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The IoT Era Has Arrived — But What Does That Mean For Retailers?

Media and ad vet Greg Kahn believes that IoT is already transforming the physical shopping experience and that local businesses need to catch up to the advances.

When it comes to IoT, what's "next" is what's "now" for retailers and shoppers.
When it comes to IoT, what’s “next” is what’s “now” for retailers and shoppers.

The “Internet of Things” has gone from a Back To The Future-type concept to an actual movement influencing the way marketers sell everything from beer to connected devices for the home.

To make sense of the way internet-accessible wristbands, mobile payments, and indoor proximity tools like beacons are changing the relationship between shops and consumers, Greg Kahn, CEO of GK Digital Media, an advisory firm focused largely on IoT, has released an extensive overview of the space, What’s Next In The Connected Retail World. The report comes with clear message for physical businesses still wondering about the meaning of it all: the IoT era is here and it’s time to move past the experimental phase.

GeoMarketing: To start, you became a leading advisor to the Internet of Things Consortium last year. What is the IoTC and what is its mission? Any initiatives being rolled out during the remainder of the year?

The Internet of Things Consortium (IoTC) is an association of more than 60 leading hardware, software and analytics companies – in areas including home automation, wearables, connected cars, smart cities, 3D printing, and virtual/augmented reality. The IoTC is dedicated to the growth of the IoT marketplace and the development of sustainable business models. The association educates technology firms, retailers, insurance companies, marketers, media companies and the wider business community about the value of IoT.

We have held a series of thought-leadership dinners across the country, called The Third Wave. At these events, we bring together an incredibly diverse mix of companies – from Time Warner to Google to Johnson & Johnson to Indiegogo for high-level conversations around partnerships in the IoT ecosystem.

We have two dinners upcoming in Los Angeles and San Francisco, respectively, before end of year. We are also hosting a unique fireside discussion event at the Target Open Concept House.

GK Media's Greg Kahn
GK Digital Media’s Greg Kahn

Why do you think IoT will be “bigger than anything done in high tech” and that it will  “transform retail as we know it?” How do we separate the hope from the hype?

You are correct in that there is still too much hype in the marketplace today. However, there are signs that connected devices are gaining real traction. For instance, in a recent tracking study, IDC predicted that 24.8 million watch units would be sold this calendar year–13.9 million of that total Apple Watch devices. Given Apple just entered the smartwatch category a few months ago, this is a considerable number. And what’s even more telling, IDC predicts that 40.3MM Apple Watches will be sold in 2019.

As far as retail is concerned, IoT is already changing the retail landscape. Consider these examples:

  • Home replenishment: Amazon launched its Dash Replenishment Service (DRS) this year, allowing connected devices to order physical goods from Amazon when supplies are running low. Whirlpool, Brita, Samsung, and GE are early partners. Device makers can build a physical button into their hardware or they can measure consumables usage so reordering happens automatically. Amazon also developed a physical Dash button for consumers – allowing them to press the device to reorder paper towels, bottled water, or chewing gum. Connecting home automation to e-commerce sites could become the next wave of retailing.
  • Virtual and augmented reality:An emerging branch of IoT is augmented and virtual reality deployed on smart devices that people wear or carry. American Apparel has created an app that allows shoppers to use their smartphones to see how items on the rack would look in different colors. If a shopper sees a shirt she likes but prefers a different color, she can point her smartphone at the product and watch it change colors. Today, this technology is mainly used on smartphones–but many industry experts project it will be deployed on smart glasses or watches over the next few years.
  • Wireless sensing and tracking: Today, in-store sensors can track smartphones throughout retail stores and record path-to-purchase data. These sensors can be used to optimize store layouts, target shoppers with relevant messaging as they walk the aisles, and offer contactless options to pay for goods. Apple Pay is rapidly gaining traction across the country, and the company reports the service is seeing double-digit growth each month.

Where is the ad and marketing tech industry in terms of its acceptance and understanding of IoT? Is the industry in front of or behind consumers in acceptance/understanding?

Well behind! While consumers have flooded the market to buy Apple Watches, Nest Thermostats and August Smart Locks, the marcom community has yet to fully embrace the possibilities of this rapidly growing ecosystem. It’s time to look past programmatic buying and viewability and dive into the exciting IoT technology that’s around the corner.

What are the tenets around approaching IoT as a marketing or consumer engagement vehicle? Is permission-based communication the first law of IoT?

As we enter the Internet of Things era, customer relationship management (CRM) solutions will evolve and take customer service to the next level by enabling enterprises to better understand their customers and offer proactive advice and support. Gartner has named IoT as the fifth driver of CRM after social media, mobile technology, big data and cloud. As more things are connected to the Internet, they will open up a whole new world of services previously unimaginable.

Consumers will no longer be burdened with endless phone trees and inflexible self-service; instead, they will benefit from fully proactive solutions that anticipates needs and addresses problems well before they occur. From a user perspective, the great potential of IoT is self-maintaining devices that fix and maintain themselves. This will be made possible with intelligent sensors embedded in devices that remotely transmit data to the service provider.

