WHY THE INTERNET OF THINGS IS WHAT RETAIL NEEDS NOW

As the industry transforms, a new report from IHL Group explores the ways the IoT can help brick-and-mortar retailers personalize, customize, upsell, and optimize.

The Internet of Things has emerged as a key solution for retailers looking to thrive in a time of radical transformation. The insights from connected devices and data analytics are behind some of retail’s great success stories. Retailers are finding that IoT-based solutions are saving money, delighting customers, improving inventory accuracy, and helping employees make smarter decisions faster.

The IoT holds enormous potential for retailers, but IoT solutions are still far from widespread in the industry. Many retailers may not be sure how to start an IoT initiative, even if they know an investment in the technology will yield returns. We talked to Greg Buzek, president at research and advisory firm IHL Group, about a new report investigating areas where the IoT can most help retailers. We started with a question about retail’s “trillion-dollar problem.” 

Q: Why is inventory such a problem for retailers?

A: Too many retailers still rely on physical inventories. The results are imprecise and corrections are little more than guesses. Retailers are often unaware of how big the problem is. You can see the disconnect in two conflicting stats. Retailers will tell you that they are in stock 92 percent 1 of the time because that’s what their systems are reporting. But our research shows that customers find what they are looking for only 75 percent of the time. Over $1.1 trillion vanishes in the gap between those two numbers every year. 

Q: What can retailers do about the inventory problem?

A: Retailers have been focused on this problem, but short of doing daily full physical inventory counts with personnel (which is extremely costly) the issue really doesn’t go away without implementing a technology solution, because merchants and executives are making decisions on faulty data. In our view, there are two technologies that provide a huge step forward in reducing the problems of out-of-stocks and overstocks, and those are RFID tagging and video analysis. We’ve seen inventory accuracy rates reach 99 percent after retailers install the right combo of tags, sensors, and cameras. 

Q: How does that work?

A: This is the power of the Internet of Things in a nutshell. When you have item-level insight into what’s in the store, where it is in the store, what’s in the warehouse, and what’s in transit, sales associates can replenish shelves and fetch strays from dressing rooms more efficiently. Overstocks and out-of- stocks are dramatically decreased because decisions are made on accurate information, not counts off by 25 percent or more. Looking a little bit into the future, advanced inventory systems will be tied to customer data programs that allow sales associates to make alternate suggestions when an item is out of stock. 

"Too many retailers still rely on physical inventories. The results are imprecise and corrections are little more than guesses. Retailers are often unaware of how big the problem is."


— Greg Buzek
President at Research and
Advisory Firm IHL Group

"What we are seeing now is a giant reconstruction project for retail, and the IoT is playing a big role in this transformation."


— Greg Buzek
President at Research and
Advisory Firm IHL Group

Today’s connected shopper craves an authentic and customized experience that delivers on a retailer’s promise of curation and immediacy. Retailers now recognize that they must deliver tailored customer experiences to retain those customers. See the results of Forrester’s in-depth surveys with retailer decision makers in the US, the UK, Germany, China, and Japan.

Read the report

Product and Performance Information

1 "What Will It Take For IoT To Scale in Retail?" a white paper by IHL Group, May 2017