WhatistheConnectedRetailEnvironment?ByTomHowells,Fraud&TechnologyWire

December7,2015

Onlineshoppingneverreallymanagedtorunphysicalstoresoutofbusiness.So,nowthetwoaremeldingintoone.TheInternetofThingsisgoingtomakeshoppingafarmorepersonalizedexperience.Storeswillbeabletotailoryourshoppingexperiencetoyourspecificneedsthroughtheuseofreal-timeanalytics.Theywillbeabletopredictwhatyouwant,howoftenyouwantitandwhereyouwillwanttobuyit.Storeswillusesensorstotrackbothcustomermovementandinventory.Facialrecognitionwillbeusedtocreateashopperprofiletoidentifybothhighvaluecustomersandknownshoplifters.Thedatafromthesedeviceswillallowstorestooperateatafarmoreefficientlevelandpersonalizecustomerrecommendationsmuchmoreeffectivelythaneverbefore.ApplicationsandDevicesfortheConnectedRetailEnvironmentInventoryOptimizationTherehasalwaysbeenadiscrepancybetweentheinventoryaretailerbuysandtheamounttheyactuallysell.Inventoryshrinkageoccursduetoshoplifting,employeetheftandvendorfraud.It’sestimatedthatshrinkagecostsstoresaround1.3%oftheirrevenue.Videosurveillancetechnologycombinedwithreal-timevideoanalyticscanmakemakeidentifyingthievesmoreeffective,especiallyifitiscombinedwithRFID(RadioFrequencyIdentification)totrackindividualitems.

Monitoringthesupplychainisanotherproblemthatretailstoresface.Oftenpredictingdemandforaparticularitemoraparticularsizehasprovenproblematic.IoTcanchangethis.Shopshelveswithbuilt-inscalescantrackhowinventorymovesandautomaticallyordermore

fromamanufacturerwhensuppliesfallbelowacertainthreshold.Overtime,bigdataanalyticscanbeusedtopredictdemandatstoresandoptimize,forexamplestockouts,inthesupplychain.

TheInternetofThingscanalsobeusedtotrackthehealthofmachinesusedintheretailindustry,likevendingmachinesandATM’s.Sensorscanbeusedtomonitorwearandtearonpartsinmachines,allowingpreventativerepairstotakeplacebeforethewholemachinebreaksdown.CustomerTrackingThereisdefinitelypushbackwhenitcomestocamerasbeingusedtotrackcustomermovementintheretailenvironment.Storeslikethemastheycantrackwherecustomersaregoingwithinthestoreandcanusethisinformationtomaximizerevenuesfromstrategicproductplacement.ThecompanyEnlightenedhascomeupwithanon-invasive,anonymouswaytotrackcustomermovements;theyputsensorsinthelightbulbs.Thesesensorscoveranywherethelightreaches.Theycandothesamejobascameraswithouttrackingtheidentityoffacesthatpassbythem.Usingthedatathesesensorsobtain,retailerscanidentifyareasinthestorethatencounterthegreatestfoottrafficandplaceitemsaccordingly.

StoreshavestartedusingApple’siBeacontotrackcustomersastheygothroughastore.ThisoptionisalsopreferabletocamerasascustomerscanoptinoroutbyturningtheBluetoothontheirphoneonoroff.TheiBeaconallowsstorestoseewhatcustomersarelookingatbasedontheirlocationinthestore.Theycanalsomonitorhowlongcustomershavebeeninthestorebeforetheyareofferedassistance.

Companiescannowtrackcustomerspendinglikeneverbefore.Thereisnolongeradividebetweenonlineandofflineshopping;theyarenowthesamething.Aretailercantrackwhatyouhavebeenbrowsingonlineandsendacoupontoyourphoneasyounearthestore.Basedonyourpreviouspurchasehistory,retailerscanuseanalyticstoworkoutwhatyouwanttobuyandwhatyourpricepointisforthoseproducts.

