Smart devices are becoming more ingrained in today’s technology-obsessed culture as we embrace the internet of things (IoT): particularly in the home, where smart thermostats are already paving the way for promised savings of up to thirty percent. Likewise, in retail, smart shelves, RFID ceiling readers, interactive displays and digital fitting rooms are starting to move beyond the drawing-board as retailers start to acknowledge the benefits of improved customer service and more revenues from near hundred percent inventory accuracy.
The online fashion retailer ASOS, for instance, estimated savings of around £14m from its first year of using warehouse automation technology, while industry analysts at Kurt Salmon (in its 2015 RFID in Retail Study) found margin improvements of over 5% for soft-line retailers who had implemented RFID for inventory accuracy and replenishment.
The premise for the IoT is really about automation. But it’s also largely to do with efficiency and information in real-time. Connected devices signify a leap towards a more intelligent, data driven future. IoT has a lot to offer bricks-and-mortar retailers who’ve been left a bit behind, technology-wise, compared to online and mobile retailing. IoT can help customers reduce the time and effort involved with shopping, providing more choice and greater levels of personalisation.
A proliferation of mobile devices, cloud-based retail solutions and cheaper and smaller sensors to continually stay in touch is making IoT in retail more of a reality. A recent survey by GS1 showed that over a quarter of the top 20 retailers in the UK – including M&S – are already using RFID in stores. Respondents said that inventory accuracy was the main driver for adopting RFID.
With the cost of RFID tags having fallen dramatically to just a few cents each, there are expected to be over 10 billion items of digitally connected clothing over the next three years, predicts RFID labelling manufacturer Avery Dennison. That’s some three billion more RFID tags in the world than there are smartphones. What’s more, investment in IoT in retail is expected to reach US$2.5 billion by 2020, according to Juniper Research.
By 2020, Gartner predicts than more than half of major new business processes and systems will incorporate some element of the IoT. Up to 26 billion internet-connected ‘intelligent’ or ‘smart’ devices will be installed, generating some US$300 billion by the end of the decade. Gartner says a thirty-fold increase in internet-connected physical devices will “significantly alter how the supply chain operates.”
There are many technologies that help improve our supply chain processes, including radio frequency identity (RFID) tags and barcodes that gather information for improved efficiency. Increasingly - especially for valuable assets and high-value goods like premium fashion lines - products are being tagged so that everyone knows where the goods are and what condition they’re being transported in. A pallet in a warehouse, or on a truck, can transmit messages showing exactly what products, sizes and style variations are included. RFID and automated data capture gives real-time visibility of stock and avoids manual counting and inevitable human error.
Consumers are driving the need for more IoT in retail. People now expect better service, thanks in part to heightened expectations from doing more and more shopping with technology. With the gradual shift towards more online shopping and popular services like ‘click and collect’ and same-day deliveries, IoT means that people can more efficiently collect orders placed online.
The stores and retail outlets of tomorrow are likely to see more interactive mirrors, personalised digital shopping assistants, smart price tags, 3D-apparel fitting and sizing apps. RFID is an integral part of IoT and the future of technology in retail. After all, in-store beacons, wearables and so on all rely on digital connectivity.
For instance, smart mirrors, which at US fashion retailer Rebecca Minkoff allow customers to choose outfits directly from a digital catalogue displayed in the fitting room, have helped increase the number of items shoppers purchase by 30 percent; while connected mirrors at Ralph Lauren in the US are linked to every item of clothing in a few stores, thanks to RFID chips. Hugo Boss has used heat sensors in some of its fashion stores to track customer movements, so that it can position its premium products in high traffic areas, says Reuters. Levis, too, has used store-based analytics for tracking inventory item popularity and shopper movements in certain US stores . Using beacon technology, customers can even receive push marketing notifications on their smartphones as they approach discounted products.
Connected retail solutions lead to far better customer service and personalisation that matches the right products to the right customer – something that online retailers (like Amazon) are generally much better at.
Big data analytics and connected devices promise so much more in terms of making informed business decisions using accurate data, rather than relying, as we have in the past, on guesswork and out-of-date forecasts.
The only real concern is that with the proliferation of so much data, how can you really make any meaningful sense out of it? A study by the US National Retail Federation and Forrester last year found that turning data into useful business insights was one of the biggest challenges among CIO’s in retail. And that’s where RFID business intelligence experts like Detego come in.
With every article tagged, fixed readers in a store can help split it up into different zones and monitor the exact movement of goods. Staff, armed with iPad’s or wearable technologies, can then be alerted to re-stock any missing gaps on the shelves, or to bring a different size of garment requested from a digital fitting room.
Contactless payments, which are already in their ascendency, will become the norm, allowing shoppers to pay for goods faster - with smartphones, smart watches and other wearables - and thus avoid queues at the checkout. For the retailer, this helps set up a direct link with the customer and facilitates further interaction. And these interactions provide invaluable data insights into shopper behaviour.
Another popular benefit of tagging goods with RFID technology - particularly among high-end fashion retailers - is to prevent theft. With around five percent of goods in the world being counterfeit, many luxury goods retailers have been drawn to the technology because small, imbedded chips in the merchandise make product authentication a lot easier. And this helps reduce fraud in the process.
Then there’s the complicated business of inventory management in the fashion business. Given ever faster fashion cycles - with retailers like Zara now launching several collections a year - changes to clothing designs have to be quick and these businesses have to rely on accurate, up-to-the-minute data on stocks and sales around the world . Whereas many retailers might plan 6-12 months ahead to manage ranges and rely on inventory data that’s only 75% accurate, fast fashion retailers can typically make changes in as little as two weeks. Nonetheless, the downside of having so many collections is lots more stock. And this means a lot more potential for markdowns, if you get things wrong.
Accurately forecasting demand has always had its limitations and stock levels can be adversely affected by many outside factors. Irregular spikes in demand can be caused by sudden fashion crazes, or winter stock left on shelves due to unseasonably warm weather.
So where smart devices can really make a difference is in their ability to more closely monitor and deal with more variables than ever before. For example, when stock is low, the IoT can be proactive by placing orders for restocking shelves automatically, as well as taking into account weather patterns and social media fashion trends.
Retailers can tailor ranges according to what styles or sizes are most likely to suit a particular region, or promote more winter jackets front of store when temperatures are due to fall.
With over half of retailers surveyed in an Accenture report citing inventory accuracy issues as a major barrier to rolling out click-and-collect programmes, RFID will clearly help retailers fulfill their omnichannel dreams. Many omnichannel initiatives are not yet working especially well, arguably because most retailers don’t have an especially accurate view of inventory. It’s not uncommon for a retailer’s IT system to say there’s a particular t-shirt size still left in stock, when in fact it was actually sold a few hours ago.
Many customers now expect same-day deliveries to their home; or, at least be able to buy online and pick up wherever’s most convenient. Alas, most retail supply chains were originally built for shipping large boxes or batches of clothes to stores, not single items directly to customers. Retailers need to rethink the store experience and make sure the supply chain is smart enough to deliver.
So, it’s time for retailers to get smarter and adapt to new ways of doing business and exploiting the connected technologies out there. After all, it seems a small price to pay for time savings of up to 90% and reducing out-of-stocks by 50%, not to mention improved customer service and near 100% stock accuracy.
Uwe Hennig is CEO at Detego.