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Can AI & IoT save retail?


Image Credit: Bloomberg / Credit Suisse

Late Q1 2017 saw a spate of news on the coming “retail apocalypse”:

Business Insider: The retail apocalypse has officially descended on America

Bloomberg: America’s Retailers Are Closing Stores Faster Than Ever

The Atlantic: What in the World Is Causing the Retail Meltdown of 2017?

Bloomberg research indicates that 2017 could see up to 8,640 store closings (extrapolated) in contrast to the peak of 6,200 in 2008. Some of the retail chains such as Payless are declaring bankruptcy and closing many stores, and many others are just closing to stay ahead of bankruptcy. And there is class of retailers such as Kenneth Cole trying to reinvent themselves as e-commerce brands.

BI has a nice chart on store closings by retailer:



The Atlantic attributes the decline of brick and mortar to three reasons:

  1. Growth of e-commerce – more people buying online
  2. Glut of malls – just too many malls especially in the US
  3. Rise of the experience – American consumers shifting habits from materialism to experience

And per BI the decline in the fortunes of brick & mortar retailers is not because of the rise of Amazon:

“It’s mathematically impossible for it to be Amazon’s fault,” Stephens said.

Online sales are growing rapidly — up 15% in the most recent quarter compared to 4% for total retail sales.

But total e-commerce sales account for just 8.5% of overall retail sales in the US. The other 91.5% of purchases are still made in brick-and-mortar stores, according to the US Census Bureau.

The same article outlines the three reasons as above (the Atlantic post) for the decline and closings.

The bottomline from all of these reportings is that for retailers to compete, and grow – they have to improve the customer experience both online and offline. It is the offline part that could stand to benefit from both IoT & AI.

At the beginning of the year at the NRF there were a slew of announcements by technology companies – dominated by how IoT – specifically technologies like RFID can improve the in-store experience for consumers. Intel, JDA, Honeywell, Zebra, IBM – and many others made a push for IoT to improve retail business – top and bottom line.

Intel & Honeywell announced a collaborative solution to:

“To succeed in the e-commerce world, retailers need to invest in connected solutions and harness the power of the Internet of Things (IoT) to track inventory and gain insights into customer shopping habits,” said John Waldron, president and CEO, Safety and Productivity Solutions business, Honeywell. “The collaboration between Honeywell and Intel will provide a platform for future technology developments to leverage both firms’ expertise in capturing and analyzing enterprise data. We look forward to working with Intel on industry-leading solutions this year.”

In an interview with Forbes, ex-CEO Baljit Dail of JDA had to say this:

Given these business trends, the things that we focus on, from a technology perspective, are things like machine learning, predictive analytics, trying to understand what the demand is in the market place. We spend a lot of time on IoT, working with a variety of different folks to get signals from different devices. A good example is our partnership with Intel on something called store optimizers. Intel has technology that is sprayed onto the label like an RFID tag. We can put in the chief RFID reader in the store, and then using our in-store technology, we can figure out what is happening to the inventory and direct the store associates.

We work with a some apparel companies. One of their big issues is that they have out of stocks on the shelf, and it is not because the inventory is sitting at the back of the store, and it is not a case of they did not get the shipment from the distribution center. The issue is that the inventory is sitting in the fitting room. What happened is, if people try it on, but they do not purchase it, they leave it in the fitting room. We have the RFID reader talking to our in-store systems, and we can send a note to the store associate and say, “Unless you are serving a customer, you need to go to the fitting room and get three of the green, large sweaters, pack them up, and put them back on the shelf because you are down to one on the shelf.” That’s another example where we’re leveraging IoT.

JDA has had a change of leadership but if you look at their new team – they come extensive IoT-oriented backgrounds – and I believe JDA would continue to look upon both IoT & AI to deliver better retail software solutions to their customers.

Other companies are also foraying to cater their products with IoT-centric solutions for the retail industry. For example, lighting companies such as Acuity Brands are trying to improve the consumer experience as well as help the retailer with proximity solutions:

Acuity Brands delivers embedded Indoor Positioning technology within wirelessly controlled LED luminaires, allowing retailers to save considerable energy and maintenance costs, while deriving highly accurate, real-time location of loyal customers, employees and critical assets. Acuity Brands has leveraged the Microsoft Azure cloud platform to deliver an affordable, scalable and secured IoT infrastructure to address multiple business needs.

Virtually every article, tweet, opinion you read on the future talks about enhancing the consumer experience as a strategy to grow the retail business. Smart Lighting companies such as Acuity are trying to leverage proximity sensing, data analytics to do both – improve the in-store shopping experience and help the retailer things such as stock outs on the shelf.

Other technology companies are helping reduce cost by optimizing their supply chain – solutions from Intel and Honeywell fall into this category. And these solutions are being driven by IoT and Big Data / AI.

Yes, IoT & AI can help retailers but it’s a Catch-22 situation. Retailers need to invest in technology – and with shrinking revenue & profits they have limited funds to do so. This, of course, puts the investments being made by technology companies in jeopardy.



Written by Ashu Joshi

August 13, 2017 at 10:49 am