tracked and counted has huge benefits for retailers. Using RFID tags, retailers can expect 99% inventory accuracy, a 50% reduction in out-of-stocks, a 70% reduction in shrinkage, and sales lifts in the 2% to 7% range.

Here are six examples of how IoT is already changing the retail landscape forever:

Home replenishment. I believe the biggest potential for the IoT is with home replenishment. Imagine pressing a button on the wall of the laundry room whenever you run out of detergent so that a new bottle is automatically ordered at your favorite online store for home delivery. These generic buttons could be configured for different products and placed around the home in strategic spots. Connecting home automation to e-commerce sites could be the next wave of retailing.

One example of this, Egg Minder, is already on the market. It’s a smart egg tray that keeps track of how many eggs are in the refrigerator and how close they are to expiring. It communicates via Wi-Fi to a smartphone app, ensuring consumers will never run out of eggs again.

Virtual reality. An emerging branch of IoT is wearables—the many different smart devices that people can now wear. Something like Google GOOGL +1.27%Glass could provide store managers with flash reporting displayed as they scan the store, comparing each department’s plan versus actual sales. Using the Google Glass prototype that Oracle ORCL +2.06% built, store managers can also scan bar codes to get extended product information as well as inventory positions. And override requests at the POS pop-up on Glass would allow managers to make decisions about each of them remotely.

Wireless sensing and tracking. In-store sensors such as Bluetooth beacons can track smartphones throughout the store and record path-to-purchase data that can later be used to optimize store layouts. They can also be used to target shoppers as they traverse the aisles, providing contextual information and offers as they go. And of course this extends to checkout, where shoppers can use their NFC-equipped contactless cards to pay for goods. Alternatives like Apple AAPL -0.86% Pay, Softcard, PayPal, and CurrentC will expand payment capabilities further by including digital coupons, rewards, and better security.

Home hubs. With the home automation trend in full swing, companies like Lowe’s, Home Depot HD +3.08%, and Staples have released their own “hub” products, which bridge protocols that vary across different vendors’ products. Using these hubs, consumers can control their lights, HVAC, curtains, closed-loop cameras, and such with a single smartphone app.

Health data mining. Self-health is another trending area. People can monitor their exercise, weight, and even how long they brush their teeth with devices connected to the Internet. Analytics mine the data for patterns and provide suggestions for improvement. It won’t be long before retailers like Walgreens and CVS offer to analyze this data to better diagnose and prescribe remedies.

Combining public and private data sources. My favorite IoT product has to be Droplet, a smart sprinkler that uses weather and soil information to determine the perfect amount of water to dispense for plants and grass, thereby saving as much as 90% on water bills. Never again will we water the grass an hour before it rains!

This sort of technology is already being used by farmers—combining genetic information about their crops with soil data from their land and a variety of public weather data sources to determine how closely, deeply, and frequently to plant seeds or spray herbicides on a given square of farmland.

With the ubiquity of connective networks, inexpensive sensors, and cloud-based data storage capabilities, technology is no longer the inhibiting factor when it comes to disrupting the retail sector. The stores that outperform in the coming year will be those whose leaders have the imagination and insight to put these emerging tools to use in ways that differentiate their organizations from the competition.

David Dorf is senior director of technology strategy for Oracle retail.