Jan 06 2022

Smart Shelves: What Retailers Should Know About the Emerging Trend

Using connected technology could help businesses manage supply and get a better grasp of the market — both in the store and across the supply chain.

Tying the supply chain to in-store inventory has long been a challenge for retailers. The rise of omnichannel retail has made it crucial that organizations have intelligence built into their supply chains, particularly as customer expectations continue to rise.

Smart shelf technology has emerged sporadically, and it hasn’t achieved widespread adoption. However, if properly implemented, the technology could be an important step toward achieving lasting digital transformation.

It starts with data and specialized hardware working together with a retailer’s supply chain.

What Are Smart Shelves?

The term “smart shelf” refers to the integration of technology and networking with retail shelves, allowing shelves to detect when an item has been purchased or removed from a shelf. This makes it easier to track inventory and restock as needed.

The concept has been evolving for years. Back in 2003, for example, two major retailers — one American, one British — collaborated with a popular razor brand on an experimental effort to track shelves through a computerized system. The idea behind the system was to track stock of goods on the shelves over an extended period and alert employees when low stock or theft was reported. However, results of these early tests were mixed, privacy advocates raised concerns and the tests were quietly shuttered a few months after their launch.

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As consumers have become accustomed to this type of automation, smart shelves have slowly re-emerged as a potential opportunity for growth — and this time, cloud-based data can help maximize the experience. One of the key innovators in this space is Amazon, which, in 2018, launched a store concept called Amazon Go, where people can purchase products simply by picking them up from a shelf. They can even leave without making a payment transaction, as customers will be directly charged after walking through the exit. The initiative, which currently has 29 locations nationwide, leverages the company’s supply chain strengths, as well as the cloud-based capabilities of Amazon Web Services.

What Are the Benefits of Smart Shelves for Retailers?

It’s not just Amazon that is showing interest in smart shelves; other retailers are getting in on the concept as part of a broader growth in interest around smart supermarkets. Smart supermarkets integrate elements such as smart shopping carts to automatically track purchases and even promote products to customers in a more targeted fashion. Microsoft, for example, is teaming with Kroger on an initiative to make the grocer’s shelves smarter.

These developments could not only help the supply chain but could also potentially reshape the retail experience if integrated with frictionless shopping concepts that allow people to buy products without having to go through a checkout process. A 2020 white paper from IDC, sponsored by Dell Technologies and Intel, recommends integrating frictionless shopping concepts with computer vision and artificial intelligence to do this most effectively.

Smart shelves can also help limit the amount of manual labor required to update price tags, another approach used by Microsoft and Kroger. The system, based on a Microsoft Azure cloud solution, uses low-power LCD screens that can display pricing information and targeted promotions.

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Smart shelves are not limited to grocery stores and retail outlets. Organizations are increasingly using the technology to track stock levels in warehouses, offering a more reliable way to track the supply chain that minimizes lost and excess inventory.

How Do Smart Shelves Use IoT Technology?

Internet of Things (IoT) technology is a significant part of smart shelf implementation. Such shelves rely on various kinds of connected devices including smart scales, which can detect if an object is removed from a specific place and identify when an object needs to be replaced. In some more recent use cases, grocers have tried adding cameras to shelves in an effort to personalize the experience for shoppers.

These approaches can tie into the shopping experience in other ways as well, such reflecting inventory on digital signage or showing whether an item is in stock on a retailer’s mobile app.

How Can Retailers Use RFID to Track Inventory?

One of the more traditional elements of smart shelf technology is radio-frequency identification (RFID), a tracking tool that can show where an item is in the supply chain process.

While the technology is not new and has at times been used as an evolution of the barcode, the technology’s individualized nature makes it a good fit for smart shelf implementations across the supply chain.

Fast-fashion retailers have taken advantage of RFID to cut down on the amount of inventory needed in stock, allowing retailers to improve their vertical integration and only produce the products that are likely to sell.

As Harvard Business Review notes, RFID is used as just one tool in a broader strategy to glean intelligence about the success of specific items on the retail floor.

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“Information from RFIDs is complemented by insights from store managers into why certain items didn’t perform well on certain days, as well as from salespeople who’ve been trained to engage with customers and give feedback about what they’ve learned to designers,” a recent article notes.

It’s also widely believed that RFID tags could help prevent food waste by discouraging unnecessary overproduction and better matching supply to demand.

What do Retailers Need to Implement Smart Shelves?

The ultimate value of smart shelves is not in the gadgets on their own, the flashy screens or even the potential of a frictionless experience; it’s in the infrastructure that can scale to meet the specific needs of a boutique or a big-box retailer. The needs of those businesses are likely quite different, but the cloud-based transformation that makes smart shelves appealing could help reshape the way that retailers do business.

By looking for effective digital transformation strategies and implementing them with the future in mind, retailers bring innovation to their shelves and advancement to their overall infrastructure. They might even cut down on waste and retail shrinkage along the way.

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