What does the Internet of Things have in store for grocery?

Designed to monitor heart rate and offer contactless payment, among other things, the apple Smart Watch, announced last month, made headlines across the world. But people are also getting excited about a less eye-catching technology launched by Apple a year earlier.

The iBeacon is a small device that can detect a smartphone or other hardware when it is in close proximity to it. It will work with iPhones, but also Android devices from the likes of Samsung, HTC and Nexus.

When it comes to the use of beacons in retail, experts warn they need to be used responsibly and that retailers should resist bombarding shoppers with promotions (see p34). Yet beacons are by no means limited to the shop floor.

That’s because, along with the Apple Watch, the iBeacon belongs in a class of devices that come under the umbrella term of ‘the Internet of Things’ (IoT). Fridges, cookers, microwaves, smoke alarms, cars, delivery vans, vacuum cleaners, light switches and the central heating will one day be connected to each other and share data with grocery retailers, food producers and consumer goods companies, say IoT advocates.

So what will this mean in practice? What is the significance of the iBeacon? And when will IoT start making a meaningful difference

Smartphones

IT research company Gartner forecasts that, within seven years, 30 billion devices will be connected to the internet, adding $1.9 trillion (£1.2 trillion) to the global economy. 

“The first steps in the IoT will be beacons,” says Dan Kirby, CEO of Techdept, a digital marketing and technology consultancy that has worked with Tesco. 

“The Internet of Things is a catch-all phrase for lots of stuff but the issue will be getting everything talking to each other. This is the importance of iBeacon, Apple has created a standard that can be adopted by everybody because most of us have smartphones that can accept this kind of technology.”

Retailers could then do quite simple things for their customers, such as creating an app to structure their shopping lists and guide them on the most efficient route through the store. At the same time, the customer’s identity, purchasing history and location can be known to the retailer, allowing them to present tailored special offers and other content to the consumer, as well as better managing stock and store layout. 

“It will be about finding ways of creating service layers and creating nuances of emotional engagement. This is where the technology will give grocery retailers an edge,” says Kirby. 

“If the consumer is shopping in a particular way there may be patterns that allow the retailer to suggest how items can be grouped together and delivered or bought in-store. The retailer can pre-empt behaviour and look at ways to make it more efficient. The consumer has a more intimate relationship with the retailer.” 

The next frontier

However, the IoT promises much more than beacons. An oft-cited example is the internet fridge, which allows householders to scan items as they are emptied, automatically ordering replacements, telling consumers when food is going off, or suggesting meals from the fridge’s contents. 

Whichever technologies associated with the IoT become popular, the system will offer retailers a new level of insight into their customers and other consumers, says Jason Nathan, global multichannel capability director at Dunnhumby. “This is the next frontier, to look at what other devices or things exist that are going to generate data,” he says. 

Nathan points to Health monitoring by smart bracelets, which can measure the wearer’s exposure to the sun. A connected smartphone could then suggest what sun cream to get and where, he says. But retailers need to tread carefully, given the intimate relationships with consumers they could forge as they exploit the IoT. 

“For retail and fmcgs, the data is of interest. The risk is when the customer uses a device, they may be appalled to learn what data could be used for, unless the proposition is made clear. You have to make it really transparent for customers to understand and opt out of if they want. Up to this point, customers have opted in to sharing data for a purpose but that is through very narrow pipe. If we are talking about a consumer’s house, kettle, oven or heating then very quickly people could start to feel creeped out.”

Supply chain

For grocery retailers to get to a point where they are able to target the customers on an individual basis, with tailored offers and services, they need more flexibility and control in their supply chains. The IoT will help achieve this, while also keeping costs down, says Emile Naus, technical director and partner at supply chain experts LCP Consulting. 

Arguably the supply chain is already pioneering the IoT in retail. Satellite tracking of trucks and internet-enabled telemetry are allowing supply chain managers to understand the precise location of their vehicles, optimise routes and improve driving standards, Naus says. 

New technologies will soon allow even more detailed management of the supply chain, he adds. Radio frequency identification (RFID) tags on pallets or individual items will tell retailers exactly where an item is, greatly enhancing service, he says. 

“Today, when you have an online order, if you have not got it in stock it means you cannot provide the item. You might think it could arrive in time, but you’re not sure, so you cannot take the order. In future, you might have something that says: ‘I know I don’t have it now, but I know it is on its way and we will have it in four hours’. That means you can take the order because within the lead time you can pick it and ship it.” 

Meanwhile, the improved accuracy of demand signals from consumers, through internet-enabled devices in the home like connected fridges, could greatly improve the accuracy of stock forecasts. 

Together with technologies that allow more accurate monitoring of conditions in storage and transit, this will cut supply chain waste, particularly in fresh produce, says Naus. “When you look at the typical waste level in the fresh produce supply chain, getting a few per cent taken off can save a huge amount of money,” he adds. 

Yet while the technology is fast becoming available to retailers, they may struggle to take advantage of the IoT, says John Newbold, creative director of design and technology consultancy 383. 

“When you look at the technology, we should be able to build these things quite quickly, but organisations are big, they move slowly and they don’t like change. It is not necessarily a technological hurdle that stops these things happening.”

Risky business

And the Internet of Things is not without its risks. KPMG cyber-security director Wil Rockall says retailers already hold a huge amount of personal data on customers through loyalty cards. If this is combined with health and lifestyle data from the IoT the risks are compounded, he says. A highly automated supply chain connected via the internet could be vulnerable to hacking attacks motivated by industrial espionage or attempts at sabotage. 

“Now is the time to think about mitigating these risks. With the IoT we can start to architect security properly and build in things like segmented networks so the back office IT is not linked with shop floor IT systems. Retailers need to ensure security is done in a considered way that matches the strategy of the organisation,” says Rockall - though he adds that the risks will be outweighed by the benefits. 

While the hype surrounding the topic can make it confusing, retailers will soon be able to reap rewards from the IoT. If they can overcome the challenges presented by security, privacy and cultural change within their own organisations, these technologies can offer more responsive supply chains, less waste and a closer relationship with consumers. 

And there is nothing confusing about that.