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How to transform the retail industry using IoT?

Every industry is in the phase of digital transformation, including the retail industry. Technologies like Artificial Intelligence, Big data, Machine Learning and IoT have powered and accentuated the digital transformation across various verticals. This article focuses on IoT (Internet of Things) and intends to provide a detailed insight into how IoT is transforming the retail market. 

Across the retail industry, IoT adoption is increasing at a very fast pace. It is anticipated that IoT is to be deployed by over 80% of global retailers in 2021. Frontier Economics states that a 10% increment in M2M connections will generate a 2.26 trillion USD GDP increment in the US alone within 15 years.

IoT applications allow retailers to increase their productivity, improve customer experience, reduce costs and increase sales. With such enormous benefits, IoT is gaining immense popularity among retailers worldwide. Global IoT’s market size in the retail sector is forecasted to rise from 14.5 billion USD in 2020 and reach 35.5 billion USD by 2025 at a CAGR of 19.6%.

The retail industry can utilize IoT technology in many ways. It helps retailers to improve store operations, track energy utilization, manage in-store navigation, manage product shelves, prevent theft and monitor goods.

In this article, the working of IoT and how it’s transforming the retail sector are discussed in detail. The points covered under this article are:

How IoT works in the retail industry?

The workflow and architecture of IoT under different retail use-cases using Azure service are described below. A developer may use any IoT development platform such as AWS IoT platform, Google Cloud IoT Core, Oracle IoT, Android Things or IBM IoT Foundation Device Cloud. We have taken the reference of Azure IoT Services and explained the following use cases using Azure IoT Suite.

In-store analytics

IoT devices connected through Wi-Fi or Bluetooth can facilitate store environment monitoring, in-store navigation and help customers locate and find the desired product. Such facilities help increase purchase rates and give customers a multichannel shopping experience by digitizing physical assets.

How it works:

iot in in-store analytics

  • Placed throughout the store, a set of IoT sensors send telemetry data such as product availability, in-store product location, condition, and sale rate to the gateway device.
  • The gateway devices send aggregated data to the IoT Central.
  • The data is exported to the desired Azure service for analytics.
  • The information that is structured in the preferred format is then sent to the cloud storage service.
  • Business applications such as Power BI now query the data and generate insights that empower retail operations.

The strategic placement of Bluetooth Low Energy (BLE) beacons is done throughout the retail store. BLE beacons are small sensors equipped with Bluetooth Smart technology which is compatible with smartphones. It sends out continuous radio signals to a specific range. The Smart devices in that range receive alerts and trigger events to provide information like the availability of a new product or a new offer.

Further, that device sends a unique ID to the cloud. The server verifies the ID and responds accordingly. Using BLE, customers entering the stores can get notifications related to current deals, personalized coupons, etc., on their smartphones.

IoT implemented to bring in-store navigation drastically improves customers’ shopping experience. It allows quick product search and provides a robust shopping environment that enhances product offerings and store layouts.

Smart Inventory Management with IoT applications

IoT technology helps businesses to track inventory in real-time, manage shelf availability and monitor product movement.

How it works:

smart inventory management on iot

  • The IoT devices or sensors embedded in shelves of a store or a warehouse send telemetry data including available product quantity, out-of-stock data, expired product details and other relevant inventory management data to the gateway device.
  • The gateway devices forward data to the IoT Central.
  • The data from IoT Central is routed to desired Azure service.
  • Azure services like Azure Stream Analytics are used to reformat a data stream and send it to storage accounts.
  • The processed data is stored in hot storage for near real-time actions and in cold storage for additional insight enhancements based on ML or batch analysis.
  • Logic applications are used to empower various workflows in end-user businesses.

RFID tags associated with every product in the store transmit data about the item through radio waves. BLE beacons broadcast data at regular intervals. RFID readers convert radio waves to a usable format and send the information to the cloud using JSON-RPC 2.0 over MQTT protocol. While BLE readers, also known as Access Points (AP), similar to the RFID readers, are used to detect Bluetooth signals and relay the message to the cloud or local Azure IoT Edge through JSON-RPC over MQTT.

Connected logistics with IoT

Connected logistics allow shipment tracking in real-time across air, water and land. Moreover, it captures the real-time environment and prevents spoilage and theft with cold chain tracking.

Cold chain monitoring is the process to monitor temperature-sensitive products like perishable food items, vaccines, pharmaceuticals, etc., throughout their supply chain journey.

How it works:

connected logistics

  • The IoT tags embedded on the cargo, shipments and fleet send the insightful data, including shipment location, temperature, humidity, etc., to the gateway devices.
  • Gateways forward the data to the IoT central.
  • IoT Central routes the data to the desired Azure service.
  • Azure services reformat the data stream and send it to the storage space.
  • Business applications empower business workflows by providing meaningful insights.

IoT tags provide products’ physical and ambient data such as location, temperature, humidity, tilt, shock, jerks and light. Typically, IoT tags connect with gateway devices through Zigbee (802.15.4).

The gateways enable upstream IoT cloud connectivity using Wi-Fi or cellular connections. 802.15.4 Wireless Sensor Network (WSN), NFC and Bluetooth are used for downstream connection with IoT tags. IoT tag pairing, end-to-end cloud connectivity, sensor data aggregation, data retention and configuration of alarm thresholds are done through gateways.

Business insights generated through telemetry data processing are typically exported to a preferred line of business application. It is accomplished using webhook, event hub, service bus or blob storage to develop, train and deploy ML models and further enrich insights.

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Energy management with Smart devices

Energy consumption has always been a cost-consuming factor for all businesses. Lighting, air conditioning, heating, refrigeration, etc., everything consumes energy and increases the electricity bill. Switching to IoT-enabled devices can reduce energy consumption and save a considerable amount of cost every year.

