IoT Planning: A 2024 Guide For Retailers

The internet of things (IoT) is a collection of smart technology that lets retailers operate their stores more effectively. From smart shelves that track inventory in real-time to beacons that deliver personalized promotions, IoT technology is changing the way retailers operate.

With IoT in retail projected to create up to $12.6 trillion in economic value by 2030, the time to start IoT planning is now. But implementing IoT requires a well-considered strategy, with special attention to IoT system compatibility, data management, and security.

This guide will explain the biggest benefits of IoT in retail, essential technologies to consider to maintain secure IoT networks, and a step-by-step approach to planning your IoT implementation.

Benefits of IoT in retail

Better customer experiences

IoT is changing how businesses interact with customers—both online and in-store. IoT sensors, for example, can detect returning customers and connect their physical presence in the store to their online browsing history, showing items they’ve previously considered buying. 

Take retailers like Rebecca Minkoff and H&M, which have already implemented smart mirrors in fitting rooms. These mirrors use radio-frequency identification (RFID) tags to detect the clothes a buyer is trying on, displaying available sizes and colors while also recommending accessories to complete the outfit.

Improved operational efficiency

Behind the scenes, IoT is helping businesses operate more efficiently. For example, a supermarket chain might use IoT sensors throughout its digital supply chain to monitor produce from the time it’s harvested until it reaches the store shelves. These IoT devices track temperature and humidity levels during transport and storage, triggering alerts if conditions deviate from safe ranges, which prevent spoilage and ensure that customers receive fresh, high-quality products.

Walmart also uses IoT sensors to monitor its refrigerators and heating, ventilation, and air conditioning (HVAC) systems, identifying potential issues before they lead to breakdowns and adjusting cooling and heating to reduce energy consumption.

And at Macy’s, RFID tags help with inventory management, providing real-time stock levels and product location updates for greater visibility into the supply chain.

More data-driven decisions

IoT’s greatest value lies in the data it provides, allowing businesses to mine customer and IoT device data to make more informed decisions. For example, Kroger has implemented more than 2,000 smart shelves with RFID technology, providing real-time inventory data and alerting staff when items run low.

An ecommerce retailer could also analyze data from customers’ smart home devices to predict seasonal trends. For example, upon noticing an early activation of heating systems in a particular region, you could proactively stock and promote winter gear to those customers, getting a jump on the seasonal rush. 

Key IoT technologies for retail

RFID technology

RFID technology uses radio waves to track products. It’s significantly more efficient than traditional barcodes as it can scan thousands of items simultaneously. It also doesn’t require a direct line of sight—RFID tags transmit data to a reader, helping track inventory quickly and accurately.

It’s no surprise that 93% of North American retailers are already using this type of IoT solution in some way. RFID technology offers:

• Better inventory accuracy: RFID can improve accuracy fromless than 70% to more than 98%, potentially leading to a 5% increase in sales. 
• Omnichannel support: RFID provides precise inventory data across multiple stores, supporting services like in-store reservations and buy online, pickup in-store (BOPIS). 
• Reduced spoilage: Temperature-sensitive RFID tags can monitor perishable goods, minimizing waste. To give some context: food waste is an $18.2 billion lost opportunity for US grocery retailers—RFID can help recover a huge part of that. 

When combined with artificial intelligence (AI), RFID can optimize store layouts, predict regional sales trends, and personalize customer experiences. Amazon, for example, is improving its Just Walk Out technology using AI and RFID for a more frictionless checkout.

Smart shelves and price tags

Smart shelves use sensors, digital price tags, and cameras to gather data on stock levels and shopping patterns, ensuring optimal inventory while providing a more immersive buyer experience. 

A McKinsey report found that 73% of retailers using such technologies reported improved operational efficiency and faster inventory turnover. That’s because smart shelves and price tags assist with store operations like:

• Real-time inventory management: RFID tags and sensors track product movement, ensuring optimal stock levels. Walmart, for example, saw a 30% reduction in stock discrepancies with smart shelves. 
• Instant price updates: Digital price tags allow quick, store-wide price changes in response to market demands. Take Kroger’s EDGE system, for example, which provides real-time pricing, nutritional information, and promotions.
• Reduced labor costs: Automated tracking frees staff for customer service and reduces operational expenses.
• Personalized experiences: Smart shelves can communicate with customers’ smartphones to offer tailored deals. Nike, for example, uses smart shelves and other technology in flagship stores that interact with customers’ smartphones to provide personalized offers based on previous purchases.

Beacon technology

Beacons are small wireless devices that send Bluetooth Low Energy (BLE) signals to nearby smartphones. They create personalized shopping experiences for customers with the store’s app on their bluetooth-enabled devices.

Use beacon technology in retail to send personalized discounts to passersby, drawing them into stores—like guiding customers to items from their online wishlist when they enter the store. You can also track customer movements and provide data on foot traffic patterns, helping optimize store design and layouts.

Connected POS systems

Connected POS (point of sale) systems unite in-store and online sales processes. They synchronize inventory, customer data, and sales records across all channels, including both POS software and hardware like tablets, barcode scanners, and card readers.

