Special Report: The Internet of Things

As a concept, the Internet of Things, or IoT, is easy to understand. It’s simply everyday objects, from a car to a Coke can, sharing data with other objects via the Internet.As a potential reality, IoT can seem overwhelmingly complex even when looked at just from a shopper marketing perspective. For marketers, it’s not as much about “things” as people. “It’s all about creating personalized experiences that engage the shopper,” says Chris Riegel, CEO of Stratacache, a retail digital technology provider based in Dayton, Ohio.Riegel lists some of the IoT-enabling technology already in use (beacons, Bluetooth low energy, in-store Wi-Fi), kicking off a conversation about the meaning, current state and potential of IoT in the shopper marketing space.What is the Internet of Things?Anne Marie Stephen: Along with beacons, sensor tags that can track merchandise and inventory in the retail environment are part of it, for supply chain management and inventory, and also to understand consumer behavior in direct relationship to a product. Was it picked up? Tried on? But the devices are just one piece of it. IoT also includes data and analytics. Loads of information can be gathered, so it’s really about robust data collection and the ability to integrate, analyze and act on that data.Shaun Kirby: At Cisco, we like to refer to it as the Internet of Everything (IoE) because it encompasses so much more than just connecting things. It’s the networked connection of people, processes, data and things. In today’s retail environment, context is king, so IoE also involves applying real-time, advanced analytics to people, processes, data and things in order to gain intelligent insights that retailers can use to improve all aspects of the retail value chain from customer experience to merchandising to operations to the supply chain.What devices relevant to shoppers can be connected?Lina Yang: Anything and everything can be connected. The more important thought exercise, though, is what should be connected. And that starts with the question of what kind of user experience will be useful and desirable. Which fewest devices can get the job done and create an ecosystem that would make the experience holistic and seamless? Let’s just take one example – the scanning trash can. That’s great if everything I ate came in a package with a UPC code and I only ate at home and I don’t recycle. People just don’t live like that.Manolo Almagro: There’s a distinction between smart devices and connected devices. Smart devices use things like context, personal profiles and real-time data. For example, a smart fridge will be able do things like scan your food preferences, look at your social feeds for what you ate at a previous meal, then see what food items are nearing their expiration date to provide timely recommendations on recipes that use those ingredients so nothing goes to waste.A connected device can be a sensor that provides a discrete data stream that can be used to execute an automated task. This is where I’d categorize the Amazon Dash button: It’s a physical button that’s wirelessly connected to your Amazon account. When the button is pressed, the data is sent to your Amazon account and triggers a “buy one unit of this product now” command.“Anything and everything can be connected. The more important thought exercise, though, is what should be connected.”—Lina Yang, HersheyAmazon Dash was described by one industry publication as neither a farce nor a force. Thoughts?Yang: I’m actually really impressed with how Amazon is prototyping and testing publicly. Under our very noses, they’re learning what works and doesn’t work for the shopper experience, and it makes me wonder what they’re doing privately. With the Amazon Dash, questions crop up. Which products are truly appropriate for mindless and repeated consumption? What happens to the agency of choice? How many buttons will a household really want around the house? But what they’re learning on the back end that answers these questions, as well as the cadence of shopping for those items and more, is of tremendous value. I think the Dash button is a means-to-an-end vision.How will connected experiences change shopper behavior?Kirby: Connected life could change the shopping experience significantly, further blurring the bounds between channels like online and brick-and-mortar retail, making the shopping experience continuous and automated. The connected pantry, supply closet or refrigerator offers the convenience of predictive, proactive ordering, so the consumer doesn’t have to worry about shopping for frequently used items or running out of them. The consumer may go directly to the manufacturer or most cost-effective source, so retailers will need to think about how to add value in becoming a trusted supplier through services like bundling with a wider range of products for more convenient ordering or through life coaching to help with things like health and fitness and other lifestyle goals.What products or categories will benefit most from IoT?Riegel: I’d say considered purchases. A brand or retailer can take advantage of a customer-initiated conversation while they are in the purchase zone.David VanderWaal: I think consumer products that are bought on a regular basis are a slam dunk. With the help of connected appliances or sensors, your coffee, your laundry detergent would be sent automatically when you get low.Kirby: CPG companies have shown great interest in IoE in stores because it gives them deep new insights into shopper behavior, brand reception and merchandising effectiveness. Categories like consumer electronics, tools and appliances could benefit even more through product instrumentation. By equipping products with sensors, brands can learn a wealth of information about how products are used, leading to better service and product innovation.