6/4/24, 7:24 PM How AI and IoT Retail Applications Are Transforming Retail

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6/4/24, 7:24 PM How AI and IoT Retail Applications Are Transforming Retail

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How AI and IoT Retail Applications Are

Transforming Retail Industry? [Part 2]
Kirill Kovalenko · Business Solutions | Retail Analytics

We previously discussed the revolutionary impact Artificial Intelligence (AI) and Internet of Things
(IoT) are having on retail analytics, highlighting the advent of IoT retail applications that are
modifying the landscape of in-store experiences. These applications are ushering in innovative
retail analytics options, allowing physical stores to mirror the versatility and responsiveness of e-
commerce platforms. They enable stores to implement A/B testing and dispense real-time
recommendations within the physical retail space, thereby driving enhanced customer engagement
and operational efficiency. In this blog, we will delve deeper into the myriad benefits delivered by
IoT retail applications, AI, and Cognitive Services and explore the multifaceted ways they are
refining the functionality and customer interactions in the physical retail environment. These
enhancements encompass innovative management of queues, social distancing, and on-shelf stock
along with providing advanced options for precise price determination.

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6/4/24, 7:24 PM How AI and IoT Retail Applications Are Transforming Retail

Table
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did you Contents
about us?

How is Retail Iot Changing Queue Management?

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What Are the Benefits and Applications of IoT in Retail?

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Enhancing Supply Chain Management

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Efficient Inventory Management

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Smart Shelf Management
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Automated Checkout

IoT Retail Applications for Enforcing Social Distancing

How is Retail AI Changing Shelf Availability Management?

How is Retail AI Changing Pricing Strategies?

How is Retail Iot Changing Queue Management?

Queues are still a tedious reality of many public and private service providers. Queue management
technology is an unglamorous but important field, especially as population growth increases
demand on services. Queue management can be explicitly tied to efficient daily operations, since
deciding how many tellers/checkouts to have open at any given time directly impacts KPIs and
revenue.

Consumer survey has shown that, on average, people are only willing to wait slightly more than
two minutes in a queue that is not making progress. Ticketing systems have been implementing
RFID technology and providing real-time updates to customers via their smartphones. Situations in
which ticketing systems are not suitable, however, still have the potential to evolve through the
implementation of retail Internet of Things (IoT) sensors and machine vision.

By being able to automatically track queues at the level of the individual using retail machine vision
a dedicated system is able to see when a customer enters the queue and how long they have been
waiting. It can detect if the wait time is approaching a previously calculated queue abandonment
threshold and automatically send a notification to a manager. At this point a new checkout may be
opened or other measures may be taken to prevent the customer attrition which queue drop-off
represents.

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6/4/24, 7:24 PM How AI and IoT Retail Applications Are Transforming Retail

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What Are the Benefits and Applications of IoT in Retail?

The retail sector is currently undergoing a substantial transformation, driven by the rapid
advancements in IoT technology. With IoT enabled devices, retailers are experiencing a wide range
of benefits from enhancing the customer experience to optimising supply chain management and
more. According to Grandview Research, the global IoT in retail market reached USD 42.38 billion
in 2022, with a projected compound annual growth rate (CAGR) of 28.4% from 2023 to 2030.

The integration of IoT technology enables retailers to create digital ecosystems, offering unique
and tailored customer experiences while expanding their reach by through connected, smart
systems. Let’s explore the key benefits and applications that IoT brings to the retail industry,
propelling it towards unprecedented growth and success.

