‘Internet of Things’ Helping Ecommerce Merchants

The adoption of Internet of Things has grown in the retail world since I last wrote about it in December 2013. While bigger companies are profiting from this technology, many smaller merchants aren’t positive whether it can help them. This post helps clear some of those doubts.

Internet of Things — IoT — identifies a community of connected devices that can communicate with one another, and may also be accessed via a wireless link using Wi-Fi or mobile phone networks. An excellent example is a car or a device that can be remotely accessed to monitor location. This is a one time transmission of information i.e., a user sending a request to look at the location of a vehicle or a gadget.

The method becomes more useful with two-way communicating, as soon as a device senses something and then sends information. For instance, a car could alert the owner if a person is attempting to break in by deploying a sensor to detect broken window. This two-way communication is the principal reason for the greater adoption of IoT.

Retailers have been using one kind of sensor, radio frequency identification, or RFID, in their warehouses for tracking inventory for many years. RFID is also utilised in brick-and-mortar stores for many different purposes like smart labeling, which can detect theft.

With costs for one label, or detector, coming down to about 5 cents, more retailers are embracing these solutions in their surroundings. It’s beneficial and makes economic sense to do so. These tags are extremely small, as shown from the picture below, making them simple to deploy. They frequently have adhesive backing to attach to labels. They typically have a tiny built-in battery which can last up to three decades, more than adequate for tagging a single thing but also enables reuse of this label.

RFID chips are extremely small, the fraction of the size of a penny. Courtesy: Alien Technologies.

IoT for Inventory Management

Let us use an example to illustrate. Say a merchant has $5 million in annual revenue with $1 million of stock in its warehouse at any given time. This inventory contains 10,000 items. Assume the retailer incurs an annual stock reduction of 0.10 percent, or $1,000. Each item set up with a $.05 RFID tag will cost the retailer $500 — 10,000 items times $.05 each.

This cost could easily recovered by reducing the losses. The RFID tag can send an alert when an item is removed — i.e., lost or stolen — in the warehouse. The tag may also increase efficiency in the warehouse, as it can enable better inventory tracking and enhance the order picking process.

Additional IoT Sensors

Retailers can use different detectors beyond RFID to enhance operations. There may be temperature-monitoring sensors to inspect the perfect temperature for perishable goods and send alarms when necessary. There may be detectors that track the forklifts from the warehouse for predictive maintenance to prevent loss of productivity. There may be detectors in delivery trucks to monitor the deliveries in real time, reduce losses, and make the delivery routes more efficient. Each detector has a unique identifier to ensure it is easy to ascertain the source and take action accordingly.

Getting Started

Using IoT requires hardware and software. Many vendors — Softweb Solutions, Zebra, Novotech, Xively, SST — today provide end-to-end solutions. These vendors will work with a merchant to understand its requirements and define the sort of sensors and software needed to implement the solution. This will involve sealing the detectors and deploying them along with the computer software. Additionally, there are vendors that sell cloud-based applications, thus eliminating the complexities for an on-premise setup.