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Analyst Angle: Taking retail and IoT into a data-driven future

The industry announcement of the Open Retail Initiative (ORI), (see this blog as well), spearheaded by Intel and Dell, couldn’t have come at a better time.  Pithy statements like “Data is the new oil” and “Data is the future” sound great, but the reality of capturing and using data to move today’s retail businesses forward is no small feat.

The realities of retail disruption

Today’s retailers are surrounded by disruptions.  Most of us are pretty familiar with online shopping, the move to online shopping has been going on for years.  Though we may think (and it may seem) that all of commerce is done through the web, online retail sales in the U.S., according to Stastica, accounted for just 10% of all sales in 2018 – that means a lot of shopping is still locally and in person. Retailers increasingly struggle with how to increase efficiency in stores, and how to improve the customer experience by integrating customers’ in-store experience with their online profile.  And both retailers and consumers are looking for a better customer in-store experience using contextualized marketing, personalized care, effective product placement, and improved in-store assistance.

There’s a second major disruption in retail today, and that is the Internet of Things (IoT), i.e. “connected everything”, and the availability of data.  Connected things have added a new wrinkle of complexity to the retailer’s systems, spewing off reams of data as products are produced, moved, moved again, tagged, stocked and purchased. Combining the product, and customer data is critical to developing a wholistic view of both product and customer, allowing better product management and a better buying experience for the customer – all leading to the illusive customer brand loyalty.

Getting this data to work for everyone is the new retail panacea.  However, today’s retail IoT environment is full of highly fragmented, proprietary, limited vertical solutions that are unable to gain real value from shared data across the enterprise.  How does a retailer navigate the waters of connected devices, different point of sales systems, hundreds of options on the back end, not to mention various connectivity options? How do you then integrate that data with personalized shopper data to create real value for the customer?

The retail solution – fewer choices and more collaboration

Developing retail IoT solutions is challenging to begin with.  Our experience shows that businesses find they need multiple technology disciplines often outside the scope of the organization just to start.  Even if a retailer manages to deliver a proof of concept design, it’s often just a single new function, or it solves a single problem in the retail value chain.  

That solution then needs to be not only implemented at scale, but also managed and maintained for its lifetime (sounds exhausting).  Then the same solution needs to be integrated with other solutions and connected to myriad corporate systems such as billing, inventory, ERP, etc. to realize the full business value.  It’s no wonder that at JBA our qualitative and quantitative research shows that 42% of our annual survey respondents believe that interoperability, with current and future systems, is a key barrier to implementing innovative new solutions.   In addition, 39% of those same respondents believe that the cost to deploy these solutions is a roadblock, with hidden hardware costs, connectivity and maintenance as the key culprits.

For retail to thrive in this age of online/in-store and data driven customer engagements, I believe the retail industry must come together to reduce risk, cost, and time to market for innovative solutions.  A focus on industry collaboration and bringing together disparate systems to benefit the entire industry – and customers must happen and happen soon.

That’s what excites me about the new Open Retail Initiative.  It’s focused on the right things – streamlining the integration of these heterogeneous online and in-store systems, integrating them with any customer management, point of sale and back-office system, combining them with any combination of hardware, all by reducing the numbered of interfaces and options to implement things of no value to the retailer.  

Spearheaded by Dell Technologies and Intel, the ORI brings together a rather unique list of retail technology providers.  The initial list includes Canonical (Ubuntu), Dell, Envirosell, HP Inc., JD.com, JDA, Petrosoft, Retail Next, SAS, Shekel Brainweigh, SUSE, Toshiba Global Commerce Solutions, Verifone, Videonetics, VMware and WiPro in partnership with groups like EdgeX Foundry, Open Stack and more.  These companies and industry consortia are focused on bringing common interfaces and APIs to simplify connectivity and a set of microservices to make sure systems don’t go down to be updated, to a highly fragmented world. Their goal, to knock down the issue of multiple components—devices, operating systems, networks, application frameworks, communication protocols and other challenges to allow enterprises to quickly and securely deploy data driven experiences across all these components can only help retailers to get innovative solutions to market faster.

The end game – a better and more efficient online and in-store retail experience

So, given the ORI’s mission, what can we expect as the business outcome?  For both retailers and customers there are significant advantages to making retail integration and data usage easier and faster to implement.   

On the customer side, we can expect deeper customer relationships and a more personalized shopping experience such as:

  • Seamless transition from looking at items online to finding them in-store
  • Personalized discounts when you enter a store
  • Directions to the location of items you are most interested in or want to buy now
  • Cashless and automated checkout that saves time and money

Retailers can also expect a more efficient and cost-effective system of managing products.  We can expect to see:

  • Better inventory management in warehouse
  • Better inventory management in stores, including smarter shelve systems that can “call” for replenishment, and better identification of mis-placed merchandise
  • Better placement of goods and merchandise based on customer traffic patterns in-store
  • Reduced spoilage and waste
  • Theft reduction
  • Proximity marketing that can help build brand loyalty and increase sales by pushing custom promotions or sales merchandise to customers when they arrive (or letting them know a store is near that has their item)

I’m excited by the prospects of the ORI, this is just the initial announcement, and I expect to see many more companies join the efforts, especially retail companies.  An industry collaboration to remove interoperability and integration as a main problem from innovative retailers will allow them to react quickly to both keep up and take advantage of these new technologies to drive their overall efficiencies and keep their customers happy.

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