How will IoT play into retail and in shaping and influencing the path to purchase? How is IoT better or worse at influencing that path than other digital channels such as mobile advertising or social media marketing or traditional ad formats? 

As mentioned above, one of the likely scenarios of IoT will be self-maintaining devices that automatically reorder needed parts or goods. Of course, that would significantly impact retail.

However, for consumer wants rather than needs, IoT will enable different ways to purchase products. Cisco has estimated that there will be over 800 paths-to-purchase in an IoT era. That contrasts to 40 or so paths today.

It is likely that retailers will blend benefits of the physical store (ability to touch, compare, and try on products) with benefits of the virtual world. The way that consumers “try” clothing or products will change, as will the means to purchase and receive those items. It isn’t a stretch to think that drones may deliver goods in the near future.

Of the items listed on the IoT Impact On In-Store Experience, is there a general hierarchy of tools that retailers and brands should take advantage of immediately? Which ones are wait and see?

The five buckets – wearables, smart vending machines, beacons, contactless checkout, and personalized shopping experiences – can all be implemented today. Retailers and brands should begin experimenting immediately with all five if they haven’t already begun the process.

Target's SF Open House
Target’s SF Open House

On “tech open houses,” does the advent of IoT and the continuing importance of e-commerce change the reasoning behind having a physical location? What impresses you about what brands like Target are doing?

What we know from consumers is that digital expectations are at an all-time high. Most individuals are looking for something new from brick and retailers — a different experience than they can get from e-tailers.

As mentioned above, innovative retailers are blurring the lines between physical and digital. They take the best of the online world and apply it offline.

Target, via its Open House, is creating an innovative environment for consumers to experiment with new smart home technology before they purchase it. The retailer hosts events and workshops in this San Francisco concept store, creating a new social experience for consumers.

The apparel and accessories designer Rebecca Minkoff created a wired environment in her Manhattan boutique where the technology is virtually invisible. When shoppers walk in the store, they are greeted by a touch screen that lets them swipe through clothing styles, press send to try on items in a personal dressing room, and even order even order a glass of champagne. The dressing rooms are interactive too, with interactive mirrors that let customers request different sizes.

Jumping back a bit to the idea of permission-based marketing, push notifications seem like a double-edged sword: we appreciate being told certain things immediately, while other pop-ups can be seen as a nuisance? To make this effective, how much education can marketers and retailers do to prevent their messaging from either getting lost or sparking a negative reaction?

The future of retail is all about the consumer. Consumers make the rules and now have access to whatever they want, wherever and whenever they want it. The power has shifted away from retailers who long held it—and now the ball is in the consumer’s court.

Brands and retailers must play on the consumer’s terms to be successful. The more brands can understand, connect and delight consumers instead of sell to them, the more long-term loyalty they will enjoy.

To that end, marketers must carefully test and learn from consumers–just as Facebook has done–to engage without offending. They must be agile to make changes quickly if they receive negative feedback and double-down where they receive positive feedback.

Is the monetization of IoT going to be different from the monetization strategies associated with other digital or media channels? How so? 

Very much so.

Here are a few of new business possibilities IoT will enable:

  • New pricing and payment models with charges based on actual usage.
  • Products with new detailed levels of built-in remote diagnostics.
  • New cloud-based remotely-controlled products and services, such home monitoring.
  • Products that automatically place reorders based on the cumulative number of uses –or that propose a discount/special offer on a replacement order at the end of the product’s life.
  • New styles of online teaching that make use of wearables, extensive video, and robots
  • Enhanced data sales that combine consumer purchase behavior, usage behavior and media behavior

And where does measurement and effectiveness come in? Because so much of these connections are clear and open, does IoT already start with inherent advantages? 

IoT is bringing billions of new connected devices into our lives. In theory, this should give IoT inherent advantages over current sources of data. However, it may be much more difficult to achieve that potential if too much IoT data is of poor quality.

Consider fitness bands that are designed to actively measure exercise. Studies have shown that many devices miscount steps or a treadmill.

Most devices in use today are remarkably simple in their measurement processes compared to “new connected” devices such as accelerometers and locators.  IoT may unleash literally thousands of potential issues. The problem is not just unique devices per se. The whole notion of connected devices is that they work in tandem to do things they cannot do alone.

For a single device, it is good enough to know whether units are measured via the English or metric systems. For multiple devices, all the units of measure must align to perform even simple analytics.

Individuals and organizations have to agree on measurement standards. This will be a major agenda item for IT and data executives who are building towards an IoT future.

About The Author
David Kaplan David Kaplan @davidakaplan

A New York City-based journalist for over 20 years, David Kaplan is managing editor of GeoMarketing.com. A former editor and reporter at AdExchanger, paidContent, Adweek and MediaPost.