Retail and the Internet of Things: addressing the elephants in the room [Pt 1 of 2]

By now, anyone with an eye on retail has probably come across one version or another of the cornucopic marketing opportunities presented by the Internet of Things.

The Internet of Things, or IoT to its friends, refers to the exponentially growing network of smart objects and devices in the real world — 50 billion by 2020, according to Cisco – that are capable of receiving and transmitting data. That’s 50-billion phones, thermostats, fridges, traffic lights, and heart monitors equipped to tell us about themselves, the environment around them, and the people interacting with them. The implications for healthcare, transport, energy, and of course, retail, are huge.

So huge, in fact, that last month five rather heavy hitters — GE, IBM, AT&T, Cisco, and Intel — came together to discuss standardising their protocols to make sure all that potential is realised: a move that gives a powerful indication as to how these corporations are anticipating this brave new world will be monetised. As Intel South Africa’s Roark Raman put it at a recent event hosted by the tech giant at Dimension Data’s Campus in Johannesburg, no one player can hope to own the whole stack. The gold is in the verticals, and to dig it out, these companies need to work together to make sure all those endlessly proliferating Things are on speaking terms.*

When it comes to the retail environment, naturally the kind of data we’re after will be consumer data. And on paper at least, it looks very much like a win-win situation.

The elevator pitch goes a little something like this: Target consumer “A” – let’s call her Vivian – strolls to her favourite coffee place (where the machine is already automatically preparing her usual orange mocha frappuccino thanks to a message she sent via smartphone). As she passes a department store, she gets an alert advising that the dress she briefly took off the rack last time she was there is now on sale. She changes course. On her way, a smart vending machine offers her a discount on a cold drink – its weather monitors have logged that it’s a 35-degree day, triggering a promotion. As she pauses to collect one, smart digital signage notes that Vivian is a female in her twenties, and serves her an ad for a deodorant. Vivian breezes on to give that dress another look.

In the department store’s fitting room, a smart mirror displays items that other customers paired with the dress. She likes the sleeveless hoodie, but she wants it in red. It’s a cinch to send an alert to the nearest store attendant and get it brought to her. Not available in her size? No problem, they’re already ordering it from another branch, and she hasn’t even had to leave the fitting room.

As you can appreciate, this vision represents a cash-cow of vast proportions. As put by Tim Hoyle, manager of “embedded retail” at Intel UK, IoT has the power to transform the point of sale into a point of service. It’s the perfect evolution of the “brand butlering” mega trend we have seen gaining momentum over the last five years.

Imagine a retail landscape in which each consumer is treated, via their device, to the kind of custom schmoozing experience we once thought was only enjoyed by Julia Roberts in Pretty Woman. Who wouldn’t want to buy more stuff?

Amazingly, the scenario sketched above is only half the story. Because even while Vivian is being ushered down a frictionless sales funnel to her new dream outfit, all kinds of data are being captured to help fill in the most elusive part of the picture: the missed opportunities. This is what Hoyle refers to as the “uncomfortable truth” of marketing. “Marketers can tell you that 50% of your marketing spend is working,” he says. “They just can’t tell you which 50%.” But now, IoT start-ups like Emotient and Shopperception are filling in the blanks.

What about the shoes Vivian didn’t buy to go with her new outfit? Smart shelf-space took note of how long she picked them up for, and what she opted for instead. And remember that deodorant ad? Vivian didn’t realise that the digital signage took note of her facial expression, and logged how long she lingered before moving on. All this information gives retailers a better chance of getting her bucks next time around.

This brings us to the biggest of several elephants in this room: privacy. In monetising IoT, and tracking what Shopperception provocatively refers to as “real life cookies”, marketers are destined to hit their heads against the same privacy issues that have plagued them in the online space… only more so. To start with, rest assured that in most territories, privacy laws would prevent technology from keeping a record of Vivian herself as an individual.

Rather, her reaction would feed into an ever-growing database of the preferences of her demographic. To learn any more about Vivian than the average salesman of reasonable EQ could tell just by looking at her, retailers using IoT technology will have to operate strictly on an “opt-in” basis. In that respect, Hoyle points out, consumer willingness to adopt these new channels is likely to come down to national temperament. IoT-enabled retail spaces might be a hit in, say, Australia, where the attraction of convenience may outweigh the creepiness of having one’s every window-shopping whim tracked by unseen eyes. In Germany… not so much.

To find out about the other two elephants in the room with IoT, look out for part two.

*That said, keep a close eye on Google: with its recent acquisition spree of start-ups such as Boston Robotics, AI developers DeepMind and home automation specialists Nest (not to mention a wearable plugin for Google Glass from Emotient in the pipeline), the Internet monolith looks set on drawing all the key components of IoT to its data-engorged bosom. And we already know it’s not too fussed about honouring the opt-in principle.

Image: Dang via Flickr.