Article
How IoT Transforms the Retail Industry
Table of Contents
IoT in retail
Why is the IoT important for retail? In the digital transformation era, businesses need to adapt to cutting-edge technologies to get a step closer to their customers and stand out from the competitors in the saturated marketplace. With such innovations as AI, ML, and IoT, customers’ way of interacting and consuming products has been modified. Eventually, with a new shifted paradigm, industries embrace these trends to drive growth and enhance business performance.
Nearly 50% of major world-known retailers have already implemented AI solutions into their business operations. Moreover, this trend is anticipated to grow exponentially, and according to Statista, global spending is expected to reach $1.1m in 2022.

For instance, Amazon was a pioneer of IoT adoption, utilizing robotics to speed up delivery times to its customers, which spurred the further embracing of smart technologies by business innovators.
As for the retail market, by 2025, the number of revenues from IoT in retail industry is forecasted to increase to $35.5 billion. What are the major factors driving such an intense IoT adoption in the retail industry? These are the following:
- IoT-based sensors became much more affordable
- smart payment solutions became easier to implement
- customers expect a better customer experience
There are a variety of applications and IoT use cases that can bring value to the retail market: monitoring customer satisfaction, automated inventory management, food monitoring, remote asset monitoring systems, smart LED lighting management, and more. IoT provides better insights into customer needs and behaviors, differentiating CX, increasing operational efficiencies, etc. Let’s take a look at the benefits and challenges you can experience while embracing IoT solutions in your retail business processes.
5 ways IoT is transforming retail
Connected devices can learn to perform actions that are based on individuals’ behaviors, preferences, and device usage. There are many use cases that show taking advantage of IoT technologies for better conversion rates and improvement of customer satisfaction. According to Oracle research, 66% of companies use IoT technologies to facilitate the customer experience. And 88% of respondents agreed that IoT data will provide them more insight about customers than any other form of data.

IoT in retail use cases
There are lots of applications and IoT use cases that transform the retail industry into smart retailing: in-store customer tracking systems, contactless checkouts, smart shelves, personalized digital discounts for loyal customers, robots for browsing inventory, etc. Let’s take a look at 5 of the most common use cases of IoT applications that are changing retail business today:

