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