Enhancing Supply Chain Management

Leveraging IoT solutions like RFID tags and intelligent sensors, retailers enhance supply chain
management by gaining a comprehensive understanding of the goods' journey from
manufacturing to customer purchase. Real-time analysis of data, including transportation duration
and storage temperature, offers valuable insights. Particularly beneficial for perishable products,
maintaining optimal storage conditions becomes crucial. Experts can estimate three-quarters of
retailers plan integrating IoT solutions to modernise supply chain management, improving
efficiency and customer experiences.
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6/4/24, 7:24 PM How AI and IoT Retail Applications Are Transforming Retail

Customer Experience Optimisation

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By harnessing the power of the Internet of Things (IoT) and artificial intelligence (AI), retailers can
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gain insight into retail business trends through data aggregation and analytics. These insights
encompass understanding consumer patterns, such as customer preferences, purchase history, and
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behaviour. Retailers can leverage this information to create tailored experiences that cater to
individual needs. Combining analytics with advanced technologies like facial recognition and
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sensing systems, retailers can even discern shoppers' moods and respond accordingly, enhancing
customer satisfaction.
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This data-driven approach significantly optimises the customer experience. IoT data enables the
implementation
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offerings or product recommendations. By using these IoT enabled devices, retailers can interact
with customers in real time, which is a significant advantage in the fast-paced retail industry where
decisions are often made within minutes. Real-time engagement and personalised offers
strengthen the bond between retailers and customers, fostering a sense of connection and loyalty.

Research conducted by PwC revealed that “72 percent of retail companies plan to use advanced
data analytics to boost the customer experience and establish a more customer-centric supply
chain.” This emphasises the growing importance of utilising IoT analytics to drive success in the
retail industry.

Efficient Inventory Management

By leveraging the power of IoT devices, businesses can effectively monitor and track their inventory
in real time. This allows retailers to automate various inventory management processes, such as
stock replenishment and product movement tracking, leading to minimised instances of running
out of stock and optimised inventory levels. Additionally, IoT-driven inventory management
enables businesses to streamline their overall supply chain operations, resulting in enhanced
efficiency and substantial cost savings.

Through IoT enabled devices like RFID tags, inventory managers can automate tasks such as
product ordering, inventory monitoring, and reordering, while also gathering and analysing data
on popularity and consumption patterns. The implementation of these IoT solutions not only
improves accuracy but also provides valuable insights that aid in making informed decisions. By
integrating smart inventory management solutions, businesses can enhance their procurement
planning, improve the customer satisfaction, and drive sustainable growth.

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6/4/24, 7:24 PM How AI and IoT Retail Applications Are Transforming Retail

Smart Shelf Management

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Smart shelves in the retail industry exemplify cutting-edge IoT technology. These shelves serve
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multiple purposes, such as ensuring inventory availability and preventing misplacement. IoT-
enabled smart shelves employ weight sensors and RFID tags, enabling precise identification of
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product quantities, continuous inventory tracking, and automated restocking notifications. These
integrated features facilitate accurate inventory management and ensure efficient replenishment
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processes. They can scan both display and stock shelves, promptly alerting staff when stock levels
are low or when items are incorrectly positioned.
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By automating these tasks, smart shelves seamlessly integrate with security systems such as RFID
tagswith
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video surveillance, enabling the detection of theft or unauthorised removal of products.
These integrated systems not only enhance security but also effectively monitor store activities.
They promptly alert personnel of any abnormal or suspicious behaviour and further strengthening
security measures and ensuring a safe environment.

Automated Checkout
The traditional experience of spending hours at store checkout counters has always been
frustrating for customers and it proves unprofitable for retailers to allocate multiple employees to
busy checkout counters. However, retailers can address this issue by employing IoT devices to
automate point-of-sale (PoS) systems, eliminating the problem of customers leaving without
completing their transactions due to lengthy checkout lines. With this automated system, the PoS
reads product tags and charges customers using a mobile payment app when they exit the store,
saving on cashier expenses.

With IoT enabled point-of-sale (POS) systems, which are portable and cloud-based, retailers can
efficiently monitor real time inventory and customer data through cashierless payment systems,
gaining valuable insights for improved decision making processes. This also helps retailers to
optimise their warehouse operations by leveraging targeted retail marketing solutions, enhancing
inventory management and streamlining logistics processes.

