Market Intelligence Research
Aug 07, 2025
Technology Primer: Building the digital foundation for retail transformation
Research — August 12, 2025 Technology Primer: Building the digital foundation for retail transformation By Zoe Roth and Zach Ciampa Retail is undergoing a digital transformation, reshaping the in-store experience through data-driven technologies and intelligent infrastructure. As physical stores take on new roles — from fulfillment hubs to immersive brand experiences — retailers are investing in connected systems that enhance operational efficiency, improve customer engagement and unlock new sources of insight. Connectivity infrastructure upgrades, emerging applications and enabling technologies are powering the shift toward smart stores, as connectivity, internet of things, edge computing and AI redefine the retail environment. At their core, retail sites are buildings that enable the exchange of goods and services — but increasingly, they also serve as digital platforms. As physical and digital channels converge, these spaces must support a complex ecosystem of connected devices, sensors, applications and analytics. This requires connectivity infrastructure — spanning Wi-Fi, 5G, internet of things networks and edge computing — to power real-time data collection, enable seamless customer experiences and ensure operational efficiency. Emerging applications, such as smart inventory management systems, geofencing for targeted advertisements and frictionless checkout, aim to deliver on the promise of more seamless and personalized in-store experiences that can rival digital shopping. Challenges and drivers Businesses across the US that operate physical stores are working on several key commerce initiatives, according to 451 Research's Voice of the Enterprise: Customer Experience & Commerce, Merchant Study 2025 survey. Respondents cite leveraging customer data for personalized in-store experiences (e.g., targeted promotions, loyalty program customization) (43%), improving in-store customer service capabilities (e.g., mobile devices for store associates, real-time inventory assistance) (43%), and upgrading store technology infrastructure (e.g., modern point of sale, cloud-based inventory management, radio-frequency identification [RFID] tracking) (41%). There is a wealth of opportunities for retailers to enhance their brick-and-mortar businesses using advanced commerce technology. Smart stores are transforming retail by addressing general challenges such as labor shortages, rising operational costs and evolving customer expectations. At the same time, key drivers include the push for greater efficiency, improved inventory accuracy, enhanced in-store experience and better data collection for personalization and analytics. Retailers are looking toward advanced technology to close the experience gap between brick-and-mortar stores and e-commerce in a bid to give shoppers more individualistic in-store visits that can compete with online experiences. Retailers are incorporating smart store enhancements — from AI-powered cameras and sensors to IoT-enabled shelves and mobile checkout — to reduce friction and bridge the gap between physical and digital shopping. Infrastructure Retailers are in the midst of modernizing their connectivity infrastructure to meet the demands of increasingly intelligent and interactive store environments. Even in recent times, physical stores have remained an underutilized area for deployed technology, ultimately resulting in a dated experience for consumers while leaving valuable opportunities on the table for brands. Today, Wi-Fi (55%) and 5G (68%) top the list of in-use technologies, reflecting a shift toward higher-speed, lower-latency connectivity to support smart store applications. IoT-specific networks (29%) and in-store apps (21%) remain in more moderate use but are poised for growth. Historically, many retailers have shied away from broader internet deployments. However, this turnaround offers insights into how greater connectivity will be a major turning point for the in-store customer experience. Looking ahead, investment priorities suggest a continued push toward ubiquitous, high-performance connectivity as businesses attempt to raise their stores' technological capabilities. Nearly half (45%) of retailers plan to enhance Wi-Fi infrastructure, while 5G deployment (43%), IoT-specific networks (37%) and edge computing (32%) are also on the road map. This signals a future in which real-time data processing, sensor integration and seamless customer experiences become table stakes for competitive retail operations. Applications Atop retail-specific infrastructure is the application layer, which focuses on optimizing user journeys and enhancing product discovery. Readiness for these applications may require infrastructure upgrades or enhancements, depending on the latency and data volumes associated with use cases. Where a smart shelf may deploy edge processing to take real-time stock and relay insights to the back office, computer vision systems tracking self-checkouts will require much lower-latency data transmission and processing. Some retail environments will leverage existing investments into beacon-equipped smart lighting or existing IoT networks with the intention of expanding connectivity. Smart store applications fall into three primary categories: customer experience, operations/checkout and back-of-house automation (including inventory management and workforce optimization). Each leverages AI and IoT to improve efficiency, enhance personalization and streamline processes. – Customer experience: Digital signage, omnichannel apps and augmented reality tools guide product discovery and bridge online/offline journeys. For example, digital displays can serve real-time offers based on shopper demographics or behavior. – Operations/checkout: Computer vision and scan-and-go systems reduce friction while improving loss prevention. Self-checkout kiosks and contactless payment streamline purchases and reduce wait times. Digital shelf tags can display promotions and dynamic pricing for sales or in response to events. – Back-of-house automation: RFID-enabled smart shelves and automated restocking systems ensure shelves stay stocked. AI forecasting helps stores align staffing and inventory with expected footfall and can integrate with warehouse management systems to understand and ultimately predict supply and demand. – Augmented labor and robotics: Retailers are adopting AI-powered tools and robotics to assist staff, automate repetitive tasks, and optimize workflows. These include digital picking technologies such as smart gloves or AR-guided headsets that help workers locate items faster and with fewer errors in warehouses and stores. In-store robotics, such as autonomous floor cleaners, shelf scanners or robotic assistants, reduces the manual burden on employees and keeps store environments tidy and well-stocked. AI-driven task orchestration tools analyze foot traffic, inventory levels and staffing to dynamically allocate tasks and optimize workflows in real time. Mobility data and location intelligence Smart store ecosystems are increasingly leveraging mobility data — from smartphones, connected vehicles and apps — to better understand foot traffic patterns, shopper behaviors and trade area dynamics. By integrating this data with in-store technologies, retailers can optimize operations both inside and outside the store. – Store siting and market planning: Mobility data helps retailers determine where to open or close locations based on real-world movement patterns, catchment areas and competitive density. Vendors often aggregate anonymized mobile location data to analyze dwell time, visit frequency and cross-shopping behavior — insights that inform expansion strategies and marketing investments. – Operational optimization: Retailers can use aggregated mobility data to forecast demand, adjust staffing levels and align promotions with high-traffic periods. When fused with in-store analytics, it creates a powerful view of customer journeys, both on-site and in surrounding areas (e.g., parking lots, food courts, neighboring stores). – Customer experience and personalization: By combining app-based location data with loyalty or customer relationship management systems, smart stores can deliver contextualized offers or messages (e.g., sending a coupon when a user is near a store or has just visited a competitor). Proximity marketing tools, including geofencing and beacon-triggered engagement, personalize customer experiences across physical and digital channels. While there is a plethora of new technologies retailers should be excited about, they must still ensure that mobility data is used responsibly, complying with regulations like the Global Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA). Fortunately, many organizations operating in the US are already largely compliant with these regulatory statutes and proactively adhere to them. Most leading providers now focus on aggregated, anonymized insights and offer opt-in mechanisms for individual-level tracking. Mobility data, when integrated with in-store sensors, workforce tools, and AI-driven analytics, enables a more holistic understanding of retail operations — bridging the gap between store infrastructure and the communities they serve. Gain access to our full news & research coverage and the industry-specific data that informs our insights This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.
