Few industries have been disrupted by emerging technology quite like retail. From exploding online sales to the growth of mobile shopping, the industry has made a permanent shift to accommodate digital consumers.
The rise of IoT has forced the retail industry to take notice; IDC expects that by 2025 there will be 41.6 billion connected IoT devices or ‘things,’ generating more than 79 zettabytes (ZB) of data. These billions of devices are creating unprecedented visibility into a business, leading to transformation of operations, from the supply chain to automated checkout, personalized discounts, smart shelves, and other advances powered by IoT. In fact, IoT can help brick-and-mortar stores create customer experiences that rival that of online stores; for instance, customers can be sent alerts about discounts relevant to them when they get close to a store, and those stores can use IoT to keep track of inventory and increase efficiency.
Today we’re sharing a new IoT Signals report focused on the retail industry that provides an industry pulse on the state of IoT adoption to help inform how we better serve our partners and customers, as well as help retail leaders develop their own IoT strategies. We surveyed 168 decision makers in enterprise retail organizations to deliver an industry-level view of the IoT ecosystem, including adoption rates, related technology trends, challenges, and benefits of IoT.
The study found that while IoT is almost universally adopted in retail and considered critical to success, companies are challenged by compliance, privacy concern, and skills shortages. To summarize the findings:
- Retail IoT is strong and improving customer experience is a growth opportunity. Retailers’ future planning focuses on IoT projects that help customers get in and out quickly, which increases revenue. Areas like automated checkout and optimizing inventory and layout are key, and survey respondents rank store analytics (57 percent) and supply chain optimization and inventory tracking (48 percent) as the top two IoT use cases.
- AI is integral to IoT and retailers who incorporate it achieve greater IoT success. For many retail IoT decision makers (44 percent), AI is a core component of their IoT solutions. Furthermore, retailers who leverage AI say they are able to use their IoT solutions more quickly and more fully. They also plan to use IoT even more in the future than those not integrating AI. Those surveyed who use AI as a core part of their solutions are more likely to use it for layout optimization, digital signage, smart shelving, and in-store contextualized marketing (including beacons).
- Across regions, unique retail benefits and challenges emerge around IoT, but all are committed. Globally, IoT is being widely adopted in retail, with the survey respondents in the US, UK, and France all reporting 92 percent IoT in adoption. In the US, IoT is often utilized for security and store analytics (65 percent each), while store analytics (49 percent) and supply chain and store optimization (43 percent) are more popular uses in Europe. Despite a variety of adoption barriers across regions, retailers are dedicated to overcoming challenges and leveraging IoT even more in the future.
- IoT is seen as critical to retail business success. Nearly 9 in 10 (87 percent) surveyed consider IoT as critical to their business success. Looking forward, respondents believe the biggest benefits they will see from IoT adoption include increased efficiency (69 percent), cost savings (64 percent), increased competitive advantage (62 percent), and new revenue streams (56 percent).
- The biggest barriers to success for retailers include budget, privacy concerns, compliance challenges, and talent. In the US, the top three concerns of retailers surveyed are a lack of budget, consumer privacy concerns, and lack of technical knowledge. In Europe, compliance and regulatory challenges top the list, followed by human resources and timing and deployment issues. Despite these challenges, the future of IoT looks bright, with 82 percent of US and 73 percent of European respondents anticipating greater IoT implementation in the future.
Microsoft is leading the charge to address these IoT challenges
We’re committed to helping retail customers bring their vision to life with IoT, and this starts with simplifying and securing IoT. Our customers are embracing IoT as a core strategy to drive better business outcomes, and we are heavily investing in this space committing $5 billion in IoT and intelligent edge innovation by 2022 and growing our IoT and intelligent edge partner ecosystem to over 10,000.
We’re dramatically simplifying IoT to enable every business on the planet to benefit. We have the most comprehensive and complete IoT platform and are going beyond that to simplify IoT. Some key examples include Azure IoT Central, which enables customers and partners to provision an IoT app in seconds, customize it in hours, and go to production the same day. To help ensure that retailers have a robust talent pool of IoT developers, we’ve developed both an IoT School and an AI School, which provides free training for common application patterns and deployments.
Security is crucial for trust and integrity in IoT cloud- and edge-connected devices because they may not always be in trusted custody. Azure Sphere takes a holistic security approach from silicon to cloud, providing a highly secure solution for connected microcontroller units (MCUs), which go into devices ranging from connected home devices to medical and industrial equipment. Azure Security Center provides unified security management and advanced threat protection for systems running in the cloud and on the edge.
Finally, we’re helping our retail customers leverage their IoT investments with AI at the intelligent edge. Azure IoT Edge enables customers to distribute cloud intelligence to run in isolation on IoT devices directly and Azure Databox Edge builds on Azure IoT Edge and adds virtual machine and mass storage support. Going forward, Azure Digital Twins (currently in preview) will enable retailers to create complete virtual models of physical environments, making it easy to unlock insights into their retail environments.
When IoT is foundational to a retailer’s transformation strategy, it can have a significantly positive impact on the bottom line, customer experiences, and products. We are invested in helping our partners, customers, and the broader industry to take the necessary steps to address barriers to success. Read the full IoT Signals Retail Report and learn how we are helping retailers embrace the future and unlock new opportunities with IoT.