The global connected retail market size was estimated at USD 11.17 billion in 2014. Technological advancements and increasing numbers of Internet of Things (IoT) applications across the retail segment are expected to drive the growth of the global connected retail market.
Asia Pacific Connected Retail Market Revenue by Technology, 2012-2022, (USD Million)
The industry has evolved significantly over the last few years owing to several new technological developments. IoT is the concept of principally connecting any device including coffee makers, cell phones, washing machines, headphones, wearable devices, lamps, and almost everything with an on and off switch to the Internet. The technology is generating opportunities in retail space by offering advanced inventory management, theft, and fraud prevention solutions. It also offers solutions to enhance communication between retailers and customers.
Businesses are bound to follow regulations such as The EU Commissioner’s report on IoT. This report proposes certain standard requirements to be followed regarding the protection of data privacy and data usage principles and a report on the Internet of Things regarding privacy and security in a connected world by the Federal Trade Commission (FTC). These standards intend to enhance and protect the consumer’s privacy and security.
Rapid decline in the costs of the components including RFID tags and sensors has positively affected the industry. The declining cost of RFID has led to increase in demand for more and more RFID components across the retail segment to curtail fraud and theft. However, issues pertaining to privacy and security and lack of IoT standards are expected to hamper industry growth over the forecast period.
Bluetooth Low Energy (BLE) segment is expected to witness significant growth over the next seven years owing to a surge in installation and usage of the technology. BLE transmits fewer data over shorter distances using much less power than Bluetooth. Retail payments and marketing verticals are increasingly using BLE technology leading to improved sales, customer loyalty, and acquisition. Although BLE has witnessed growth in customer engagement and marketing, its application is also increasing across contactless payments.
NFC technology is expected to witness growth at a CAGR of over 22% due to increasing volume of cashless payments in the industry. It is gaining popularity due to its security, ease-of-use, and versatility.
Hardware segment has dominated the market over the last few years. The segment accounted for over 60% of the total industry revenue share in 2014, owing to the increasing proliferation of connected devices at retailer and consumer levels. Further, hardware growth is stimulated by IoT including sensors and communication chips. RFID amongst hardware components is anticipated to grow at a CAGR of over 23%. Increasing adoption of RFID components in retail is due to several benefits they offer including inventory management, preventing theft & fraud, monitoring customer behavior, and preventing loss.
However, the software segment is expected to witness the highest growth with a CAGR of nearly 24% over the forecast period. The software segment is flourishing due to increasing number of IoT applications across the industry. Retailers are increasingly adopting the internet of things (IoT) to interact more with their customers and to gain a competitive advantage. For example, in December 2015, BMW UK has launched an exclusive end-to-end online service wherein customers can pick, finance, and make a purchase for cars online. The aim of BMW retail online is to provide the dealer with more opportunities and channels to get in touch with potential customers.
The managed services segment is accounting for over 40% in 2014, which is anticipated to witness considerable growth over the future. It significantly reduces the recurring in-house IT costs and enhances efficiency. Managed services include outsourcing the lifecycle management activities, production support activities, maintenance and support activities, and much more. As IoT in retail is gaining momentum, retailers are constantly facing rising data security threats. Therefore, to manage the expanding database, managed service providers invest heavily in data protection, security, and disaster recovery solutions.
Remote device management services are anticipated to grow at a CAGR of nearly 24% due to tremendous growth in the remote devices at the workplace. It provides security as it enables secure access to data and prevents misuse.
Asia Pacific is estimated to be the most flourishing regional market which is expected to grow at CAGR of nearly 25% over the forecast period. Developing countries in Asia Pacific including China and India are anticipated to witness considerable growth owing to the increasing adoption of the Internet of Things.
North America is estimated to dominate the global connected retail industry accounting for over 35% of the revenue share in 2014. Companies in this region, especially in the U.S. are investing the most in IoT infrastructure, which is projected to drive regional growth over the next seven years.
Key industry participants include Zebra Technologies Corporation, Softweb Solutions, Inc., SAP AG, PTC, Inc., NXP Semiconductors N.V., Microsoft Corporation, Intel Corporation, IBM, Google, Inc., Cisco Systems, Inc., Atmel Corporation, and ARM Holdings PLC. Vendors are adopting strategies such as product differentiation and innovation by investing in R&D operations to gain advantage over their competitors.
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Artificial Intelligence (AI), Virtual Reality (VR), and Augmented Reality (AR) solutions are anticipated to substantially contribute while responding to the COVID-19 pandemic and address continuously evolving challenges. The existing situation owing to the outbreak of the epidemic will inspire pharmaceutical vendors and healthcare establishments to improve their R&D investments in AI, acting as a core technology for enabling various initiatives. The insurance industry is expected to confront the pressure associated with cost-efficiency. Usage of AI can help in reducing operating costs, and at the same time, can increase customer satisfaction during the renewal process, claims, and other services. VR/AR can assist in e-learning, for which the demand will surge owing to the closure of many schools and universities. Further, VR/AR can also prove to be a valuable solution in providing remote assistance as it can support in avoiding unnecessary travel. The report will account for Covid19 as a key market contributor.