Analysts suggest that 65 percent of the total value of the Internet of Things in 2030 will be represented by B2B applications. In other words, the majority of the economic value generated by IoT will come in the context of businesses interacting with other businesses, rather than individuals.
In retail, this trend comes as no surprise—IoT devices provide valuable insights for business leaders. For example, retail stores can use cameras to observe and understand what shoppers are interested in and where they go in the store. This data can be used to create layouts that are more effective at selling. In this article, we will look at how IoT is applied in one of the retail industries—home improvement.
Before we dive right into the use cases, let’s briefly talk about how the IoT works. An IoT network consists of a vast number of sensors distributed throughout equipment, vehicles, and buildings. These sensors produce data that reflects some physical conditions in the real world—for instance, temperature, height, or weight. This data is then evaluated and correlated by backend computing.
In home improvement, the results of IoT evaluations help companies automate business processes and make informed decisions. For example, IoT sensors and actuators help automate manufacturing or gather non-personal consumer data for retailers. Some retailers are already implementing IoT devices to improve their productivity. Let’s look at the five examples relevant to the U.S. market.
Launching a smart home product line has become a trend among home improvement retailers. In recent years, Lowe’s, Leroy Merlin, and Ace Hardware have looked into this. Yet, sometimes a problem with retailers’ smart home ecosystems is that they are closed, meaning that homeowners can’t mix components from different vendors. These solutions aren’t always viable because of their closed nature.
For example, Lowe's rolled out their smart home solution in 2012 but shut it down seven years later. The system called Iris only worked with products from Lowe's, and not other manufacturers. Lowe’s proprietary devices were not enough for customers—they needed the ability to use them with products from third-party vendors, such as Amazon or Philips. Iris, however, didn’t allow them to do it.
Unlike its competitors, Ikea chose interoperability and openness, which helped it transform into a tech company faster. Back in 2019, Ikea made a strategic decision to grow in the smart home market, because it saw its strength in a thorough understanding of life at home. But the company was a retail giant, not a tech one. Hence, the management understood that creating a closed system would limit their growth.
Thus, Ikea launched a smart home system Dirigera supporting Matter, the latest smart home standard designed for better device compatibility. Dirigera supports not only Ikea’s ecosystem, but also devices from Amazon, Apple, Google, and other vendors signed up to the Matter standard.
With a smart home app and products in its portfolio, Ikea achieves two goals. First, gains an edge in the tech industry, while keeping its main business in home improvement retail. Giants like Amazon and Apple have recently been in turmoil, so now might be an opportunity for non-tech enterprises to enter this market. Second, Ikea positions itself as a forward-looking organization, offering its customers a vision of their future home, rather than just furniture.
The company plans to make more of its products smarter—these may be lamps or bookshelves with built-in speakers, tabletops with wireless chargers, or side tables with embedded air purifiers. All of them will be able to connect to Ikea’s “just home” ecosystem. In the words of Ikea executives, it’ll be “the evolution of home.”
Home Depot, America’s biggest home improvement retailer, claims that customer service starts with product availability. The longer a customer waits for the info on a product, the longer it takes for them to make a purchasing decision, which affects the conversion rate.
“If [a product] is not available and accessible, you’ve already lost”
To tackle this, Home Depot launched in-store mobile devices for their staff, powered with IoT. The devices called hdPhones were developed in collaboration with Zebra Technologies, HPE, and Aruba. Thanks to the long-ranged product scanners built into the hdPhones, employees can find products and check pricing from more than 40 feet away. This is useful when locating products in the overhead storage and serving customers.
On top of that, the app Sidekick on hdPhones helps managers. With the Sidekick, they have better visibility into the stocking levels and can set inventory tasks more efficiently. For example, if a manager walks down the aisle and notices that a product is out of stock, they can instantly get the location of the shelf on the hdPhone and create a task for their subordinates.
Home Depot says that having “more connected” associates working with the new devices means a better digital in-store environment. The faster Home Depot employees work, the faster their customers get what they need for their projects—and buy it.
The delivery time is the top factor for customers when making an online purchase. McKinsey research shows that almost half of omnichannel consumers will shop elsewhere if delivery times are too long. On top of that, customers approve of retailers who meet or even exceed their expectations in terms of delivery times.
Wayfair, an online home store, decided to use autonomous vehicles, which are considered IoT devices, to meet customer expectations. The retailer tried them out together with Waymo, a company owned by Alphabet, in a six-week test in July and August 2022.
Waymo’s autonomous trucks hauled Wayfair’s goods in Texas, between facilities in Houston and Dallas. Although the trucks operated mostly autonomously, they were supervised by a driver and a software engineer.
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According to the retailer, the pilot worked great. Throughout this test, Wayfair evaluated data relating to logistics, loading, and autonomous performance. The results were positive—the retailer and their partners were impressed with the way the technology could identify and respond to stalled vehicles and roadside hazards.
Routine tasks like changing labels are time-consuming—the longest they might take is 30 hours in a week with 800 price changes. In many cases, this job is done by customer-facing staff. It means that those hours could be spent talking to customers and helping them make a choice—but it doesn’t happen. Analysts say that task automation helps associates become more useful to the customer, which fosters customer loyalty.
70% of retail executives worry labor deficits will hinder their growth (Deloitte)
To increase staff efficiency, one of the Ace Hardware stores located in Pawley’s Island, SC, has teamed up with an IoT provider to install digital labels. Thanks to these labels, prices are updated automatically which saves time in person-hours. Besides, the labels help quickly identify shortages and enhance the accuracy of inventory. This is achieved by displaying the quantity on hand right on the digital screen.
The labels are wirelessly connected to a pricing management system. When an employee changes the product price in the system, the new price is saved and can be displayed on the electronic label right away or at a later time.
The innovation had two significant results. First, the store owners noticed a morale boost among associates within the stores, who finally had time to be in touch with the customers. Second, a huge return on investment was seen after three years. According to Ace Hardware, the system is cost-intensive upfront, but in the long run, it pays for itself.
According to the 2020 Organized Retail Crime Survey, shoplifting is a big problem in retail—it costs retailers $700,000 for every $1 billion in sales. A usual way to prevent theft is to lock products up, but it harms the customer experience. If a shopper decides to purchase these tools or have a closer look at them, they have to ask a store employee to unlock them.
Lowe’s, Home Depot’s biggest competitor, came up with an idea to avoid the inconvenience with IoT sensors and electronic chips. Here’s how it works with power tools: each tool has an embedded chip with a unique serial number. The number is also encoded to the product barcode, so the tool won’t work until a Lowe’s employee scans this barcode at the checkout with an IoT-powered scanner. In other words, a customer needs a store employee to activate their tool.
The new process can reduce shoplifting and enhance customer experience at the same time. If the tool doesn’t work without the activation, it makes no sense for a criminal to steal it. Moreover, stores won’t have to lock their items, so shoppers could make their purchase decisions faster.
For Lowe’s, the proof of concept started with power tools, but the retailer sees potential to use this system for other items in its stores. Moreover, the retailer says that the aim of Project Unlock is to start an industry conversation. For Lowe’s, even if there are no immediate gains from the pilot, it’s still beneficial to have a proprietary technology that might become an industry standard.
IoT in home improvement has many applications. Retailers use it to:
To understand how your business can benefit from IoT devices and apps, we recommend defining your business goals and technical capabilities. That will show you which way is preferable—developing technology in-house or getting help from third-party providers. If you need advice, give us a shout, and we’ll help you outline your IoT roadmap.