Loyaltycardsarealreadyusedinmostsupermarketchains.Loyaltycardstrackwhatyoubuyandofferpromotionalcouponsbasedonpastpurchasesatthecheckout.Theloyaltycardallowsthesupermarkettousebigdatatocreateacustomerprofileforyouandalsoallowsthestoretomaintaininventorybasedonthecharacteristicsofthecustomersthatshopatthatparticularbranchofthechain.PointofSaleThetraditionalprocessforbuyingaproductistypifiedby:findtheproductinthestore,waitinlinetopurchaseit,performamonetarytransactionandwalkoutthestore.TheInternetofThingsischangingthis.RFIDtagsemitdataacrosselectromagneticfieldsthatarepickedupbysensors.ThecontinuingdecreaseinthepriceofRFIDtagsmeanstheycanbeattachedtoalmostanyitem.Thesetagswillbeusedtocompletelyautomatethecheckoutprocesstothepointthatcustomerswon’tevenhavetotakeitemsoutoftheirshoppingcart.Customerswillwalkpastascannerthatpicksupsignalsfromeachitem’sRFIDtag,talliesupthepriceandthenchargesyourmobilepaymentaccountasyouleavethestore.Customerswon’tevenneedtoswipeacreditcard.Companieswillalsobenefitfromautomatedcheckoutsastheywon’thavetoemployasmanycheckoutattendants.HowBigWilltheMarketBefortheConnectedRetailEnvironment?ThemainbenefitsofIoTfortheretailindustrywillcomefromtheautomatedcheckout.Byautomatingcheckouts,retailerswillbeabletoreducestaffingbyupto75%,whichwillcutcosts

byasmuchas$380billionin2025acrosstheindustry.Thiswillalsoreducecheckoutlinetimesbyupto80%,savingupto$135billionintime.Overall,retailhasthepotentialtocreateaneconomicimpactofupto$1.2trillionayearby2025byadoptingIoTtechnologies.RisksfortheConnectedRetailEnvironmentOneofthemainconcernswithIoTinretailistherearesomeoptionsthatdonotgivecustomerstheabilitytooptout;ifyouwalkintoastore,youareeffectivelyprovidingconsenttolettheretailercreateanonlineprofileofyoubyeithertrackingyourfaceasauniqueidentifierortrackingyourphoneasyoumovearoundthestore.Italsoappearsthatusingvideotechnologywithoutconsumersconsentisonthewaytobecomingthenorm.Privacyadvocacygroupshavegivenupintheirattemptstosecurestandardsfortheuseoffacialrecognitiontechnology.Theywalkedawayfrom16monthsoftalkswithretailersastheyfelttheywouldn’tbeabletogettheprivacylevelstheyfeltconsumersdeserved.

Eventhoughyouaretheonlyindividualwithyourfaceintheworld,thisdataisstillhackableandjustas40millionTargetshoppershadtheircreditcardinformationstolenthroughhacking,facialrecognitiondoesn’thelptheproblem.Target’ssystemswereinfiltratedbyahackerwhocompromisedtheirheatingandcoolingsupplierusingaphishingemail.Fromthere,thehackersstoleaTargetemployee’slogincredentialsandthenanalyzedthenetworkuntiltheyfoundthecompany’sinternalserverforthousandsofregisterswherecustomersswipetheircreditcards.Theytheninstalledmalwarewhichcopiedthedetailsofeverycardswipethattookplace.Alreadywithfacialrecognitiontechnology,policeusesoftwarelikePittPatttofindanindividual’snameandsocialsecuritynumberwithintwominutes.Allyouneedtoimpersonatesomeonetooneofthesesystemsisaphotographofthatindividual.

Thisarticleispartofourseriescalled“AGuidedTourtotheInternetofThingsintheSIMConnectedWorld”.Nextweekwewillbediscussingtheconnectedoffice,whichwilltransformthewaywework.

TomHowellsisacontributingwriterforFraud&TechnologyWire(www.fraudtechwire.com),aweeklypublicationsponsoredbyArgyleData,Inc.