Why and How IoT in Retail? Between RoI Modelling and The Need of Transformation

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1 Why and How IoT in Retail? Between RoI Modelling and The Need of Transformation Saverio Romeo Principal Analyst Beecham Research #IoTRetail

2 17% expects a return greater than 7.5% 48% expects a return less than 7.5% 35% sees IoT as an innovation and capital investment Source: RSR. August The Internet of Things in Retail: Great Expectations. Is Investing in the IOT about ROI and/or competitiveness? Are ROI and competitiveness mutually exclusive? ROI and Competitiveness

3 M2M was about monitoring and controlling machines and environments through gathering data. What is M2M

4 After-Market Applications Low/Medium volume per application Add-on networking: retrofit Medium/High cost per unit Often requires high level of support Good fit for MVNOs/resellers Vending Car Wash Vineyard Monitoring Regulatory Meter Reading Medium/High Volume during install Embedded networking Low cost per unit Favours tendering process Good fit for MNOs ecall a crossover (see note below) Toll Collect ecall Line Fit Medium/High Volume Embedded networking Low cost per unit Increasingly requires international coverage Fit with international MNOs and MVNOs OnStar/ Telematics Handheld Tracking Pumps Source: Beecham Research Note: ecall in EU is now a unique crossover of Regulatory with Line Fit characteristics The Three Waves of M2M

5 The Ubiquity of M2M M2M and Retail

6 Moving towards the Internet of Things Towards Data-Centric and Service-based Scenarios

7 It is not just about monitoring the functioning of the coffee machines, but also about predictive maintenance offered as a service because of the data gathered over time It is about having an updated view of the stock and of the consumption behaviour for specific products. That enables predictive analysis on production and consumption because of the data gathered over time Service-centric Models in Retail

8 DATA DATA Source: Beecham Research M2M is about dealing with a specific application through a specific data set using mainly one sensing device. Single data set for M2M

9 Smart Offices Smart Lighting Smart Water Systems Smart Transport Systems Smart Retail Spaces In a smart city space, the devices are diverse and numerous dealing with different sources of data. Integrating, analysing and understanding that data can provide city stakeholders with a new view of the city. Source: Beecham Research Smart City as an IoT Case

10 Several devices and several applications for different purposes. The data gathered is diverse in nature and velocity. A middleware layer called Smart City Platform is required to enable the management of devices, the development of applications and the analytics of the data. Source: Beecham Research The Need of IoT Platform

11 As in smart city, the retail environment become a smart retail space in which different devices and sensors gather different sources of data. The data integrated with enterprise data are then used for optimising processes and designing new services. Source: Beecham Research IoT in Retail

12 Public Spaces On-line Mobile In-store Social Media Front-end (Channels) Enterprise Applicatiosn Applications Enablement Layer Enterprise Data Data Analytics Layer Data Management and Orchestration Layer Smart Retail Platform Sensors and Devices Device and Connectivity Management Layer Smart Retail Platform

13 Source: Sierra Wireless Devices Connectivity Platform Application Data on the coffee machines are gathered. The coffee maker is able to predict the needs of the coffee machine. Therefore, they can sell the coffee machines and also a predictive maintenance services. But, if the coffee machine is connected, other services can be designed, perhaps customer-oriented ones (contactless payments, customer interaction). Enabling Services through Monitoring

14 Customer s presence in the shop is detected through in-door position solutions (such as beacons). The customer can then interact with items (RFID-based), simulate choices (virtual mirrors and others), purchase the item. Meanwhile, customer data is sent to the platform and the item data as well. Customised offers can be designed (real time and personalised). Source: IoT for Stores Indoor Services

15 A number of luxury fashion brands started to use RFID as a way to fight counterfeit items. Amongst those are Salvatore Ferragamo and in 2016 Moncler joined with tags which contains a unique ID that even allow users to scan and authenticate their goods via their smartphones or through an official website. Traditionally many chains including Walmart and the UK's Marks & Spencer have for years been using RFID tags to products in order to help with inventory tracking and management, allowing those retailers to quickly assess where products are in the supply chain; how many they have in stock at a given warehouse, store or even specific clothing rack; and replenish accordingly. Additionally, RFID have been used to fight theft, using the unique serial numbers in the RFID chips to prevent people from returning unregistered, likely to be stolen, products to stores, or to target suppliers illegally producing excess stock and selling them on the open market. Potentially, subject to issues to be resolved with data protection laws, people wearing the tagged clothing items could be identified and tracked as they pass through checkpoint-equipped doorways and or retail smart shelves containing hidden RFID reader devices and targeted marketing provided including relevant discount incentives for example. Fighting Counterfeit Fighting Fraud Data Privacy Regulatory Environments RFID for Fighting Fraud

