IoT and Retail: Better Shopping

Great article exploring the future of retail and IoT by Carmen Peter, SAP.

The Internet of Things will likely change our world much more extensively than we realise. This applies to the world of shopping, too.
Michael Osthof skillfully maneuvers the Playmobil figurine with its small plastic shopping cart through the store entrance, while his colleague Hendrik Hilger eagerly watches from behind his laptop. What looks like adult men playing with a toy shop actually has a more serious background.

At the SAP Retail Innovation Lab in St. Ingbert, which the two men lead, they are adapting SAP solutions for the retail sector in close cooperation with other teams in SAP and then presenting them to customers in the most hands-on way possible. 

The Innovation Lab has built a small, sensor equipped store – mostly in their spare time – that shows which IoT scenarios can already be implemented with the SAP HANA Cloud Platform. Retail customers were thrilled by the prospect of using the model themselves instead of having to put up with the usual, extract PowerPoint presentations. So it was no surprise that the team won a prize for it straight away at a retail event in Switzerland.

“It’s really something special when customers return to the stand two or three times and bring different colleagues with them each time,” says an excited Sascha Magold, the scrum master and design thinking coach who designed the wood model and then sawed and soldered it for weeks in his hobby basement. “Customers immediately notice what else we can implement for them.”

As soon as the figurine passes the entrance, you can see how the counter on the corresponding Fiori tile switches from three to four in real time. This means our Playmobil friend is the fourth customer to enter the store. When a few steps later he takes his favorite breakfast cereal off the shelf, a message showing the remaining number of boxes is sent to the system. If it drops below a defined value, an employee is sent a message via smartwatch: It’s time to fill the shelf again. Integration with the back-end system, to initiate a replenishment order, is also planned.

Better Service Thanks to IoT

In addition, heat maps can be generated to show the path customers take and the time they spend in specific areas. This makes it possible to assess multiple locations and determine whether products are positioned well or whether customers wander through the store for long periods because something is difficult to find. It is even technically possible, based on register receipts, to determine the time when buyers of high-priced articles enter the store. This would make it possible to determine the most favorable time for launching new products. And if the number of items placed in the shopping cart is tracked, the system can even initiate the opening of another cash register when needed – before impatient customers start calling out loudly in a Saturday afternoon queue.

All the same, the Internet of Things (IoT) doesn’t end at the cereal shelves. If a store offers clothing, changing room mirrors that are integrated in the system can suggest different combinations with other articles from the assortment. The customer can virtually try on the different variants. Sensors on hangars or in the garments are also possible, which report how often a garment was taken into the changing room but then put back again. In such garments, the price and look seem to be right, but possibly not the cut. As a result, retailers don’t only see which garments are purchased and which aren’t – as is currently the case – but can also deduce why a certain article isn’t selling well.

Moreover, thanks to the IoT, retailers can increasingly control and analyze all channels – whether retail outlet, online store, or catalog mail order. A clear competitive advantage. The possibilities seem limitless, especially since nearly all customers are now mobile and young people – as “digital natives” – practically expect service variety through new technologies. As Sascha says, tomorrow’s customers might even order and pay for their goods with an app and only pick them up at the store.

Privacy: The Hot Potato

Despite all the enthusiasm, Hendrik admits that privacy remains a difficult topic. But he assumes that brands will subject themselves to a certain self-control, to maintain credibility. Brands that promote sustainability, for example, will not use facial recognition; in Henrik’s opinion, organic and “Big Brother” are mutually exclusive. In addition, people should always think about which personal data they want to reveal.

But can they maintain control over this at all when customers are registered at the entrance and then tracked on their way through the store? Countries with more lax privacy laws, such as Brazil, are already experimenting with more forward methods. When the GPS sensors in a smartphone show that a customer has entered a competing store, he receives a message offering a discount on certain products if he leaves the store again as quickly as possible. A brave new world of shopping. But instead of seeing such promotions as a violation of privacy, says Sascha optimistically, people should take advantage of this development. If you want a discount, for example, you simply enter the store next door intentionally.

No matter what you really think of it. The colleagues from the Retail Innovations Lab are sure that SAP, with its forward-looking HCP platform, has a crucial lead in the IoT domain that must be exploited. There are many interactive systems in the meantime, but only very few of them can match and centrally manage huge datasets with one another. That’s why the team is hoping to receive more support for such projects. After all – and this is where Michael, Sascha, and Hendrik agree – they all show customers the benefits of new technologies, especially the value added by the HCP, tangibly with specific examples. They would also help employees to contribute talents that they normally only use in their personal lives enthusiastically, and reduce the oft-quoted “silos” between departments.

You can almost see the Playmobil figurine, which Michael has now helped to reach the exit, nod its head in approval.