“There have to be some key retailers who are going to take the leap of faith to enter this bold new frontier.”—David VanderWaal, LG ElectronicsWhat are the biggest challenges before IoT is adopted at retail?Stephen: The data and analytics pose a huge challenge. We’re looking at having more data available than we ever have before. What resources do a brand or retailer have internally to manage that information? What systems do they have in place? How does that data integrate with other data sets that they use? The data itself has no use unless you can harness it and harvest it for actionable insights.Kirby: Another technical challenge is providing recommendations that are genuinely useful to shoppers. Two ingredients are required for this: deep contextual information about the shopper’s current experience in detail, in addition to their past purchases and preferences, and intelligent algorithms to discern what assistance or recommendations would be most helpful and appropriate and at what time.Almagro: Technical challenges aside, the critical milestones for accelerated adoption will be determined by shopper confidence in three key areas: data security; privacy – who’s going to see my personal data and what will they do with it; and value proposition – getting more personalized and efficient retail experiences based on the amount of data shared.How long will it be before the IoT significantly impacts retailers and brands?Almagro: With all the hype and huge revenue projections, IoT will gain substantial traction in the next three to five years. This pace will place considerable pressure on retailers to build out the infrastructure required to secure and process the data streams that will be available when the IoT hits critical mass. Brands will experience similar pressure because shoppers will have increased expectations for more personalized, real-time, context-driven experiences.VanderWaal: There really hasn’t been any technology with scale; you do need to have an app open to have these experiences in-store. And, yes, there’s Foursquare and Shopkick, which have a decent amount of scale, but nowhere near the penetration needed. I think that’s coming within the next 18 months, though, and then there also have to be some key retailers who are going to take the leap of faith to enter this bold new frontier, making sure that the messages are relevant and aren’t just noise to a shopper. Once that happens, I would say within the next three to five years you’re going to see this in most of the mass, probably a lot of the grocers and some of the electronic superstores.“IoT will gain substantial traction in the next three to five years. This pace will place considerable pressure on retailers and brands.”—Manolo Almagro, TPNDo privacy concerns present an obstacle?Riegel: Consumers are wary of anything that comes across as collecting and sharing data on their activities; however, research indicates that when offered something of value in exchange, consumers are more willing to forego inhibitions on privacy. When shoppers are connecting on their terms using their devices, privacy becomes much less of a concern, but you have to demonstrate the value of the connection.VanderWaal: All we have to do is look at Facebook to realize that people are actually open to sharing a lot of data, but consumers have to be the ones in control of what they do and don’t want to share.Does IoT pose a threat to brick-and-mortar stores?Yang: People will always crave experiences. They crave things that will stimulate and delight their senses. To that end, I don’t think physical retail experiences will go away. But they will, and must, change. I can see a future of bifurcated physical stores – those that turn into meaningful destinations where the act of commerce is in the background, ceding way to truly immersive, enjoyable and stress‐free experiences. The others may turn into “lights out” automated warehouses that serve simply as a distribution center for delivery of goods.Kirby: IoE, in fact, can help improve the in-store experience, thereby ultimately bringing more customers to the store. For example, retailers are leveraging smart digital signage, mobile applications and in-store sensors to understand where a shopper is in the store, what products they’re looking at, when they’re seeking additional product information or when to suggest complementary products. They can use this intelligence in real time to send relevant offers to the consumer’s mobile phone, display additional product information on a digital sign or even send a sales associate over to assist the shopper.Stores can use facial recognition technology to recognize a customer at the entrance and provide sales associates with background information on the customer’s buying habits and shopping preferences, enabling the sales associates to better help the customer and provide a more tailored experience. Retailers can also use augmented reality apps on consumers’ mobile phones and wayfinding technology to help shoppers quickly find the items they’re looking for in the store. Stores are already using IoE technologies to eliminate the checkout line as we know it today, to make shopping in-store faster and more convenient.When things start to “think” for consumers, what will be the biggest challenges or opportunities for brands and retailers?Yang: If effective marketing is all about tapping into emotional needs, and an unemotional device is doing the thinking, umm. … And you can probably forget about all of those unplanned purchases that made up a big portion of your sales – yikes! But the silver lining is that by thinking about future states now, there’s always a way to turn challenges into an opportunity.

Special Report: The Internet of Things

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