IoT in Retail - Reshaping the Customer/Retailer Experience

Learn about the benefits, use cases, and applications of IoT in retail. And, explore different future trends to have a competitive advantage in the market.

Retail today is a massive market with tonnes of players fighting alongside to grab maximum customer attention. Adding to this, the industry also deals with core issues like shoplifting and theft, inventory management, operational inefficiencies, etc., that require a modern transformation. What can be done to mitigate these? By employing IoT in retail.

IoT, since its inception, has played an important role across industries, including the retail industry. The technology is flexible and can be used in collaboration with tech like AI, ML, blockchain, etc., to remove redundancies, automate processes, remove manual errors, predictive analytics, and whatnot in retail.

Combining every important aspect of IoT in retail in a single resource, through this editorial, we have tried to share what the tech can do for you. So, let’s begin this journey.

IoT in Retail - Market Analysis 

Before understanding the use cases and benefits of IoT in retail, it is much more important to hear what the market says. To begin, the collective market size is expected to reach $46.77 billion by the end of 2025 and is growing at a CAGR of 19% till 2029. However, there is a lot more that is going on in the industry, and to throw light on it, here are more stats:

• Cellular IoT connections are crucial for many retail applications like POS terminals, digital signage, etc. And, while the number of connections in 2023 was 147.9 million, it is expected to reach 217.7 million by 2028.
• RFID tags are commonly used in retail, and their market is expected to grow with a CAGR of 12.7% between 2025 and 2034.
• AI in retail can’t be implemented without using IoT, and as per NVIDIA, 69% of retailers reported an increase in annual revenue upon using AI, while 72% of retailers reported a decrease in operational costs.
• Personalization is a huge aspect of retail that can be implemented through IoT, and around 79% of customers said that they’ll switch to other websites if they are not able to find their desired product.

Benefits of IoT in Retail - The “Whys” Behind its Adoption

There are several benefits of using the Internet of Things in retail. Here are a few that we felt you need to learn in order to understand the impact:

• It helps in providing personalized recommendations to customers.
• The tech allows real-time tracking of products and provides alerts for restocking.
• Analyzes the behavior of the customers to help understand which customer prefers what.
• Predictive analytics for energy management and store equipment to predict the need for maintenance.
• Can enable contactless payment and pickup options for customers.
• Aids in optimizing the supply chain to remove potential bottlenecks and real-time shipment tracking.
• Improves in-store experience through lighting using color psychology.
• Help optimize the layout of the store to boost sales by collecting previous data points.
• Use machine learning in collaboration to predict future demands.
• Helps prevent theft and detects suspicious activities to deter crime in stores.
• It can help reach sustainability goals like optimized water and gas consumption.

IoT Use Cases in Retail + Real Applications of the Same 

There are tonnes of IoT use cases in retail. Below, we have discussed the most important ones, along with IoT applications in retail that are transforming the industry.

Improving the In-Store Customer Experience

Selling a product is becoming more and more difficult today. Many customers prefer to go to multiple stores before buying an item. So, it becomes necessary for retailers to improve the in-store customer experience to keep the customer enticed. 

This can be achieved through IoT implementation in retail, as it allows you to control in-store lighting, air-conditioning, and even the colors within an area to boost sales. These factors subconsciously impact the decision-making of the customer, compelling them to make a buying decision. Plus, if you combine these factors with a seamless shopping experience then it can even help promote repeat customers in your store. 

Rebecca Minkoff, a fashion designer brand, wanted to improve their in-store experience. Customers were getting overwhelmed by the volume of clothes, finding the right size and style was an issue, and there were no personalized recommendations in place. 

What did they do? Well, they provided IoT-driven features to their customers. For example, connected mirrors, smart dressing rooms, personalized recommendations, mobile integration, and interactive displays. The result: better customer engagement, increased sales, improved customer satisfaction, and data insights related to customer behavior.

Application of IoT to Improve In-Store Experience

• Personalized Shopping: IoT-enabled sensors and beacons can send alerts to the customer’s phone based on which aisle they are walking to provide tailored promotions and recommendations.
• Interactive Experiences: Smart mirrors in the changing room can help customers try different colors and sizes of a particular product. This reinforces the buying experience.
• Smart Shopping Carts: These are carts with an in-built display. They share real-time offers on products that the customer prefers.

