The adoption of the Internet of Things (IoT) technology is growing rapidly among multiple verticals, and the retail industry is no exception. Having exceeded $52 billion in 2023, the global IoT in retail market is expected to grow at a CAGR of 29.3% throughout 2024-2030, as highlighted by Grand View Research.
IoT enables retailers to establish networks of interconnected devices and sensors and collect vast amounts of information in real time, including customer, inventory, and employee data. By processing and analyzing this data, retailers can derive valuable business insights, helping improve business operations and customer service.
This article covers the top IoT use cases that showcase how a retail business can benefit from the technology.
Inventory tracking and control
The use of IoT enables retailers to track their inventory, including raw materials used in manufacturing and products intended for sale, in real-time, which can enhance and facilitate inventory management significantly. For example, a retailer can use RFID IoT readers to collect inventory data from RFID tags on facilities’ walls or store shelves.
RFID IoT readers can transmit the collected data to a centralized digital solution, such as an inventory management or enterprise resource planning system, for further processing and consolidation. Logistics team members can easily access this data to track stock and transit inventory.
In practice, they can check the quantities of particular inventory items across warehouses to optimize inventory levels more effectively. In parallel, they can monitor the condition of the company’s products and materials to prevent inventory spoilage and waste, which can lead to unnecessary financial expenses.
Macy’s, one of the oldest American retail chains operating for more than 165 years already, has implemented IoT and RFID to enhance inventory visibility among its online and offline stores. The combination of two technologies helped Macy’s mitigate inventory losses attributed to inventory theft, increase the accuracy of demand forecasting, and fine-tune inventory levels to minimize storage costs. In three years, the company’s inventory turnover improved by 15%.
Supply chain optimization
Retailers can maximize the speed at which they deliver products to customers by enabling supply chain optimization, and IoT can come in handy here. Specifically, a company can use IoT to collect freight data via GPS and RFID tags located in vehicles and freight packages. The processing and analysis of this data enables a company to optimize its delivery routes and eliminate bottlenecks in the supply chain, which can result in enhanced shipping speed and customer satisfaction.
Danish shipping and logistics services provider Maersk helps companies from various industries, including those operating in the retail market, transport goods around the globe. The company operates a huge fleet of 700 vessels, transporting more than 12 million containers annually. The adoption of IoT technology allowed Maerks to increase the visibility of transported goods across its complex supply chain.
Maersk’s customers can now track the location of their goods in real time and better plan for their receipt upon arrival. This enables retailers to reduce labor costs and optimize storage space, enhancing their satisfaction.
Marketing personalization
The widespread adoption of IoT devices among consumers, including wearables and smart home sensors, allows retailers to collect vast amounts of customer information, including behavioral and geolocation data. Marketers can use this data to launch more targeted and personalized marketing campaigns to convert leads into buyers more efficiently.
Samsung, a South Korean electronics manufacturer and retailer, is known for its powerful wearable devices, such as Galaxy Watch7 and Galaxy Ring. The variety of data gathered via these devices (from media content to geolocation and health diagnostic data) is used by Samsung to create personalized marketing content and launch more targeted advertising campaigns for millions of consumers worldwide.
Product usage monitoring
After a product is delivered to an end consumer, a retailer can monitor its usage continuously via IoT technology and thus gain multiple business advantages. First, product usage monitoring enables retailers to define if a product requires maintenance and notify customers timely, thus improving overall service quality. Second, a retailer can consider product usage data when designing new products to enhance their efficiency and safety or improve their look and feel.
Volvo, a Swedish automobile manufacturer and retailer, equips vehicles with IoT-enabled telematics to collect data about their performance in the natural environment. The company utilizes this data when developing new product lines and automotive software, thus ensuring driving safety and comfort to customers.
Product layout optimization
Among other things, a retailer can use IoT technology to improve an in-store product layout. For example, a company can implement smart cameras complemented with IoT to recognize consumer behavior around the product shelves and analyze their reaction to certain layout options. By analyzing this information, the retailer can determine and maintain an optimal product layout, thus boosting sales of certain items and increasing the average check size.
Alnatura, an organic food manufacturer and supermarket chain located in Germany, has implemented a platform integrated with IoT and AI technologies to optimize inventory levels and enhance product layout. By using the platform, the company was able to create more efficient planograms for its 139 stores and cater to the diverse preferences of local shoppers, resulting in a 6% reduction in out-of-stock and 4% growth in the fresh assortment revenue.
Final thoughts
Companies that are drifting towards retail digital transformation are implementing the Internet of Things at an accelerating pace. By implementing IoT technology, retailers can collect a wealth of data that can be analyzed and used for a wide variety of purposes.
Potential use cases for IoT in the retail industry vary from inventory tracking, product usage monitoring, and marketing personalization to supply chain and product layout optimization. Regardless of a particular application area, it is recommended for a retailer to resort to IoT consultants prior to the project’s start. A consultant can provide strategic guidance and deliver a robust IoT solution to help a retailer ensure smoother and more cost-efficient technology adoption.