The CEO Perspective: Internet of Things for Retail  Top Priorities to Build a Successful Strategy
 

The CEO Perspective: Internet of Things for Retail Top Priorities to Build a Successful Strategy

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If the Internet of Things (IoT) is causing a wave of disruption
across industry, then the retail industry is poised to ride the crest of that wave. Unlike any other sector, retail has direct contact with one of the largest populations of potential consumers that fully embrace technology and innovation. Retailers need to stay current with the latest technologies to earn the loyalty of the next-generation consumer and capitalize on emerging business opportunities.

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The CEO Perspective: Internet of Things for Retail  Top Priorities to Build a Successful Strategy The CEO Perspective: Internet of Things for Retail Top Priorities to Build a Successful Strategy Document Transcript

  • Value View The CEO Perspective: Internet of Things for Retail Top Priorities to Build a Successful Strategy If the Internet of Things (IoT) is causing a wave of disruption across industry, then the retail industry is poised to ride the crest of that wave. Unlike any other sector, retail has direct contact with one of the largest populations of potential consumers that fully embrace technology and innovation. Retailers need to stay current with the latest technologies to earn the loyalty of the next-generation consumer and capitalize on emerging business opportunities. The IoT is breaking down traditional industry boundaries. Your customers are individuals with interests that drive interactions across industry verticals. Think of the cross section of industries that enable connected homes, connected cars, and connected retail. With increasingly sophisticated technology, these businesses can now intersect to enable one user experience across all interaction points and channels, creating added value for the customer and new growth opportunities for well-poised companies. The IoT is at the heart of this transformation. It connects people, machines, items, and services to streamline the flow of information, enable real-time decisions, and heighten consumer experiences. Leading retailers are already investing billions in the IoT – and realizing returns that range from uber-efficient inventory management to real-time promotions that grow sales. They are beginning to transform their business practices and recognize that, in time, the IoT will touch nearly every area of retail operations and customer engagement. How can you successfully navigate this transformation? Consider these top priorities to build a successful IoT strategy. US$326 Billion Worldwide Retail Industry IoT Revenue Opportunity by 2018 19.8% 2013–2018 Revenue CAGR Source: Worldwide Internet of Things Spending by Vertical Market 2014–2018 Forecast, IDC, June 2014. Faster Fashion Connected Cars Known for its ability to quickly transform runway fashion to in-store merchandise, Spain-based retail chain Zara is improving processes even further. By tracking inventory from factory to point of sale with a microprocessor-based tagging system, Zara hopes to speed its supply chain, improve customer service, and increase security.1 Automated Vending Intelligent Replenishment At Mobile World Congress, SAP demonstrated an automated vending machine that takes convenience to a whole new level. Designed to drive business and streamline operations, the machine features a personalized touch screen, gamification, automated payments, and the ability to communicate inventory replenishment and repair needs to back-end software.2 Upholding its commitment to premium standards and outstanding quality, BMW Group Research and Technology is working on the future of the connected car by integrating vehicle-related services into automobiles. Retailers can target drivers with tailored offerings based on their proximity to local stores.3 Unplanned stock-outs can now be a thing of the past. By using smart store shelves, specialized marketing equipment, and smart consumer appliances such as the Samsung Smart Fridge,4 retailers can drive replenishments based on actual inventory levels and customer orders to uncover tremendous cost savings and increase sales. 1 Sarah Morris, Zara’s tagging system means even faster fashion, Reuters, July 15, 2014, http://www.reuters.com/article/2014/07/15/inditex-zara-idUSL6N0PQ3MY20140715. 2 Ron Miller, This smart vending machine is the future of technology, CITEworld, IDG Enterprise, March 5, 2014, http://www.citeworld.com/article/2115348 /internet-of-things/this-smart-vending-machine-is-the-future-of-technology.html. 3 Andreas Schmitz, Tomorrow’s Connected Car, SAP News site, April 14, 2014, http://www.news-sap.com/connectedcars/. 4 Samsung Releases New Smart Refrigerator in South Korea, Widget.mobiletradar.com, September 16, 2012. www.sap.com/contactsap © 2014 SAP SE or an SAP affiliate company. All rights reserved.
  • Value View The CEO Perspective: Internet of Things for Retail Top Priorities to Build a Successful Strategy Embrace Innovation With the marriage of smart devices, advanced connectivity, and e-commerce, IoT and machine-to- machine (M2M) communication are already gaining traction in many areas of retail to optimize efficiency and develop new business models. Use of this technology is accelerating with mobile and cloud innovation, as well as advancements in Big Data and predictive analytics based on in-memory computing. It’s also becoming more affordable and practical as the size and price of sensors shrink. Retailers that embrace innovative technologies can gain first-mover advantage (see the table, below). Automated Merchandising and Operations • RFID-enabled sensors on products • Automated shelves and coolers • Smart fulfillment centers • Perishable tracking • Fleet operations monitoring • Sustainability monitoring • Digital signage • Automated store lighting • Cold chain and perishable tracking 50% Reduction in shrinkage enabled by IoT based on an estimate of the big three UK supermarkets 81% American and British millennial adults who value experiences more than material items $70billion Wearable technology market forecast by 2024 Retail Innovations for the Internet of Things Personalized Marketing • Proximity-based consumer interaction in the aisle • Interactive, personalized, seamless digital experiences Exceptional Customer Service • Parking assistance • Security, fraud, and counterfeiting controls • Automated checkouts via smartphone • Automated vending machines • Connected homes • Wearable devices • Interactive, personal digital signage Source: The ‘Internet of Things’ Is Now, Connecting the Real Economy, Morgan Stanley blue paper, April 3, 2014. Source: 10 Trends for 2013 and Beyond, JWTIntelligence report, December 4, 2012. Source: Wearable Technology 2014–2024: Technologies, Markets, Forecasts, IDTechEx research report, February 28, 2014. 2% Lower cost-to-sales ratios enabled by automatic checkout at the supermarket 22% chain efficiencies and targeted marketing Potential margin enhancement through supply Estimated cost savings for global online fashion and beauty retailer ASOS in the first full year of using warehouse automation $16.6million Source: The ‘Internet of Things’ Is Now, Connecting the Real Economy, Morgan Stanley blue paper, April 3, 2014. www.sap.com/contactsap © 2014 SAP SE or an SAP affiliate company. All rights reserved.
