How IoT Can Disrupt the Traditional Retail Business
If the Internet of Things (IoT) is causing a wave of disruption across the market then the retail industry is poised to ride the crest of that wave. Unlike any other sector, the retail industry has a direct contact with one of the largest population of potential consumers that fully embrace technology and innovation. Retailers need to stay current with the latest technologies to earn the loyalty of the next-generation consumers and capitalize on emerging business opportunities. According to a recently released TechSci Research report, ‘India Internet of Things (IoT) Market Opportunities & Forecast, 2020’, the IoT market in India is projected to grow at a CAGR of more than 28% during 2015-2020.
According to Boston Consulting Group and Retailers Association of India report titled ‘Retail 2020: Retrospect, Reinvent, Rewrite’, India’s retail market is currently evaluated at $600 bn and is expected to double to $1 tn by 2020 largely driven by income growth, urbanization, attitudinal shifts, and most importantly the growth and penetration of the Internet across the country. Modern trade is expected to grow three times to $180 bn in 2020 from $60 bn in 2015 and eCommerce to grow at an even faster pace to quadruple in the same time to become a $60-70 bn market. The digital platform is also shaping the way consumers buy and data suggests that there will be a rapid increase from the 35 mn people buying online to about 100 mn in the next two years.
IoT: Driving Innovation for Retail
IoT is viewed as a major driver in the Indian retail sector. There is no question that the connectivity of ‘things’ will only continue to affect how businesses run in the future.
Some of the major IoT impact areas in retail could be: Inventory management, fleet management, location based promotions and offers, location-based advertising, connecting the store shelf and the back room, improving the traceability of inventory before and after the point of sale, reducing fraud and shrinkage along with maximizing in-store flow management, etc.
In the retail sector, consumer engagement is the prerequisite for sales and brand equity. However, consumer retention can happen only if the supply chain is agile and smart to keep retailers up and running. The supply chain execution can be intact and flawless if predictive maintenance and ‘self’ healing minimizes the downtime of the machinery and equipment involved. IoT is the key to the effective functioning of the same. Today retailers using the IoT to generate an ‘ecosystem’ which is poised to gain market advantage and truly capitalize the opportunity.
IoT offers retailers opportunities in three critical areas: Customer experience, the supply chain, and new channels and revenue streams. In fact, it is estimated that retailers seeking to capitalize on IoT technologies will spend approximately $2.5 bn in hardware and installation costs by 2020 which is nearly a fourfold increase over this year’s estimated $670 mn spend.
The main challenge retailers face today is with regard to the enormous volume of data which is generated—the storage, analysis, and application of this data is essential for retailers in the competitive market today. IoT ensures easy access to data while big data analytics and related solutions benefits retailers with regard to managing the scale, velocity and varietyof data generated. The better the management and analysis of this large amount of data, the more effective the strategies for growth and increasing market share.
The IoT in the Indian context is however not without its fair share of challenges. Some of the hygiene factors that broadly govern the IoT landscape which are a concern in the Indian context are inadequate telecom reach, erratic power supply, security and privacy of data, IoT standards and above all affordability, which is the most important factor that will ensure large scale adoption of IoT for an Indian retailer. This is the most crucial time for India to focus on hardware and software products. There will be tremendous opportunities to innovate from components to devices to systems to software analytics to services. To participate and succeed in IoT, Indian retailers needs to innovate. Product level innovation and ecosystem is the key for success and this is what will provide organisations with a competitive edge. Retailers that take the lead in this space stand to gain an important advantage in an already competitive environment. Early adopters will be positioned to more quickly deliver IoT-enabled capabilities that can increase revenue, reduce costs, and drive a differentiated brand experience. (The author is Managing Director, Teradata India) email@example.com