While the vertical applications of IoT in big industries—such as connected cars and smart factories—currently get most of the attention in today’s market, IoT in retail is quickly becoming one of the major use cases for digital transformation. This shift is coming about as the traditional retail industry space is now facing huge pressure to transform itself as e-commerce continues to offer more convenient and cheaper alternatives to traditional retailing. As such, many retail chains are increasingly turning to IoT in an attempt to operate more efficient organizations and gain a better understanding of their businesses.
At a global level, this push is being largely driven by the US, where retailers are facing extreme pressure from “e-tailers”. In the last year, over 4,000 retail stores have closed, and almost half of US shopping malls are expected to close by 2023. The US media is calling this phenomenon the “retail apocalypse” and this trend is expected to continue in the future. Japan’s market is structurally very different from that of the US, but the continued rise of e-commerce in Japan will also drive change in the domestic market, and therefore retailers will increasingly look to technology in order to enhance their competitiveness.
Retail IoT will deploy a wide variety of technologies in order to create more intelligent and efficient organizations, with some of the most important being big data analytics, connected sensors, artificial intelligence and service robots. There are a variety of challenges that retailers are facing where IoT can offer improvements to business operations. One of the biggest challenges in Japan is labor shortages, which is why there is a movement to increasingly use robots in stores and to move towards automated checkout systems to reduce manual labor. Current demand forecasting and shelf stocking are also somewhat limited in terms of data frequency and specificity, and hence big data analytics, artificial intelligence and smart shelves are starting to be used to give companies a better understanding of their customer demand and to automate purchasing functions. Once these technologies are implemented, retailers will need less physical space and stores can be smaller, allowing for savings on rent. Retailers are often limited in terms of what kind of data they have about their customers, which will allow an omnichannel experience that will increase the degree of targeting, and retailers can use this in their marketing. Blockchain technology is also becoming more popular in terms of giving retailers the ability to track the life cycle of their products in order to limit fraud in their supply chains.