Optimizing the Inventory for Online/Offline Store

Inventory plays a huge role in retaining a customer. Ideally, if a customer buys a product from you then they are highly likely to visit again for a similar type of product. However, it is important to have your inventory restocked. Otherwise, they will turn to another store or website. But, overfilling can also lead to losses.

Kroger was struggling with inventory accuracy. However, they implemented IoT solutions like edge shelves, digital price tags, and data analytics to overcome these challenges.

Using IoT, it is possible to optimize your inventory by assessing the kind of products that customers frequently buy. This will help optimize the inventory based on demand and will also reduce losses. 

Applications of IoT in the Optimization of Online/Offline Stores

• Real-Time Inventory Tracking: IoT devices like RFID tags, sensors on shelves, etc., can help track the quantity and location of the items for timely fillups.
• Automated Restocking Alerts: The IoT system will trigger alerts whenever a particular stock goes below a pre-defined threshold. 
• Waste Reduction: In the case of perishable goods, IoT sensors can monitor factors like temperature and expiration data, helping to avoid spoilage.

Enhancing On-premise Security

Shoplifting is a major issue in the retail industry. In fact, it is expected that retailers might lose over 160 billion in shoplifting in the year 2026. 

Aside from this, there are several other on-premise issues like protection of customer payment information, theft by employees, vandalism, preventing unforeseen accidents, etc. So, it becomes important to focus on on-premise security. Gladly, IoT technologies in retail can help it.

Applications of IoT in Enhancing On-Premise Security

• Smart Cameras: There are several types of cameras that are used in retail, such as dome cameras, bullet cameras, PTX cameras, etc. Each of these types of cameras comes with smart sensors, night vision, high-resolution video quality, unusual behavior detection, etc., depending upon what brand and camera you choose. These provide live feed and help in deterring any potential threat through motion sensing, facial recognition, etc.
• Smart Sensors: In retail, many stores use motion sensors, door/window contact sensors, glass break sensors, vibration sensors, RFID sensors, etc., for real-time monitoring. These can be integrated to detect an event, trigger alarms, and even access control for proactive security, loss reduction, better efficiency, etc.
• On-Premise AI: To drive real-time analytics for store security, it is important to use on-premise AI that processes the data from sensors and cameras. Solutions like Avigilon, Scylla, IntelliVision, etc., are AI-powered suites that are being used in retail. These systems help track objects, people, suspicious behavior, weapons, etc., within the store, helping in deterring crime before it happens. 

Application of New Business Models

In retail, there are several business models that can be tapped to improve sales and even provide more convenience to customers. A few examples of this would be:

• Subscription-based model
• Omnichannel retailing
• Personalized shopping experiences
• On-demand delivery
• BOPIS (Buy Online, Pick Up in-store)
• Circular Economy
• Virtual Try-Ons (through AR/VR)

In fact, there are several companies like Amazon, Sephora, Nike, etc., that understand the importance of adding new business models. But how can IoT help with it? Well, here are a few explanations:

• Smart devices have built-in sensors that help in tracking usage patterns and can be used to trigger replenishment automatically.
• Beacons and RFID tags can track products and customers across channels, providing a singular view of inventory and customer behavior.
• Smart lockers and RFID tags help with automated order fulfillment and tracking, enabling the customer to pick up orders at their convenience.

Applications of IoT in Implementing New Business Models

• Smart Blenders: To introduce a subscription model, smart blenders can be used to create a custom mix based on the activity levels of the user to provide necessary supplements and nutrition.
• Smart Shelves: These shelves can be used in retail to see what the customers pick from what aisle. Based on this information, a personalized shopping experience for related products can be created. This is enabled by assessing similar customer preferences of other customers and what they choose next.
•  RFID Tags: The circular economy is environmentally focused, enabling the reuse or recycling of a product. Using RFID tags, a product’s lifecycle can be tracked. The customer will take the RFID tag to the store, and based on where the product is in its lifecycle, discounts can be provided, compelling customers to reuse and recycle.

Self-Checkout for Customers

A 2024 report by Capital One states that around 73% of customers prefer self-checkout rather than traditional staff registers. The reasons are pretty clear, i.e., shorter wait times in queue, speed of transactions, increased privacy, etc.