1. Targeted notifications via beacons
Beacons are Bluetooth devices that are used to notify potential customers within geographical proximity of special discounts, offers, events, etc. on their smartphones. For example, when you’ve previously downloaded a certain app and are going near the store, you will likely get reminders about a discount or special event.
Beacon-triggered content can remarkably increase customers’ in-store purchasing decision-making by building a stronger connection between people and places. The first ones to introduce beacons to ensure a reliable and consistent experience for customers were Apple IBeacons. According to the Swirl Networks survey, 70% of shoppers admit beacon technology increases their buying decisions.
Statista shows that beacon technology’s global market value is estimated to surpass $2.6 billion in 2026, and it’s a tenfold increase from $280 million in 2016.
2. Smart shelves to optimize inventory management
Smart shelves are one of the common IoT in retail use cases. Smart shelves are comprehensive devices that are designed to fulfill different tasks for supply chain and inventory optimization. With smart shelves, retailers can:
- Keep track of items to ensure they are out-of-stock.
- Ensure order and proper placement of each item.
- Detect potential theft.
With RFID tags and weight security sensors for retail stores, store managers get real-time notifications and updates. Such solutions streamline inventory management and eliminate manual errors; furthermore, they are cost-effective since IoT devices help save money on security staff and prevent overstocking and shortage.
IoT devices help save money on security staff and prevent overstocking and shortage.
Based on RFID technology, smart shelf systems are equipped with tags, readers, and antennas. How do they work? RFID tags transmit data to the reader through radio waves that are further analyzed and processed by IoT systems.
3. Personalized discounts to incentivize returning customers
IoT technology is a creative way to develop a marketing strategy to attract more valuable and long-term customers. Let’s imagine you are selling toasters and your potential customer has recently been browsing them online. When visiting a store he/she can receive a notification about the personalized discount on toasters. Stores can also implement retail sensors that track returning customers to send them loyalty discounts. Such discounts tailored to customers’ needs have the potential to improve conversion rates significantly.
Compared to traditional discounts, customized loyalty rewards serve as an incentive mechanism to influence returning customers into becoming devoted ones.
4. Automated checkouts without cashiers
Long lines have always been an obstacle for a customer to purchase a product. IoT devices can substitute humans and deliver a much better experience with mobile POS (point-of-sale) terminals. When a customer leaves the store, this system reads tags on each item and conducts a payment operation.
Moreover, automated checkouts may save you a ton of money since you do not need to hire multiple sales assistants and cashiers. According to McKinsey, IoT devices and applications will accelerate work process efficiency resulting in savings from $150 billion to $350 billion globally in 2025.
5. Robots can free up staff from routine tasks
The image of robots passing you by in the store may be frightening. But it can also provide vast opportunities for better customer experience by optimizing business operations and cutting costs. The future of retail automation is already here. The question remains as to how society will adjust to this shift towards automation, and how much time is needed. Nevertheless, autonomous robots are gaining traction, especially due to the COVID-19 pandemic.
Robotics technologies can be leveraged in retail businesses to enhance in-store customer service and warehouse management as well. For example, Amazon, a giant e-retailer, has many robots to fulfill orders in warehouses.
In 2016, in cooperation with Fellow Robots, home improvement retailer Lowe introduced LoweBot which helps customers quickly navigate through the store and find items they are looking for.
Target’s robots called Tally also provide retail assistance designed to keep track of product inventory on the shelves helping sales assistants to focus more on customer service.
Benefits of IoT in retail
Nowadays, retailers have already been reaping the benefits of implementing the Internet of Things in their businesses. IoT software development services allow retailers to track and monitor customers’ behavior, analyze it accurately, and obtain valuable insights to improve marketing opportunities and the development of sales strategies. Among the most prevalent advantages are improved SCM, better in-store inventory tracking and customer experience, personalization, theft reduction, and in-store staff optimization. Let’s explore the main advantages of using IoT applications in retail:
1. Improved supply chain management
With RFID and GPS technology, the entire process of supply chain management can be significantly enhanced since each item is tracked and monitored. Making items connected will ensure end-to-end data visibility across the entire ecosystem. Throughout the delivery process – from the beginning of the journey to the ultimate destination point – smart retail and IoT solutions solve traceability issues. Supply chain participants get real-time access to information on the product and materials flow. Eventually, retailers are empowered to ensure efficient transport logistics by determining the materials’ safety, accurate timelines, and the right conditions. According to Deloitte,
74% of business leaders saw revenue increase after applying smart devices in logistics.
One of the most critical challenges for supply chain management is incorrect storage conditions and temperature-sensitive inventory that lead to food waste and health concerns. According to a survey report, grocers lose $70M per year to spoilage. Furthermore, smart devices in retail foster control over supply-chain products and assets, help analyze data in real-time, and subsequently, prevent product damage throughout the entire journey. Intelligent devices embedded in products and vehicles can detect misconduct and raise alerts to online dashboards should tampering, fraud, or abnormal temperature levels occur. Therefore, a variety of applications have been invented to optimize supply-chain processes.

2. Smarter in-store inventory tracking
The lack of accurate inventory tracking is one of the permanent issues in the retail industry leading to stock-outs or overstocks. Sales representatives suffer from disorganized shelves, lack of inventory that is not replenished on time, etc. It all results in unreasonably high expenditures, employees inefficiencies, mishandled inventory tracking, and missing out on sales opportunities. Moreover, inventory management issues affect customers’ experience, especially when some necessary items cannot be found.
IoT applications help capture data that is required for product order management and automation, ensuring inventory visibility. Inventory tracking solutions powered by intelligent devices such as RFID tags, beacons, sensors, digital price tags, video monitoring tools, etc., can improve procurement planning, as well as take customers a step closer to satisfying their needs.
Inventory-centered IoT solutions ensure direct synchronization of physical assets with database servers. Based on POS data analytics, retailers can optimize inventory management and adjust quantity leading to a reduction of stock-out and overstocks.
3. Better customer experience and personalization
IoT technologies help retailers collect data related to customers’ interactions with store items and their feedback after the purchase. Machine learning algorithms analyze this data providing real-time shopper satisfaction insights that can enhance customer engagement and experience.
In comparison, in online shopping customer experience is customized with banner ads and product suggestions. With the IoT in retail, the capabilities of online browsing and purchasing history make online shopping easier in terms of cross-selling and upselling opportunities. Nevertheless, IoT solutions significantly affect how brick-and-mortar stores operate, providing them with huge opportunities to improve sales and increase revenue.

