5 questions retailers should ask before using the Internet of Things in stores

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In 2016, an Amazon Go grocery store in Seattle unveiled technology letting shoppers grab groceries without having to scan and pay for them -- in one stroke eliminating the checkout line.
In 2016, an Amazon Go grocery store in Seattle unveiled technology letting shoppers grab groceries without having to scan and pay for them -- in one stroke eliminating the checkout line. Credit: David Ryder/Bloomberg

McKinsey estimates that by 2025, the potential economic impact of the Internet of Things (IoT) in retail could be anywhere from $410 billion to $1.2 trillion annually. This means, if you're a retailer considering IoT adoption, it's not a question of "if," but "when."

But introducing IoT to the store requires a lot of time and resources. So before you begin investing in automated checkouts, smart customer-relationship management, robotics, in-store personalized promotions and more, here are five questions you need to ask yourself to ensure your business is ready.

1. What is your end goal?

IoT offers many potential benefits to retailers, but IoT for IoT sake won't move margins, or drive customer loyalty.

Creating an effective use for IoT in your organization requires an analysis of your business goals and challenges, your current in-store technology strategy, and your vision of the ideal customer experience. For example, while augmented reality is press-worthy, you might gain bigger returns by focusing your strategy around energy management, predictive equipment monitoring or store optimization.

Remember, IoT isn't a strategy on its own—it's a means to accomplishing an end. So when developing your strategy, begin with the end in mind.

2. How will your strategy improve the customer experience?

Speaking of IoT goals, make sure your goals will help—and not hinder—the customer experience. In 2018, customer experience is the top priority for brand marketers. So if you are using IoT as a way to spam the customer in-store, expect your investment to crash and burn.

As you begin to evaluate IoT opportunities, prioritize technology that improves the customer experience. For example, can you use IoT in a way to help customers get questions answered faster, navigate the store more effectively, or get rewards for customer loyalty program participation?

When looking at customer experience, it's also important to see how IoT can make your employees more effective to. An IoT strategy that provides employees with additional time, insights, and conversational tools is a great way to ensure both employees and customers are engaged.

3. What will you do with the data?

While IoT relies on devices, it's still a data strategy. This means that to be effective it must be measurable, sharable, and actionable.

A lot of data is generated by IoT, so it's important to decide early-on what data is critical to collect. To put it another way, if the data isn't actionable, what is the point of collecting it?

When getting started, decide in advance who will own the data, and who will have access to it. While Marketing and IT typically share responsibility for IoT, there is value in sharing the data more broadly through the organization. Ask yourself: are there places where a shared view of IoT data could enable new business practices, like within your manufacturing and / or supply chain teams? Can IoT data be leveraged to drive more effective customer service response, optimize maintenance resources, or eliminate other risks from your business?

Finally, it's important to plan how data created by devices will flow through yours systems. You must consider how many devices will be creating information, how will devices send the information back, and how you will leverage add-ons like analytics to make sense of the data once its all collected.

4. How will you capitalize on the network effect?

McKinsey reports that up to 40 percent of the potential value of an IoT strategy lies in the interoperability of the systems. This means that, if you're looking at each piece of technology as an individual device, you're missing a huge opportunity to leverage the whole ecosystem of technology. Especially when machine-learning is involved.

You would never ask your human staff to work in silos -- why would you ask your technology to? As you create your IoT strategy, think of each piece of technology as a physical helper, working alongside other helpers. With that perspective, it's easy to see that enabling one device to communicate to another device can help the entire system get smarter as a group.

For example, if you are planning to launch shelves that can track inventory, do you also have an input that can help you decide if low turnover is because of the product, or the story layout? Analyzing inventory movement alongside the traffic patterns is a great way to answer that question, but it most likely requires more than one device to work together.

5. How will you maintain security?

According to Forrester Research, 92% of global technology enterprise security decision makers have created security policies for their IoT devices, but only 47% can enforce them. With 60% of global consumers expressing concern about IoT security breaches, security is an important consideration of launching IoT-enabled systems and services.

Also, be thoughtful when determining how input is collected from users. IoT comes with risks, but those risks can be mitigated by working with a trusted partner, and choosing device manufacturers that design security into the function of their applications from the ground up.

Kass Dawson joins Bozoma Saint John, Alexis Ohanian and a stellar lineup of other innovators, founders, CEOs, researchers and marketing leaders set to explore the future at Ad Age Next this Nov. 13 and 14 in New York. Dawson will present on SoftBank Robotics' Pepper robot and what's next in human-robot interactions. See the full speaker list right here.

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