For many years, online retailers had an advantage over their physical counterparts in some areas due to everything running digitally. Yet today, remote monitoring technologies and IoT are changing the paradigm for all kinds of retailers, enabling physical operations to enjoy the same benefits as those online.
The Internet of Things (IoT) has tremendous potential to change the game for Consumer Package Good (CPG) organizations. As the price of sensors and RFID technology has come down, more and more businesses have installed them in coolers, vending machines, shelves, and more to monitor conditions and the customer experience. With IoT, CPGs have unprecedented access to data and insights that reduce costs, improve productivity, and increase revenue.
Andres Jejen
To learn more about how IoT is changing retail execution and what CPGs should think about when considering how to implement IoT, I spoke to Andres Jejen, Global Product Director for Retail Execution at AFS Technologies.
What does IoT mean for CPGs and how is it impacting them?
Andres: IoT is changing the way CPGs manage stock and keep their business running efficiently. Right now, we’re seeing two areas of IoT applications focused around inventory and asset management. One of the main ones is connected vending machines. Using IoT, vending machines report back data such as inventory, needs for replenishment, or current amounts of cash on an automated basis. This is extremely beneficial for manufacturers that directly manage their own machines.
The second big development is related to smart shelves and smart coolers. Coolers give you an automated view of products present and relay back conditions such as temperature and maintenance needs. Smart shelves go further than just product monitoring by combining availability with customer perceptions to identify how the consumer is reacting to the price and positioning of specific products.
How is IoT impacting retail execution programs specifically?
Andres: It’s always about increasing revenue. When products aren’t displayed correctly, businesses quickly lose sales. IoT enables automatic and immediate notifications about shelf conditions so it’s easier and faster for suppliers to replenish coolers, fix shelves, or attend to machines. If the shelf is smart enough to report conditions, this reduces the personnel required to maintain assets in the field. Without the need to physically go check, CPGs can dispatch the right products with the right resources and eliminate wasted trips.
In addition, any empty shelf space is more than just a lost revenue opportunity – it is an opportunity for competitors. Real-time sensor notifications prevent empty spaces in stores that competitors might snap up. To ensure shelf space isn’t available to competitors, it’s important to make sure that products are available at all levels in the store that meet expected demand. For example, it much more difficult to keep candy on the shelf in October than it is throughout the rest of the year. IoT makes this easy by assessing shelf data and correlating it against average demand of any given product at any time of the year. Collecting this type of information over time doesn’t just help stock levels, it also helps improve product distribution in markets and helps capitalize on area-specific trends.
Can you talk a little about how you’re working with Microsoft to embed IoT capabilities into the AFS solution? What’s new?
Andres: One contribution that Microsoft has brought to the table is their perceptive intelligence. Smart sensors on the shelf can be aligned to specific promotions, and return info back to the system about how customers react to the products and offers, even if they didn’t purchase. This intelligent perception of customer behavior is very much aligned to the future of retail execution.
The industry as a whole is turning to a customer-centric view where the consumer is at the center of everything. It no longer matters if businesses are advertising the right prices or putting them in the right places if their consumers don’t have a good experience while shopping in the store. That’s why we are working with Microsoft – to give our customers the ability to make their retail experience revolve around their customer. This shift, a truly customer-centric approach, is only possible by bringing together aspects of Dynamics 365and the features of the Cortana Intelligence Suite.
What enables you to see how people react to products in the store if they don’t purchase them?
Andres: Well, that’s interesting. We can track customer reactions by placing sensors at eye-level. These sensors trigger capture video of a customer’s reaction as they pass by the shelf at a certain speed. The videos capture information like if a product is grabbed, whether they checked the price, or if the customer was drawn to something lower down on the wall. We can deliver these insights to our customers using Microsoft’s perceptive intelligence algorithms.
What should organizations consider when they want to add IoT capabilities into their retail execution program?
Andres: When we talk with customers, we encourage them to answer 4 questions:
- How many man-hours can you save by implementing this IoT technology?
- What level of investment are you willing to put in?
- What types of stores are you targeting that investment towards?
- What are you going to do with the data you capture? That is to say, what is the ultimate goal beyond cost savings?
That fourth question is where Microsoft really comes in to play. AFS leverages Microsoft technologies to interpret data and then use machine learning to find patterns and specific trends. Capturing these data points and converting them into something measurable is a titanic effort – way more than something our customers can just sit down and do in an Excel file.
Companies need to be very aware of what they want to measure, what they want to do with their data, and especially what they want to achieve. Businesses can simply say “sell more,” but how are they going to do it? Is the goal to achieve larger shelf space? Is it to change packaging? Is it adding new flavors? You cannot grow the business by just saving or selling more, you need to do a combination of both.
Are you seeing anything truly innovative from your customers? Or are most companies still in the pilot stages of IoT implementation?
Andres: The IoT space for retail is relatively young. AFS has a handful of companies using IoT technology, most of whom are still using IoT to optimize their current business processes. I’ve seen a lot of retailers running pilots with sensors in their stores to try and understand what products will give them the best revenue but this is just a start. Manufacturers also stand benefit from this store level data so it not just the responsibility of the retailer – it’s shared. Once business start working together, that’s when we can expect some innovative shifts.
The innovation right now is happening at tier-1 companies, especially in the food and beverage industry. When you’re managing product in millions of locations it’s really easy to see the advantage to having a continuous flow of information going back to the manufacturer. Representatives at these companies can have all the information they need on the health of the coolers the moment they walk into a store and will know how to manage store inventory to be as effective as possible.
Do you expect that in the future it will still be primarily global retail companies driving IoT adoption, or will regional players eventually get on board?
Andres: Once IoT technology becomes even more affordable for even smaller companies, it will be easier to make the case for benefits and ROI. We definitely see regional companies using IoT in the near future. The same thing happened with retail execution software in the past – it was very expensive and painful to implement at first, but eventually when the price became less prohibitive more and more people started adopting it.
That’s a great thing about Microsoft – they work at such a large scale and can keep the costs of the services down especially as products mature. As the ability to participate trickles down to innovative tier-2 companies, they’ll want to follow the tier-1 companies because the benefits are clear.
What’s different about what AFS does for the CPG industry?
Andres: I believe AFS is ahead of the curve in many ways, specifically with regards to the consumer-centric experience. We are shifting our gears and none of our competitors are going this direction – they’re still focused on product merchandising, placement, price, availability, etc. We want to take advantage of all of the benefits the technology provides us with now that we have an alliance with Microsoft. When we show customers the possibilities, they get very excited.
No comments:
Post a Comment