16 Minimizing inventory carrying costs by up to 10% Reducing misses sales opportunities [Sales increased by 10-15%] Deterring and detecting inventory shrinkage Optimizing product placement [measured in productivity terms] Optimizing in store staff [reduction in staffing costs by 10-15%] Improving order fulfilment Expanding customer services The Effect of RFID and other IoT Technologies on Inventory Management

17 In 2014, IKEA was amongst the first retailers to use augmented reality as the way to display its furniture catalogue. This provides a unique opportunity to consumers of a virtual preview of furniture within the room of their choice at their convenience. The retailer initially offered this in conjunction of a mobile app with a physical catalogue. The latest app version dropped the need for a physical catalogue al together. Amongst the most important features is that camera uses the approximate dimensions of the virtual furniture which are based on the size of this physical, real-world IKEA catalogue. The item can be rotated, repositioned and manipulated so that it looks just right, before confirming the selection from a scrollable list. The final virtual version of the new sofa, desk or bookcase with the room in the background is shown onscreen. (IKEA app video) Additionally in 2016 IKEA trailed VR for the kitchen in real world size. Using an HTC Vive headset, consumers can use the app to explore one of three differently-styled kitchen room settings. The user can change the colour of cabinets and drawers with a click. Additionally it can be viewed from different perspectives either by a 3.3 foot-tall child or a 6.4 foot-tall adult, enabling to discover hidden dangers or possible design solutions. AR Catalogue The Case of IKEA Car Industry Embracing AR in Show Rooms Expansion towards the use of VR AR and VR for Customer Engagement

18 Maintaining inventory accuracy in stores Maintaining system-wide inventory visibility Increasing the inventory available for crosschannel fulfilment Inventory Management Gaining a deeper and more insightful understanding of internal processes Monitoring of equipment and property conditions Predictive maintenance Automating response to event Efficiency Processes and Asset Management Innovation Integration Business transformation Customer Engagement Closer engagement with customers through a variety of devices Creating new services to offer to customers Benefits from IoT Solutions

19 Good paper from PTC on metrics for ROI in IoT scenarios Defining Metrics Different metrics for different applications. In the IoT, RoI calculations is context-specific Adjusting Measuring Modelling ROI

20 Suggested models by a number of IoT platform providers Start small and fast Clear Business Objective Basic Calculations using iterations of RoI modelling Invest in Phases to improve RoI Scale Extend out to other scenarios Designing and IoT Solution

21 Applications Enablement Layer Data Analytics Layer Data Management and Orchestration Layer Which Smart Retail Platform? Sensors and Devices Device and Connectivity Management Layer Long Range: Cellular, Fixed, LPWAN Short Range: Wi-Fi, ZigBee, BLE What type of Connectivity? Critical Choices

22 System Integrator Solution Provider Developer Community Company willing to develop an IoT strategy MNO/Telcos Distributor Hardware Technology Vendor Partnerships as a Paradigm

23 Security Attacks The cheese was pretty safe! M2M Security

24 The Internet of Things brings security complexity. The points of attack are several and diverse. Any weak device is a potential access threat. The Internet of Things strategy should be secureby design and the security approach should pragmatic (secure what needs to be secured) and holistic (all over the continuum of data and access points). Security Attacks IoT Security

25 Designing, developing, and deploying an IoT solution can require different skills. Therefore, the impact of that process can be horizontal across the organisation. Who governs that new and multidisciplinary process? Is there the need for a specific profile within the organisation able to manage that process? A possible answer to that is the Chief IoT Officer. But, who is he or she? The Chief IoT Officer is a Program Manager or a Project Manager experienced in running complex and multidisciplinary projects. He or she should also have a strong internal marketing capability in order to sustain the vision internally, a sort of in-company champion. But, he or she needs to have a medium-long term vision, but, able to navigate the shortterm Finally, he or she is a flexible individual experienced in navigating changeable contexts and able to talk different working languages (being an engineer if necessary, but also a branding designer if needed) But, the Chief IoT Officer is not alone. He or she has an IoT Team that reflects his or her characteristics, strategic and multidisciplinary. From system architect to solution specialists, from data scientists to software developers, from marketing experts to designers, to branding experts to organisational experts. IoT Team and Skills

26 Porter, M.,Heppelmann, J. How Smart, Connected Products Are Transforming Competition, Harvard Business Review, November 2014 Porter, M., Heppelmann, J. How Smart, Connected Products Are Transforming Companies, Harvard Business Review, October PTC Whitepaper. Quantifying The Return on Investment (RoI), 2015 Microsoft Whitepaper. Addressing RoI in Internet of Things Solutions, 2016 Interesting Readings

27 Thank you Saverio #IoTRetail