However, the technology also offers several advantages to retailers as well. For example, reduce labor costs, increase efficiency, optimize staffing, reduce errors, etc. And, IoT is being heavily used to implement self-checkout. From the product being placed on the shelf to its final purchase, IoT systems can keep a keen eye on the product. Plus, IoT-based payment terminals have various payment methods that include contactless payments and mobile wallets for seamless checkout. 

Decathlon implemented a self-checkout payment system understanding the importance of it. They implemented RFID-based systems at their stores. And, integrated RFID readers in their checkout tables, enabling cashiers to scan multiple products in an instant. They also added RFID-based EAS (Electronic Artificial Surveillance) to detect any unpaid items being taken out of the store and prevent theft.

Applications of IoT for Self-Checkout

• RFID-Powered Checkout: RFID tags eliminate the need to manually scan an item, allowing customers to simply put the item in a designated area for transaction, improving the speed of checkout while reducing manual errors.
• Anti-Theft Gates: A major issue with implementing self-checkout is theft. In fact, statistics show that stores that implemented self-checkout saw a 63% increase in theft. So, it is important to use these systems to detect any unscanned items being taken out of the store.
• IoT-Enabled Payment Terminals: Key players like Ingenico, PAX Technology, Verifone, etc., are a few IoT-enabled payment terminals that help with self-checkout. Customers initiate a payment through a card or their mobile wallet, and these terminals complete the payment by providing relevant authorization automatically while ensuring that all this data is encrypted in the process.

Monitoring Walk-In Traffic

Retail stores run on the footfall of customers. A comparison of MoM (month-on-month) customer footfall is also a metric that is used by retail companies. And, there are companies that often conduct huge sales so monitoring the foot traffic also becomes essential to figure out if there have been incidents of shoplifting or theft.

IoT technologies in retail can help with it, too. There are people-counting sensors, wifi, Bluetooth tracking, and other IoT devices that can help. Some of the benefits that can be reaped through these devices are:

• Up-to-the-minute insights for foot traffic patterns.
• More accurate in comparison to traditional methods.
• Automated data collecting saves time and resources.
• Granular details related to customer behavior and preferences.

Foot Locker, a leading global retailer of athletic footwear and apparel, wanted to know how many people visit their stores. For this, they implemented people counting sensors to get an accurate idea of the traffic that included peak hours, popular areas, and even customer dwell times.

Applications of IoT to Monitor Foot Traffic

• Infrared Beam Sensors: These sensors are placed at the entrances and exits of a store. So, whenever a customer enters the store, they break the infrared beam connected to a counter that increases as people enter.
• Time-of-Flight (ToF) Sensors: ToF sensors use light to measure the distance and create 3D images to accurately count the number of people even in low-lightning conditions.
• Bluetooth Beacons: These are small devices that are spread throughout the store, emitting Bluetooth signals that are detected by smartphones, giving a much more granular number of customers in the store. 

Optimization of Store Layout

A survey conducted in the year 2021 in Kwa Mashu, KwaZulu Natal, South Africa, among 400 respondents across 40 convenience stores highlighted the importance of store layout. To add, ResearchGate created its own report based on the survey above to understand customer behavior in the context of improper store layouts. Here are some of the findings from both:

• 53% of respondents felt that the floor space was inadequate.
• 55.75% of respondents said that the convenience stores were poorly designed.
• 68.25% of respondents found merchandise displays to be problematic.
• Poor layout caused customers to abandon stores for convenient options
• Proper layout helped customers navigate the store.
• Layout influences the time spent by customers in the store.
• 82% of respondents said they would still visit stores despite existing layout issues.
• 82.5% of customers who shop twice or more per week suggest that the layout must accommodate regular visitors.

Upon studying this, it can be easily concluded that improper layout doesn’t affect loyalty but the preference is clearly towards a proper layout. And, in this increasingly competitive market, this can be a game changer. Plus, IoT can help with it. Some of the benefits it can offer in this domain are:

• Tracking of movement patterns, revealing areas where customers are likely to navigate.
• Representation of high-traffic zones and areas with less engagement.
• Personalized layout of store adapted to individual customer preferences and shopping habits.

