In its report “Internet of Things (IoT) in Retail Market Size, Share & Trends Analysis Report By Solution, By Hardware (Beacons, RFID Tags, Sensors, Wearables), By Service, By Technology, And Segment Forecasts, 2018 – 2025” Grand View Research said the global Internet of Things (IoT) in retail market size was estimated at $16.36 billion in 2016 and is expected to develop at a CAGR of 21.5% over the forecast period. IoT offers retailers opportunities for development of an ecosystem that connects the physical and digital world. The retail industry has witnessed wide utilization of connected products by adopting an integrated platform.
 
Increasing penetration of e-commerce platforms has enabled traditional retailers to become proficient at using connected technologies. Implementation of IoT in retail stores has allowed retailers to determine customers’ profiles and their buying history by orchestrating with wearable devices. Proliferation of connected devices and adoption of collective standards are contributing to the growth of IoT-enabled competencies across the retail industry.

Emergence of digital sensors is enabling Machine to Machine (M2M) communication for sending product information, coupons, and discount codes. Retailers have combined smart technologies with in-store solutions, such as wearables, beacons, video analytics, and Bluetooth Low Energy (BLE) to collect a vast amount of data from customers.

However, inconsistent IoT standards are expected to hamper industry growth and product development. Several devices from different manufacturers that perform same the functions may have fundamentally different data formats and potentially different touch-points, such as frequencies of generating that data, which further leads to lack of interoperability. Rising security and privacy concerns are also expected to challenge the market growth over the next few years.
 
The hardware segment captured a market share of over 60% in 2016. Proliferation of connected devices is offering a significant opportunity to manufacturers. Reduction in total cost of ownership and improved return on investments offered by IoT-based hardware devices are expected to increase their adoption over the coming years. The low cost associated with these devices, along with quick transactions, help in meeting targeted sales and improving labor efficiency, which in turn is expected to fuel market growth.

Furthermore, development of smart technologies such as beacons and Radio Frequency Identification (RFID) tags is expected to fuel segment growth. Rising demand for enhanced in-stock product positioning and suitable product assortments is expected to drive demand for interconnected devices over the forecast period.
 
The market for RFID tags was valued at over $3.5 billion in 2016. Decline in cost of RFID tags is expected to propel demand over the forecast period. Moreover, demand for these tags is increasing as retailers realize the benefits of RFID in applications such as monitoring customer behavior, inventory management, and loss prevention.

Demand for wearables in the retail industry is maturing at a fast pace with several new entrants entering the sector. Moreover, retailers are increasingly incorporating wearable devices in their stores and aligning their customer experience strategy to meet demands of quickly evolving customer expectations. One of the key changes compelled by these devices is enhancement in in-store shopping experience, opening a new spectrum of application and thereby boosting retail sales.

The Near Field Communication (NFC) segment accounted for a revenue share of over 25% in the IoT in retail market in 2016. NFC is gaining prominence as it combines contactless smart card technology with the convenience of smartphones. NFC-based devices are widely used in retail applications including mobile ticketing, mobile payment, easy pairing with other devices, and data transfer. Drug store and supermarket owners are increasingly deploying NFC-based applications to accelerate check-out processes.

Bluetooth Low Energy (BLE) is evolving at a faster pace as it facilitates design of single-mode chips that can be integrated in cheaper battery-powered devices. The technology has the ability to affect several aspects of retail customer experience. Similarly, with regard to payments, the technology enables store check-in and an intelligent interaction, which is simpler to execute.
Managed services captured a revenue share of over 40% in 2016. Increasing adoption of these services to reduce IT costs is expected to augment industry growth. Retailers have been embracing Payment-as-a-Service (PaaS) solutions, which offer them terminal management services and gateway solutions. The solution allows value-added payment services such as payment gateway, mobile banking, and POS terminals and effective routing of transactions.
 
North America is envisioned to emerge as a leading regional market with a share of over 35% in 2016. Increased spending on product monitoring and supply chain monitoring are expected to open new growth avenues over the next few years in the region. High e-commerce penetration in the region has put departmental stores under pressure for improving in-store customer shopping experience and increasing average footfall.

The European region contributed to global industry growth significantly in 2016. Increasing adoption of beacons in economies such as France and U.K. are contributing to regional growth. For instance, Les Terrasses du Port, a prominent shopping center in France, has deployed one of the largest networks of BLE beacons in the region, allowing retailers such as H&M and Zara to deliver promotional offers and information to customers’ smartphones. Moreover, regional beacon manufactures are providing content management systems used by retailers to deliver offers and mobile apps for enhancing their efficiency.