By Guy Murphy, industry technology evangelist, MuleSoft.
E-commerce is thriving in the UK. According to IMRG, £133 billion was spent online in 2016—a number expected to increase by 14 percent this year largely due to sales made on smartphones. As a result, traditional retailers need to meet changing consumer expectations and stay competitive by offering true omnichannel experiences.
Critical to offering customers seamless omnichannel experiences is a careful orchestration of digital technologies, largely explaining why 69 percent of global retailers plan to increase digital transformation investments this year. Chief among the transformative technology that retailers are investing in is the Internet of Things (IoT), which is set to have the biggest impact on the industry since the advent of e-commerce.
A transformative journey
The challenge many retailers face as they look to create a new generation of connected experiences is that they must integrate new IoT technology—such as Radio Frequency Identification (RFID) and smart devices—with legacy systems, such as ERP applications and AS/400. However, legacy systems are the sleeping risk monster when it comes to IoT, as integrating monolithic systems built up over decades with emergent SaaS applications can be a major challenge. As a result, many retailers are failing to join the dots in a quick and cost effective manner.
MuleSoft research shows over half of UK consumers think that retailers provide a disconnected service and they don't get a personalised experience. If retailers fail to address these shortcomings quickly, innovative new approaches such as the IoT-enabled Amazon Dash could cut retailers out of the purchasing process altogether. For example, by allowing customers to reorder products for home delivery at the push of a button, these services provide a whole new value chain for consumers and eat into highly lucrative retail markets, such as refills.
However, if retailers can connect the dots effectively, they can create more compelling consumer experiences, compete effectively and drive up revenue.
Connecting the dots
To overcome connectivity issues, retailers must first realise that IoT is as much about integration as it is about the internet. Those that successfully create an "Integration of Things" can deliver personalised shopping experiences, streamline supply chains and even create new revenue streams.
RFID sits at the heart of this proposition, allowing retailers to digitise and then track physical assets across the supply chain and in-store. For example, take an item of clothing that's been bought online then returned to a physical store. With RFID tagging, the retailer can quickly scan the merchandise back into the system, so returns can be reintegrated into the supply chain much faster, enabling far greater efficiency in inventory management.
IoT-based technologies like RFID also enable retailers to offer highly personalised online shopping experiences within brick-and-mortar stores. For example, U.S. retail giant Target uses beacon technology to send customised recommendations and discounts to consumers that opt into its mobile app. A parent might receive a discount on nappies, while an athlete might receive a discount on sports equipment.
Additionally, if a customer adds their shopping list into a store's mobile app, a retailer could use smart lighting to guide shoppers to desired items or suggest complementary products. The retailer could further use customers' preferences to power targeted ads on smart billboards in the store or trigger the appearance of a store assistant armed with an understanding of the customer to help them find what they're after. This is very much at the cutting edge of what's possible, and we're already starting to see some movement towards more joined-up experiences through IoT integrations.
For example, Costa Coffee is using smart vending machines to boost sales by altering products according to what's popular in a local region or store at any given time. McDonald's is doing something similar with its own smart terminals, where customers place their orders. In the past, McDonald's had no way of understanding what was driving sales until the end of trading, but now it can be more agile and respond to demands in real time by changing its menus in line with what customers are ordering and based on stock availability.
Retail's connected future
IoT technology isn't beneficial in isolation; it needs to be connected to a retailer's other systems and applications to add value. As a result, retailers must integrate their IoT endpoints with the systems, data and applications that underpin their business. If they join these dots successfully, retailers can generate a single "view of the truth" in real time across the organisation.
This can best be achieved with API-led connectivity, which is critical to a retailer's ability to share information between its digital technologies, both internally as well as externally with the emerging market of suppliers and vendors. In today's micro-specialist environment, rarely do consumers get everything they want from one supplier. Retailers need to play into the sharing economy, rather than try to own every aspect of their customer's journey.
In order to effectively join the sharing economy, retailers can use their API strategy to organically build an application network, where any existing or newly emerging system, application, data source, or device can be quickly plugged in and out as market conditions change. Armed with such a capability, retailers can respond with speed and agility to any new business opportunity.
While we're still in the early days, IoT innovators are beginning to trial these technologies in their major flagship stores. In the coming years, these early adopters will begin to standardise the operating models and technologies that others will follow in the future. This will mark a major shift for the industry, as IoT use-cases begin to stabilise and platforms start to work better at scale.