Kathy Gibson reports from MyWorld of Tomorrow – There is real money being invested in the Internet of Things (IoT) in the retail world.

It’s estimated that retailers will spend well over $2-billion on IoT-enabled technologies in the next few years, says Jessica Knight, CEO of UCS.

But is IoT overhyped? Knight reminds delegates that many technologies – like Google Glass – have been touted as the next big thing but come to nought.

“I think the contrast is the Tesla story,” she says. “It took a long time to come to fruition, but has achieved radical breakthroughs, and the vision is starting to become a reality now.”

Recent research shows that more than half of leading retailers believe IoT will dramatically change the way they do business in the next three years.

“This is a big percentage, and the timeframes are quite soon,” says Knight.

Key operational challenges that IoT can solve include inventory accuracy, visibility into shopping behaviours and speed of fulfilment.

“What we can take away is that there is a congruence of connected customers, connected operations and connected channels. The sweet spot for IoT is in the overlap of these three areas.

Recent McKinsey research on IoT took settings including the home, humans, retail environments, offices, factories, work sites, vehicles, cities and outside.

The value from each of these settings was quantified, and factories came out as the place where the value would be highest, with retail coming in at number four.

However, it also showed up a lot of uncertainty about the value of IoT in the human context, with a fair degree of uncertainty in the retail space.

UCS partner SAP has a view of four key areas on IoT in retail. They are faster fashion, connected cards, automated vending and intelligent replenishment.

In terms of fashion, Knight talks about Zara. “It all started with a new look at the role RFID tags could play in their business model.

“They started this journey three years ago and by the end of 206 will have rolled out an end-to-end RFID system,” she says. “Key to this was allowing the RFID to be embedded in the security tags, which allows it to be re-used.”

The dual technology tags are less expensive now, and can be recycled, but they also offer benefits in in-store workflow. Time to do stock counts have been dramatically reduced, with improvements in accuracy.

This allows for speedy and accurate store stock replenishment, enhanced security controls and improves customer service.

Zara has tagged about 500-million items and reduced out-of-stock items – improving sales by as much as 10%.

The connected car is also seeing some interesting pilots making it easier and more convenient for online orders to be fulfilled.

The ability to have goods delivered to your car boot using a one-time PIN code, and using GPS to track the car down is already being piloted.

Automated vending is the third area of interest. “IoT is taking this to another level,” says Knight. “Companies are deploying fully automated, reduced-line stores. They can be put into retail areas and achieve targeted penetration in a low-cost way, and taking a lot of the risk out of it.”

Intelligent replenishment refers to the ability for smart packaging to allow fridges or pantries to order new goods as they run out.

Amazon is piloting the Dash system that lets user re-order products as they run low by simply scanning the product in question.

Meanwhile, Amazon is also piloting the use of drones for fulfilment. In South Africa, drones are specifically not allowed to deliver items, Knight points out.

Other industry commentators have spoken about the connected home and the connected store, Knight says.

The connected house includes connected health and wellness devices, connected pantries, connected appliances, connected comfort devices, connected content and even connected medicine cabinets as well as home security.

The connected store includes technologies like beacons, contactless checkout, scanning, smart mirrors, smart shelves and RFID.

Some examples include memory mirrors that let customer change their clothes virtually – trying out different items, colours and accessories without the hassle of actually trying them on.

In terms of payments, there are pilots that put payment systems in wristbands. “My opinion is that we will use smart phones rather than wearables,” says Knight, although she believes there are specific use cases for the wristband.

Customer tracking can be used to show organisations how customers are shopping the store and letting them make decisions on store layout.

Knight debuted Eva, a robotic assistant. This device contains sensing and panoramic photography. Pictures are processed to create images that can be viewed and analysed to monitor retail accuracy.

Some South Africa customers are piloting lockers as a delivery device, Knight adds, with Makro in particular promoting the concept.

In terms of solutions that are available now, lockers, instore interfaces and smart lockers offer high value with low complexity.

Other low complexity solutions include wearables, smart shopping carts and smart devices.

High-impact solutions that will need more investment are smart shelving, i-beacons, smart mirrors, car boot pickup and drones.

Knight believes that some of the challenges that need to be overcome include privacy and security; the tension that comes from being agile and innovative while running the existing business; and interoperability or seamless connectivity.

“Another big one is what do you do with the data?” Knight asks, “Traditionally, South Africa retailers have not done a good job of getting value out of the data, letting customers feel they are getting a better experience.”

Identifying return on investment is possibly the final challenge.

Going forward, Knight says companies can’t think of IoT in isolation, but have to put it in the context of their operation. “Think about what you are looking for, and looking to improve. This will be specific to companies and their own customers.”

She recommends that organisations identify key business challenges and opportunities. “I think in South Africa, retailers are going to look to improve their supply chains.”

She suggests that retailers look to smart, innovative partners that will accompany them on their journey.

“Finally, don’t be afraid to test and learn – and that could mean test and fail.”