IoT implementation in retail can radically improve the store layout, providing ease in finding a product and an overall better experience. In fact, Foot Locker, the brand discussed above, used people counting sensors and data analytics to figure out areas of high movement, enabling them to create an optimized store layout.

Applications of IoT to Optimize Store Layout

• Heatmaps: Heatmaps show the density of the population in any area, and help in figuring out spaces where most customers visit. IoT devices like infrared beam sensors, video analytics, wifi-analytics, etc., can be used to track customers in-store, helping in the creation of these heatmaps.
• Beacons: Beacons can be used within the store to guide customers to find a specific product using their smartphone. This helps reduce frustration and increases the efficiency of customers in finding a product.
• Smart Shelves: Shelves that are equipped with weight sensors or RFID tags can be used to detect the dwell time. Dwell time would be the time that the customer picks an item and assesses it before purchasing or leaving it on the shelf.

Improving Omnichannel Experience (Online/Offline)

Improving the omnichannel of your retail brand can help in several ways:

• It allows customers to have a seamless and consistent experience across channels.
• It enhances the loyalty of the customers if the touchpoints are catered across channels.
• It can help in increasing sales with the integration of models like BOPIS.
• Retailers who have an omnichannel presence have a competitive advantage.
• Omnichannel strategies can provide insights, helping you understand which channel generates the most revenue and which needs more effort.

Sephora, a leading beauty retailer, wanted to create a seamless shopping experience across channels, both online and offline. To achieve this, they started using store mode in their app, digital mirrors, beauty advisors with mobile devices, personalized emails, an omnichannel loyalty program, and BOPIS. What happened? They were able to drive higher sales, engage customers more, improve customer loyalty, and even enhance the brand experience. With the help of IoT, each of these channels can be tracked and improved based on the data collected.

Applications of IoT to Improve Omnichannel Experience

• Smart Lockers: Automated secure lockers that allow customers to conveniently pick up online orders. This reduces the wait time of a BOPIS transaction.
• Smart Mirrors: Interactive mirrors that are fitted in changing rooms sharing related products and offers on them. These mirrors even allow customer assistance, further improving the in-store experience.
• Integrated Chatbots: Chatbots on websites that are integrated with in-store data can provide a live view of the available products to customers. It can also handle customer queries helping in providing a unified experience across channels.

Tracking Buyer Behavior 

Here are some stats from the survey of IntelligenceNode to showcase the importance of tracking buyer behavior:

• 2 out of 3 customers actively look for discounts, offers, or competitive pricing.
• Customers between the ages of 18 and 44 continue to spend money on fashion or apparel.
• Free delivery appeals to around 60% of the population, especially the younger demographic.
• 3 out of 4 customers compare products while shopping in-store online.
• Around 50% of customers between the ages of 25 and 44 are interested in purchasing from eco-friendly and sustainable brands.

Each of the stat mentioned above clearly showcases the importance of tracking buyer behavior. Tracking behavior will enable you to understand what your audience wants to create relevant product offers and even better-placed merchandise displays for improving sales. IoT can also help in gauging in-store movement, product interaction, and preferences to figure out customer behavior. 

Kroger used IoT for assessing customer behavior. They implemented digital shelf labels, NFC (Near Field Communication), and data analytics to achieve it. This led them to deliver personalized content, an interactive experience, and data-driven optimization.

Applications of IoT to Track Buyer Behavior

• Foot Traffic Sensors: Infrared beams, video analytics, or Wi-Fi tracking can help monitor customer movement, enabling the right placement of items for better visibility.
• Interactive Displays: Touchscreens or kiosks help in tracking the products or features that customers engage with. This will help in understanding which customer prefers what, helping retail stores garner more sales.
• Environmental Sensors: These monitors help in determining the right temperature, humidity, and air quality that influences customer comfort and their shopping behavior.

IoT in Retail - Trends to Conquer the Market

Considering the prominence that IoT in retail is getting, there are several trends in the domain that are getting pushed further and will make up the future ecosystem. Throwing light on them, here are some key IoT trends to focus on if you want to conquer IoT in the retail market:

Supply Chain Visibility and Transparency

Not just retail but visibility and transparency of the supply chain is a major trend in many industries. The reasons are simple: with the growing marketing, the associated complexities are also growing, requiring effective management of the supply chain. And this can be achieved through IoT integration that offers benefits like:

• Real-time tracking and monitoring of goods.
• Automated data collection.
• Monitoring of environmental conditions like temperature, humidity, etc.