A large retail chain can lose nearly $2 billion annually on wasted or spoiled food due to inefficient storage systems and legacy refrigeration systems. In overheating or power cuts, the alarm of the legacy systems may delay and there’s no mechanism to get warnings before an emergency occurs.

How it works:

  • The Smart IoT appliances embedded with sensors gather information related to energy consumption, behavior during power cuts, wear and tear data and an emergency like short-circuits (if any). The collected data is forwarded to dedicated gateways.
  • Gateways send the aggregated data to the IoT Central for further processing. The LoRaWAN protocol is used to establish a connection between class A sensors and the LoRa gateway.
  • The gateways send the alert notification to the person in charge and simultaneously instruct the appliances to take the recommended action.

IoT-powered devices continuously log, monitor and alert the in-store personnel about energy usage, temperature, gas leakage, electricity breakdown, etc. Through Smart Energy Management devices, store owners can directly interact with the devices’ controllers and retrieve prioritized information.

Smart refrigeration IoT devices provide cloud-based temperature monitoring and notify the controllers about any emergencies using temperature sensors and mesh networking technology.

Theft prevention with geo-fencing

The retail industry is continually facing shoplifting crime since the shop owners fail to provide enough attention and spot the shoplifters. The National Association of Shoplifting Prevention (NASP) states that more than $25 million worth of merchandise gets stolen every day. Retail shrinkage, including employee theft, vendor fraud, paperwork error and many more, adds more to the retailers’ losses.

How it works:

The geo-fencing technique is used to prevent shoplifting and overcome the problem of retail shrinkage. It uses a Radio Frequency Identification system (RFID) or a global positioning system that allows store operators to create a virtual barrier or zones around specific locations in the shop. If a customer tries to move a product from its particular area, the shop owner receives an alert and a message is sent to the store in charge.

Geo-fencing enabled IoT beacons or Smart devices help retailers in various ways:

  • keeping goods safe,
  • managing company-owned resources,
  • tracking customers and employees movements,
  • eliminating thefts and
  • minimizing losses.

Customer engagement with sensors-enabled shopping carts

Shopping carts embedded with sensors transform the customers’ shopping experience and increase their engagement.

How it works:

The sensor-enabled shopping carts help retailers grow their businesses by allowing them to visualize shoppers’ flow by category/subcategory, analyze paths, understand shopping patterns, and provide faster checkouts.

The carts embedded with sensors use connectivity protocols to track the wheels’ movements and record their distance. It provides precise data of shopping carts with in-store journeys. The data is stored on the cloud and used for further analysis to gain insights.

What are the potential challenges of implementing IoT and how to resolve them?

IoT offers numerous benefits; still, many retailers are hesitant to adopt the technology for their businesses. It is due to the issues of concern and possible challenges that IoT devices impose. These challenges need to be addressed and resolved responsibly to facilitate seamless IoT integration into the retail operations.

Challenge 1: Security

Maintaining privacy and security is the main problem of implementing IoT devices. Providing data access to customers gives more opportunities, while at the same time it opens doors for cyberattacks as well.


There must be a close collaboration between retailers and IoT software developers to ensure that the devices in-built with a robust security mechanism implement end-to-end encryption, periodic software updates, secure passwords and an IT infrastructure that constantly scans for vulnerabilities.

Challenge 2: Infrastructure

Lack of infrastructure and networks to deal with a massive amount of IoT data make retailers’ operations less efficient. Retailers need to make considerable investments in robust networks, cloud computing, data centers and devices like barcode scanners, tablets, etc., to make their stores digital.


Retailers must start with minor changes like using IoT-controlled air conditioning or lighting. It will bring near-term ROI, after which retailers can move towards implementing more sophisticated IoT solutions like in-store analytics.

Challenge 3: Data management and analytics

Retailers lack relevant technical skills to manage data and gain valuable insights from IoT systems.


Retailers can manage their IoT data by hiring experts or relying on skillful, well-trained and qualified third parties.


The article focused on providing detailed insights on how IoT works under various use-cases of the retail industry. The key takeaway here is to notice how IoT is on the verge of fundamentally changing the way retailers operate.

Ultimately, every retailer will embrace the technology and witness that IoT increases their customers’ satisfaction and improves product handling and supply chain management in upcoming years. On the flip side, the retailers who don’t innovate may experience a loss in their customer base.

One of the article’s underlying themes has been about data and how forward-thinking retailers can use the generated insights to channelize their customers by telling them what to buy, how to get discounts, and when their favorite product will get back to stock. At the retailers’ end, the approach results in reduced shrinkage and much tighter inventory control.

IoT provides numerous benefits to the retailers, such as valuable insights, real-time tracking, constant monitoring, etc. With such advantageous facilities, retailers can streamline customer experiences and amplify their profits.

If you’ve got a store with a wide range of products to handle, you must implement IoT to keep track of your products in real-time. To get an IoT-enabled system developed for your business, contact our team of IoT experts who have extensive experience designing and developing custom IoT solutions specific to our clients. Get in touch with the leading professionals and discuss your requirements.

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Author’s Bio

Akash Takyar
Akash Takyar
CEO LeewayHertz
Akash Takyar is the founder and CEO at LeewayHertz. The experience of building over 100+ platforms for startups and enterprises allows Akash to rapidly architect and design solutions that are scalable and beautiful.
Akash's ability to build enterprise-grade technology solutions has attracted over 30 Fortune 500 companies, including Siemens, 3M, P&G and Hershey’s. Akash is an early adopter of new technology, a passionate technology enthusiast, and an investor in AI and IoT startups.

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