With RFID chips, beacons, and sensors, retailers are empowered to make better decisions by offering a personalized experience to their customers. Instead of waiting for customers to find an offer, retailers can utilize smarter ways to promote their products and special offers, for example, on smart displays in stores. Having been hooked at the right moment, a shopper is more likely to make a purchasing decision.
IoT can offer a customized experience in retail by tracking customers’ location in stores. Euristiq developed such an IoT solution for the world’s largest health and beauty retail group. By implementing a low-cost in-store customer tracking system that monitors movement, collects data, and analyzes it, store managers can view the most popular sections in a store, check how many people are standing at the checkout, and track where the employees spend most of their time in the store.
One more benefit of IoT is that retailers can form a better individualized experience for their customers based not only on in-store customers’ interactions with the products but on their online browsing history as well. By collecting data from online shopping and in-store interactions of the customer, retailers are able to offer smarter suggestions for upsells.
4. Reducing shrinkage and fraud
Fraud is the most prevalent type of revenue shrinkage in the retail industry. Considering the fact that theft affects the net profitability of the retail market immensely (averaging between 1%-3% of gross profit), retailers are looking for new solutions to ensure the security of their stores and inventory.
With smart devices, inventory can get an additional layer of visibility and traceability.
IoT-driven sensor technology provides vast amounts of real-time data that allows businesses to track products and delivery processes which reduces theft. Traditional human monitoring cannot be so accurate as to validate the sale of goods. To prevent potential theft, smart shelves, cameras, and beacons can send alerts in case any suspicious behaviors or activities are detected. Logistics becomes more efficient with product tracking through devices embedded into products or shipping containers. It is easier than ever before to identify misconduct and fraud activities.
5. Optimization of in-store staff
It is a common case in stores when a customer needs advice or recommendations while looking for something, and there is no sales associate nearby to help. On the other hand, in many cases, customers turn out to be uncomfortable and offended when intervened by a salesperson. Thus, to prevent customers from being disrupted and facilitate their buying decisions, business owners utilize motion detection, facial expression sensors, and cameras powered by machine learning algorithms. For instance, once a smart device identifies ambiguity or confusion on a shopper’s face, it sends a notification to a nearby salesperson’s smartwatch or mobile app.
Challenges and solutions of using IoT in retail
Retailers often do not know where to start when it comes to implementing IoT technology in their business processes. Whereas there are obvious benefits, there are also specific challenges retailers face. Let’s shed some light on the top 3 challenges for IoT in retail and the solutions to solve them.
Challenge: Infrastructure
Huge volumes of IoT data require robust networks and infrastructure for retailers to digitize their stores. Data centers and cloud solutions need significant investments, which most businesses can’t afford.
Solution: To implement new technologies, businesses need to estimate their investments. A step-by-step approach will definitely impact positively on retailers’ ROI. Therefore, before implementing big-scale systems such as inventory tracking, start, for example, utilizing smart devices to optimize lighting systems.
Challenge: Data security
Along with offering huge opportunities for retailers, Internet-enabled retail has raised cross-industry concerns because of GDPR regulations. Data security and privacy are the biggest challenges due to a large number of connected smart devices in the supply chain which means an increased possibility of security breaches.
Take, for example, DDoS attacks which are performed by infecting IoT smart devices with botnets and common vulnerabilities. Social-engineering attacks are also one of the most popular methods of cybercrime that trick employees into clicking on phishing links, unconsciously granting attackers access to the entire infrastructure.
Solution: To secure their systems, retailers have to partner with cybersecurity experts and educate their staff on possible threats and vulnerabilities. IoT software developers can help ensure the security of devices through end-to-end encryption, secure passwords, etc.
Challenge: Data management
To gain valuable insights from IoT systems, retail employees need to have relevant qualifications and technical skills to proceed with data processing and analysis. Data is a valuable asset that requires it to be properly managed. Without correct data management, one cannot achieve data integrity which is important for the data’s searchability and traceability. By collecting more and more data in the system, retailers need to secure and maintain data integrity, otherwise, it could be compromised.
Solution: Retail businesses are advised to hire IoT professionals, third parties with technical backgrounds like Euristiq that have the necessary expertise for data management.
Key takeaways
In 2019, the revenues from the IoT sensors market amounted to over 11.9 billion U.S. dollars worldwide, with forecasts predicting that this number will increase to about 43 billion by 2025.
IoT solutions empower retailers to get valuable insights that they can use to streamline their supply chain and inventory processes, enhance customer experience, increase marketing conversions, and boost their ROI as well. While access to customer data via IoT-powered devices brings retailers a step closer to customer satisfaction, at the same time it presents challenges such as cyberattacks, bad data management, and overinvestments. Nevertheless, in combination with AI, and ML, IoT is gaining traction due to the demand on the market and the need of society to keep a social distance.
If you are looking for enterprise-scale Internet of Things solutions, feel free to contact our software development team, who will help you optimize your expenditures and gain a competitive advantage.