How the Internet of Things Is Changing Retail

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Paulina Pasławska

Updated Feb 21, 2024 • 9 min read
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The IoT is changing the retail industry by creating more efficient and data-driven processes, enhancing the customer experience, optimizing operations, and ultimately improving profitability

The worldwide IoT market within the retail sector is anticipated to achieve $35.5 billion by 2025, marking a substantial rise from the $14.5 billion recorded in 2020. This showcases a remarkable compound annual growth rate (CAGR) of 19.6% during the five-year period from 2020 to 2025.

This growth trajectory is propelled by several pivotal factors, including the notable reduction in the costs of IoT sensors and hardware, the strong desire from customers for a frictionless shopping experience, and the growing acceptance of intelligent payment solutions.

In this article, we will delve into the various ways IoT is changing retail, exploring real-world examples that illustrate its impact.

Enhanced customer experience

One of the most noticeable changes brought about by IoT in retail is the enhancement of the customer experience. Retailers are now using IoT to create personalized and seamless shopping experiences.

Smart mirrors

In clothing stores, smart mirrors equipped with IoT technology enable customers to see themselves in different outfits without actually trying them on. These mirrors suggest matching accessories and even allow customers to change the lighting to simulate various environments.

Augmented reality-driven virtual mirrors represent an integration of cutting-edge technology with tangible objects within the Internet of Things (IoT) framework. These mirrors encompass components such as electronic displays, sensors discreetly positioned behind the glass, as well as software and associated services.

Rebecca Minkoff was among the pioneers in the fashion industry to introduce innovative elements in their brick-and-mortar stores, such as intelligent mirrors. The designer’s store in New York utilizes smart mirrors that recommend clothing based on the items a customer brings into the fitting room.


Image source: CNBC

H&M has integrated intelligent mirrors featuring voice assistants powered by Microsoft Azure into their Times Square store. Their marketing strategy centered on the concept of "Instafame" and the opportunity to "become the star for a day."

Any individual could snap a selfie in front of the mirror, which was then transformed into the cover page of an H&M fashion magazine. The results show that 86% of customers who took selfies scanned them with a QR code, and 10% of them signed up for marketing emails.


Image source: H&M

Location-based offers

Location-based offers in retail, powered by the Internet of Things, are a dynamic marketing strategy that leverages real-time data from connected devices to deliver personalized promotions, discounts, and incentives to customers based on their physical location within or near a retail store. This approach not only enhances the shopping experience but also drives foot traffic, boosts sales, and fosters customer loyalty.

Starbucks uses IoT to send special offers to customers' phones when they are near one of their stores, encouraging them to stop by.

Efficient inventory management

IoT sensors in store shelves can monitor product availability and notify staff when items need restocking. This ensures that customers always find what they are looking for.

Smart store management

IoT technology is also being used to streamline store operations and reduce operational costs. Retailers are leveraging the power of IoT to make their stores more efficient and eco-friendly. IoT sensors can monitor and control lighting, heating, and cooling systems based on real-time occupancy data, leading to substantial energy savings.

Walmart oversees a vast network of over 7 million distinct IoT data points within its U.S. stores. On a daily basis, this network of interconnected devices transmits nearly 1.5 billion notifications concerning temperature, operational status, and energy consumption.

To efficiently handle this immense data load, the Walmart Global Tech IoT team has developed in-house software equipped with advanced algorithms, enabling the real-time detection of unusual events and prompt resolution of issues.


Image source: Walmart

Real-time tracking

Sensors in shipping containers, trucks, and warehouses provide real-time data on the location and condition of products. This allows for better inventory control and fewer instances of lost or damaged goods.

Intelligent shipping containers represent an evolution in cargo transport containers, integrating a range of technologies to improve the oversight, tracing, and administration of merchandise.

These containers feature an array of sensors, connectivity choices, and data processing capabilities, enabling the continuous collection and transmission of up-to-the-minute data pertaining to the container's whereabouts, state, and surrounding conditions.

Maersk Line, one of the world's largest shipping companies, uses IoT to monitor the temperature and humidity of its cargo containers to ensure the safe transportation of sensitive goods like pharmaceuticals.

Convenient shopping: Checkout automation

Retailers are experimenting with IoT-powered checkout solutions, such as cashierless stores, where customers can grab items and simply walk out without the need for traditional checkout counters.

Cashierless stores employ a combination of IoT sensors and AI-powered computer vision software to enable customers to shop without waiting in line for checkout, revolutionizing retail by minimizing human interaction while ensuring secure and efficient transactions. This technology promises a convenient and secure shopping experience, with IoT devices and AI continuously monitoring and recording transactions to prevent theft.

Amazon's cashierless stores, known as Amazon Go, rely heavily on IoT technology for location-based offers and seamless checkout experiences. Customers can pick up items and leave the store without going through a traditional checkout process.


Image source: Business Insider

Optimized processes with video analysis

The obvious application of video data analytics in the retail industry would be queue detection. Hikvision, Prolux, Axxonsoft, or Easyflow provide solutions for analyzing the number of people waiting in queues. They also give insights on how queues change over the course of the day.

All these solutions use Convolutional Neural Networks, which are specialized neural networks in Deep Learning. Those algorithms are synced with shop cameras to analyze videos in real-time. Whenever they detect a person, the event is recorded and added to the overall shop traffic data.

Another useful integration would be detection of out-of-stock-products. Walmart has a few supermarkets that have a built-in system informing store employees about shortages of products on shelves.

Video analytics could also measure how much time a customer spends in a shop. Using personal identification, the system could develop strategies for shop management to optimize customers’ shopping time. Of course, taking into account whether the customer wants fast service, or they’d rather stroll along the aisles.

The mentioned above Amazon Go supermarkets' whole cashierless system is based on video analysis that tracks the customer’s shopping cart.

Finally, video analytics could be also used for outdoor monitoring in the retail industry. The system could detect how many potential customers are passing by the store, and thus define hot hours. This type of retail data analytics provides information on how busy the area where a store is located actually is. And based on the geographical locations of supermarkets and their workload, optimal locations for new supermarkets could be found.


From enhancing the customer experience through smart mirrors and location-based offers to optimizing supply chains with real-time tracking and predictive maintenance, IoT is reshaping various aspects of the industry.

As IoT technology continues to evolve and become more accessible, we can expect even more innovative applications in retail. Retailers that embrace IoT are poised to stay competitive in a rapidly evolving market while also meeting the ever-growing demands of today's tech-savvy consumers.

Photo of Paulina Pasławska

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Paulina Pasławska

Product Manager
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