An excellent example of this technology can be observed in Amazon Go stores, where successful
implementation of self-checkout technology has taken place. By eliminating the need for
additional labor, such as cashiers or extra personnel, this approach benefits both the store and the
consumer, resulting in cost reduction. According to McKinsey’s research estimates, automated
checkout could be worth as much as $380 billion per year in reduced costs for retailers around the
world in 2025.

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6/4/24, 7:24 PM How AI and IoT Retail Applications Are Transforming Retail

IoTdidRetail
Where you hear Applications
about us? for Enforcing Social Distancing
Following all of the government-enforced restrictions on gatherings and distancing during the time
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of COVID-19, physical retailers have been some of the most affected. In many cases, even as the
restrictions are eased, distancing restrictions and occupancy restrictions add a layer of complexity
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to managing the reopening of stores. IoT systems that keep track of store occupancy and crowd
movement for analytics reasons can be easily retooled in order to assist with COVID-19 related
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customer restrictions.

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Real-time alerts can be sent to managers or floor staff if store occupancy increases above a
designated level. Heat mapping tools can also be used to analyse which areas of the store are
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causing bottlenecks and clusters, leading to violations of distancing guidelines. This is especially
useful for large retail store spaces in which it is more difficult for staff to keep track of the entirety
of the space at all times.

How is Retail AI Changing Shelf Availability Management?

Stock replenishment in a retail space is typically not particularly responsive. Once the inventory
management system indicates that the stock of a particular product is low, it is placed on order
and the displays are replenished in waves as these orders come in.

For a retailer, having the product be, not only in inventory, but also on the shelf at the time when it
is needed is vital for retaining customer loyalty. A little over 30% of customers, not finding a
product on the shelf, will opt to look for it at a different store, costing retailers almost 5% of their
total annual sales. Even those that don’t will spend over 20% of their entire in-store time resolving
these out of stock issues.

The use of retail RFID tags to track stock replenishment is an established and widely used
technology. These sensors would typically track pallets as they are delivered into the stock room
and as these pallets are then taken out onto the shop floor. Since this data is already been
gathered, the next step is to feed it into machine learning models. This opens up new ways to
predict and anticipate demand, and be able to pre-empt shortages and bottlenecks.

RFID tracking methods, however, are not feasible to use for individual stock items on the shelves.
This is because it may not be feasible to ensure that every product is properly tagged or report
accurately on products that are unpacked into the wrong section. High fidelity retail IoT visual
sensors combined with AI Machine Vision can solve this problem by being able to identify not only
how much stock remains on a shelf, but whether or not it is of the appropriate type even if it is not

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6/4/24, 7:24 PM How AI and IoT Retail Applications Are Transforming Retail

optimally arranged. These kinds of sensor combined with real-time alerts open up the possibility
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for effective priority based-stock replenishment.
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How is Retail AI Changing Pricing Strategies?

One of the main levers that is available to sellers operating both within e-commerce and traditional
retail is pricing. Understanding how price changes effect buying patterns is one of the most
fundamental aspects of retail strategy. Although development in this field have been very much
trailblazed by the big online retailers, there is no reason why physical retailers can’t implement the
same machine learning based analytics to guide their pricing strategies.

Determining an optimal price is often not a straightforward process and there is no single best
formula to use. The effect of concurrent promotions, sales cannibalisation, cross-selling, seasonal
and geographical variability and many more play into the decision making process. There are too
many factors for a human to take into account and pricing is frequently performed based on
instinct and an overemphasis on less relevant indicators such as current stock volume.

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6/4/24, 7:24 PM How AI and IoT Retail Applications Are Transforming Retail

Given the large number of factors that have to be considered, pricing is an area which benefits a lot
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from the application of machine learning models. Something which is potentially more of a
challenge for physical retailers than their e-commerce counterparts is ensuring that all the relevant
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data points are consolidated and available in the appropriate format. Once this is done, the
application
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item sales.
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If you’d like to know more about how these new technologies are transforming traditional
storefront-based retailers, feel free to contact us.
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