NRF15: Retail's future in the Internet of Things

The future of retail is in the Internet of Things. The big question is how retailers will capitalize on IoT's data.

By Guy Courtin, Vice President and Principal Analyst at Constellation Research

This week I'm deep in the heart of the Javits Center for the 2015 Retail Big Show, running between meetings and navigating the ever growing maze of companies. Every year I go into these meetings wondering what the "big theme" will be for the show. In the past we have had Big Data, omni-channel retail, store level replenishment, eCommerce to name a few.

This year it feels like a continuation of omni-channel and analytics. But the underlying theme I have picked up from the briefings and press releases is the rise of the Internet of Things (IoT) in retail. That's good, because we just published a piece on the evolution of IoT within supply chains, retail and CPG being part of that study. Click here to see the report.

One finding from the research is that retail's readiness for IoT lags behind other industries such as A&D or industrial. In part, that's because these industries have already being practicing IoT for asset management or monitoring of inventory - they just did not have a cool name to label what they were doing. An airplane engine or locomotive manufactured by GE is a large piece of machinery that warrants having some connectivity, as opposed to a pair of Diesel denim jeans.

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However, retailers and their supply chains are ripe for adoption of certain uses of IoT -- especially when it comes to the connected home, connected warehouse, connected truck, or even connected store shelf. The question becomes: What are the near term business cases for retailers? Where will they be able to create the business cases for IoT that will be funded and return a favorable ROI for their businesses? Retail and CPG supply chains have already tried their hands in what we are calling IoT 0.0 and 1.0 -- bar codes and RFID. Will the third time be the charm?

What I will be looking for during my time at NRF is: What are the business initiatives for retailers and CPG companies that can leverage the potential influx of new data that IoT will be throwing off? Many retailers and CPG companies I meet with are already speaking of struggling with the data they already have and how to handle it and make it actionable. IoT has the potential of adding another massive amount of data on top of that existing information. We have advocated that companies in any industry need to ask themselves the simple question - why do I need this information and what business aspect will it impact? This is even more important in the retail space, as many have narrow margins and -- let's be honest -- have been burned by the promises RFID held out but were never achieved.

I am an optimist with regards to IoT.As in every technology evolution, there will, be growing pains. I will be keen to learn where retailers are going with their IoT strategies. Are they just trying to ride the hype wave or do some have real tangible business initiatives that will put some real wood behind the IoT arrow? Stay tuned!