  • Value View The CEO Perspective: Internet of Things for Retail Top Priorities to Build a Successful Strategy Worldwide IoT Revenue According to IDC, estimates for IoT revenue by region in 2020 will be: Think Big Data and Analytics The growing number of connected devices will result in huge data volumes. Social networks will add to this massive “data lake” of IoT information to enrich pure machine data. By correlating all this data, you can gain invaluable insight about consumers, trends, and preferences and fuel promotion and placement efforts. But how will you make sense of it all? Retailers need to develop a strategy to not only store and secure large volumes of data, but also to enable advanced analytics at both the local and enterprise-wide level. These capabilities will help you understand past actions and predict future trends so you can deliver the right inventory mix at the right time. What’s more, they’ll enable you to act in the moment and provide higher levels of service to engage your growing audience of connected customers in real time. Cloud-based data warehouses and real-time analytics will be a must. Beautiful Design Nest Labs captured significant market share by introducing a connected thermostat that features design and use simplicity that its customers love. $2.6 trillion Asia Pacific $2.1 trillion Western Europe $1.9 trillion North America $217.1 billion Central/Eastern Europe $76.3 billion Latin America $114.4 billion Middle East/ Africa Source: Worldwide and Regional Internet of Things (IoT) 2014–2020 Forecast: A Virtuous Circle of Proven Value and Demand, IDC #248451, May 2014. Think Design With experience becoming increasingly more valued than material items, begin your plans for new products and services with the human experience in mind. Whether you operate in a business-to-consumer or a business-to-business model, think what will simplify life for your target audience and offer a delightful user experience. The intent is that the products and services are not only IoT capable, they should also be beautiful to the end consumer. The Internet of Things is an important technological shift for customers, consumers, and our brands. Our ability to explore and learn and innovate around IoT in retail is a key part of our constant thirst for knowledge around our brands – connecting and engaging with consumers.” Greg Swimer, Chief Technology Officer, Unilever Think Global An increasingly connected world provides an effective springboard for growth and optimization. The IoT is removing the physical barriers so retailers can reach broader target audiences – opening up new global business opportunities and delivery models. Global Reach China-based Alibaba Group started as a business-to-business portal and leveraged innovation and technology to become a global leader in online and mobile commerce. “ www.sap.com/contactsap © 2014 SAP SE or an SAP affiliate company. All rights reserved.
  • Value View The CEO Perspective: Internet of Things for Retail Top Priorities to Build a Successful Strategy Address Privacy and Security Data privacy and security need to be part of every discussion when planning an IoT strategy. Consider the breakdown in people, processes, and technology that led to the Target security breach and its financial and customer relationship aftermath. Your security practices need to be infallible, and the IoT connections delivering data and enabling the consumer experience need to be tamper proof. Beyond security, retailers need to clearly explain how they collect and use personal data. Privacy policies must prevent the unwanted sharing of personal information to third-parties or in public forums. Opt-in programs that demonstrate the benefits of sharing data – such as incentives, exclusive offers, or loyalty rewards – need to be part of the equation. Enable Your Infrastructure The IoT brings together a vast range of technologies, including hardware, sensors, devices, apps, telematics, data, and connectivity to the cloud. Who you partner with to build your infrastructure will have a great impact on its potential for success. Assess how software vendors, device makers, and telematics platforms can reshape product design and enable connected strategies. See them as strategic partners in your process. SAP® Connected Retail software supports the IoT for the retail industry and is powered by the SAP HANA® platform, advanced analytics, and best-in-class solutions to optimize business processes. The software bridges silos of data across physical, digital, and social channels to help create a real-time enterprise. It enables responsive supply chains, real-time demand-based replenishment, predictive maintenance, and highly personalized consumer engagement. Harmonize It All The real value of the IoT for retail is in connecting your infrastructure to your broader business process software. The use of in-memory technology will become a necessity to successfully combine IoT data with business transactional data in one shared database, in real time. For example, running the IoT for retail on an in-memory platform can help you become a real-time retailer, enabling unprecedented benefits in terms of consumer insight and just-in-time distribution and maintenance. It enables an environment where you can finally monitor, analyze, and automate in ways that greatly improve customer experiences, streamline key business processes, and create new business models. Are You Ready for Retail IoT? The IoT is not a distant concept for future consideration. The time to think about IoT is now. Learn more at: sap.com/iot or SAP ® solutions for the Internet of Things. © 2014 SAP SE or an SAP affiliate company. All rights reserved. No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP SE or an SAP affiliate company. SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE (or an SAP affiliate company) in Germany and other countries. Please see http://www.sap.com/corporate-en/legal/copyright/index.epx#trademark for additional trademark information and notices.