Internet Of Things Has Potential Value Of $1.2 Trillion To Retail Industry
The McKinsey Global Institute projects an optimistic future where IoT technology helps connect customers to physical retail locations.
While many have speculated positively on the value of the Internet of Things, a report from the McKinsey Global Institute projects an even more hopeful future for the catchall term for connected devices than previously predicted, especially in regards to local retail.
The report covers the full extent of IoT’s potential, projecting anywhere from $3.9 to an astounding $11.1 trillion dollar global economic impact by 2025. Of that, roughly $410 billion to $1.2 trillion will impact the retail industry and how local businesses and services interact with their customers.
Automated checkout systems alone could add up to $380 billion in potential value but combined with the many other retail uses of IoT, McKinsey believes the value could be anywhere from $410 billion to $1.2 trillion by 2025.
The lion’s share of spending from IoT’s emergence may be tied to the addition of automated checkouts. But other features will also see significant investment. Real-time advertising in the form of in-store promotions through the use of beacons, laying out aisles in a way that is best to connect with consumers’ portable devices , and inventory management can all be thoroughly upgraded through IoT to drive retailers’ revenue.
As many beacon and wearable proponents have noted before, the primary influence of IoT is intended as a tool to enhance the “in-store experience.” McKinsey reports an increase of 3-to-5 percent in productivity in stores that use beacons, projecting a potential economic benefit of $89- to $348 billion a year.
The report notes that these in-store, real time promotions will offer the greatest advantage to large companies that already have a comprehensive, built-in database on their customers and will more easily be able to integrate technology and data sources quickly. However, initiatives like Facebook’s giveaway of thousands of free beacons will hopefully open up the market for smaller retailers to use as well.
In short, IoT will have a major impact on the way customers interact with retailers. McKinsey does report on some potential roadblocks to mass IoT adoption, namely the barriers between objects running on different operating systems and the lack of a universal means of communication between devices. Hopefully, those barriers will be dissolved over the next few years. If they are, McKinsey’s optimistic future for the technology could one day be a reality.