A connected POS system help retailers with the following:

• Real-time inventory tracking: POS systems automatically monitor stock levels across physical and online stores. For example, fashion retailer Odaje uses Shopify POS to manage inventory across its 16 physical and online stores to avoid stockouts and overstocking.
• Faster checkouts: A POS system can streamline transactions and reduce customer wait times. Offbeat Bikes uses Shopify POS for quick and easy transactions, improving customer satisfaction. Owner Mandalyn Renicker says: “The Shopify interface is just easier to use too. Customers recognize it, especially at checkout where when they see that Shop Pay icon, they know checking out will be a breeze.”
• Data-driven insights: A POS provides unified reporting across all sales channels, helping retailers make informed decisions about inventory, staffing, and marketing.

Smart cameras and surveillance

IoT cameras come equipped with internet connectivity and various sensors. They’re capable of real-time monitoring, data transmission, and integration with other smart devices.

Smart cameras help retailers with the following:

• Enhanced security: Get real-time monitoring and instant alerts for suspicious activity, which helps with quick intervention during potential shoplifting incidents. 
• Customer behavior analysis and improved store layout: Smart cameras track foot traffic patterns, time spent in certain areas, and customer demographics to create engaging displays and identify peak shopping times.
• Real-time operations management: Keep track of queue lengths and checkout times, allowing managers to adjust staffing levels on the fly.

Steps for planning IoT in your business

Define objectives

What do you want to achieve with IoT? Objectives should tie directly to your overall business goals, whether increasing sales, improving efficiency, or enhancing the customer experience.

Take the French sporting goods retailer Decathlon, which set a goal to improve inventory accuracy and customer experience. It tagged 100% of its products or packaging with RFID and currently uses more than 50,000 RFID readers between its warehouses and stores worldwide.

Assess readiness

Examine your current setup to see if you’re ready for IoT. Do you have reliable internet and compatible devices? If you’re planning to use smart shelves, can your inventory management system handle real-time data?

Evaluate your team’s skills to see if you need to plan for training or hire more people. You’ll also need to review your budget for initial setup and ongoing maintenance.

Work with a partner

The right IoT technology partner will securely collect data, offer valuable insights, minimize security risks, and help you scale.

Choose a provider who understands your business and can tailor IoT solutions to your needs. Ask about their approach to data security, scalability, and how they work with platforms like Shopify. Check reviews and compare pricing before making your decision.

Develop a roadmap

Create a step-by-step plan for bringing IoT into your business. Start small, perhaps with smart inventory tracking in one warehouse, before expanding. Set clear milestones and include plans for staff training, system integration, testing, and customer communication along the way.

A solid roadmap keeps your project on track and helps manage stakeholder expectations. Zara, for example, developed a phased roadmap for its RFID implementation. It started with a few stores, then gradually rolled out to all of its more than 2,000 locations, allowing time for adjustments and learning.

Run pilot projects

Create a thorough IoT test plan covering functionality, performance, and security. For example, if you’re trying smart shelves, test how accurately they track inventory and update your system. Note any issues. Maybe they work well for small items but struggle with larger products. Your team or IoT partner should be able to help solve these teething problems.

Once satisfied, roll out your solution to a small group—for example, one warehouse section or a single product category. This careful testing helps you spot and fix issues early, control costs, and gain insights to guide your full IoT rollout.

IoT deployment and iteration 

After a successful pilot, bring IoT into your entire operation. Start with a detailed plan, including a timeline, communication strategy, and training schedule. Then roll out in phases—you might begin with smart sensors in one warehouse and then expand.

Update your website to handle IoT data, perhaps adding personalized product recommendations based on real-time inventory, and train your customer service team on new IoT features.

Finally, monitor key performance indicators (KPIs) like inventory accuracy and order fulfillment speed. Regularly gather feedback from your team and customers to find areas for improvement, and be ready to adjust based on what you see.

IoT planning challenges

IoT doesn’t come without its challenges, particularly: 

• Data protection: Use robust encryption for all sensitive data. If you’re implementing smart fitting rooms, for example, make sure that any personal user data collected, like size preferences or purchase history, is securely encrypted before it’s transmitted to your CRM system.
• Cyberattacks and IoT device management: Your IoT devices could be potential entry points for hackers. Implement strong, unique passwords for all connected devices and maintain regular firmware updates. Consider creating a segmented IoT network specifically for multiple devices, isolating them from systems that store sensitive customer data.
• Budget for IoT implementation: IoT projects can be capital-intensive. Adopt a phased approach. For example, you could start by integrating RFID tags on your high-turnover SKUs to track real-time inventory levels. As you see return on investment (ROI), gradually expand your IoT infrastructure to other operational areas.
• Integration issues: Before investing in your IoT ecosystem, assess its compatibility with your existing tech stack. For instance, an advanced AI-powered recommendation engine won’t be effective if it can’t access your product database or order management system seamlessly.

Making IoT planning work for your retail success

IoT planning can significantly improve your retail business, but it’s an ongoing process that requires regular adjustments based on results and feedback.

Your IoT strategy should align with your business goals and your customers’ needs. Stay flexible and willing to adapt as you learn what works best for your store.

Ready to get started? Shopify POS works seamlessly with many IoT devices, including RFID tags and smart shelves. Explore how Shopify’s flexible solutions can support your IoT plans and help your retail business grow.