In fact, the increased adoption of RFID tags is also a signature to this trend, as RFID tags are majorly used for tracking products including the supply chain. 

Smart Shelves and Product Monitoring

The valuation of the smart shelves market was close to US $4.4 billion in the year 2024. And the market is expected to grow with a CAGR of 23.0% between 2024 and 2030. Additionally, the global monitoring tools market is expected to reach US $43.28 billion by the end of 2025, and its growth is expected to increase with a CAGR of 17.62% between 2025 and 2034. 

Each of these stats showcases the growing significance of smart shelves and product monitoring. However, if we factor in the market of global retail, which is expected to reach US $34.87 trillion in 2025 then we can speculate the growing share of retail to boost the stats of the IoT solutions above. And in fact, there are many reasons to think this way. For example:

• These solutions can help with real-time stock visibility, reduce out-of-stock situations, and optimize stock levels.
• They can help improve product availability for customers, provide personalized recommendations, and even provide product information for customers.
• They are able to increase operational efficiency by automating restocking alerts and data-driven insights while reducing labor costs freeing up tasks of staff.
• These solutions can help with targeted promotions, dynamic pricing, and optimized product placement.
• They can help reduce waste and increase sustainability by identifying products that are about to expire and optimizing inventory levels to minimize the amount of unsold merchandise.

Enhanced Security and Loss Prevention

As of now to enhance security and loss prevention in retail, there are several technologies that are being adopted. To showcase them in brief, here are those technologies and the purpose for which they are being implemented.

• Artificial Intelligence and Machine Learning: Artificial intelligence and machine learning in retail are being used to detect unusual transactions, monitor inventory levels, and predictive analytics for shoplifting behavior.
• RFID: The tech helps in product tracking throughout the stores, reduces incidents of shoplifting, minimizes mishandling, and even tracks items if they are stolen.
• Advanced Surveillance Technology: For this, retailers are using smart cameras in the store. These cameras provide analytics, help identify suspicious activity, and monitor moving patterns. Aside from this, AI enhancements are being made to get comprehensive monitoring capabilities.
• Physical Security Devices: Peg locks and recoiling tethers are being used heavily to secure merchandise and easy integration with various display fixtures.

In-Store Analytics and Foot Traffic Monitoring

As per NRF’s (National Retail Federation) annual retail sales forecast report, 70% of business in retail in 2024 happened through brick-and-mortar stores. So, it becomes important for retailers to help with analytics of peak hours and customer movement. Therefore, retailers are looking forward to leveraging tech to optimize store layout, staffing, and product placement in underperforming locations. They are also focusing on understanding customer behavior to provide a personalized shopping experience. 

In-store analytics and foot traffic monitoring are also being implemented because they give the retailer a competitive edge. Plus, it helps them estimate the footfall during peak seasons to optimize the inventory accordingly and increase customer satisfaction.

Contactless Payment and Checkout

The contactless payment market is growing at a CAGR of 21.1% and is expected to reach US $70.08 billion. Contrarily, this figure was US $57.85 billion showcasing the stark increase in market expected. In fact, there are several reasons behind the increase in adoption. For example:

• It reduces the time of transaction leading to shorter queues and increases customer throughput.
• It streamlines the checkout processes to free up staff to focus on other work.
• It lowers the cost of cash handling and less time is spent on reconciliation.
• It is more secure in comparison to traditional methods.
• It improves the hygiene of the store, providing a cleaner and safer environment for customers.
• It helps in aggregating valuable information related to customer behavior and preferences.

Final Note

The impact of IoT in business has been largely positive. And, considering the flexible nature of the tech, even retail as an industry is enjoying the benefits of it. Today, the competitiveness of a product is not judged primarily through its quality but through several factors that include in-store experience, discounts & offers, accessibility, ease of shopping, etc., and with the application of IoT, each of them can be achieved with ease. 

With this editorial, our aim was to help you understand the benefits, use cases, and trends of IoT in retail and what it can do for you. Hopefully, we are successful in our endeavor, and if you require further resources then you can check out our dedicated IoT blog page.