OK, so it might not be breaking news, but while the Internet of Things (IoT) has been talked about for a while, it’s genuinely starting to hit a tipping point in relation to its impact in the retail industry. Analyst IDC has forecast that the IoT will represent a $326bn revenue opportunity to the retail sector by 2018, so it’s something every retailer should be taking a look at.
The Internet of Things, as I’m sure you know, refers to the connections that are being made not only between people and the Internet, but those that are formed between connected devices, machines and products: essentially anything that can contain a sensor and transmit information via the web. It’s the concept that allows a car manufacturer to track its cars, alert the driver to an issue and direct them to the nearest service centre. Or that enable a fridge to know when you’re running low on milk and automatically order more from an online retailer. And for retailers to track inventory through its supply chain via smart tagging.
As a retailer, what would it mean if every one of your products carried a sensor and was connected to the internet? It might allow you to deliver vastly improved customer service. It could open up opportunities for personalised marketing, spot offers and entice customers in-store (the ability to geolocate every single one of your products is a powerful thing). It has the potential to open up avenues for innovative new products and revenue streams.
Perhaps the most powerful encapsulation of the value of the IoT to retailers is the ability to add enhanced experience to products. Research shows that more than 80% of American and British millennial adults place more value on experiences than material items. So if you’re a producer of the latter, you can use the IoT to deliver more of the former.
But there are considerations to take into account. Key amongst those is ensuring that a rush to connect your products to the internet doesn’t have an adverse or unwanted effect on your customers’ privacy and security. Allowing and incentivising customers to opt-in (and out) and being clear about how you collect and use any personal data is essential.
But the IoT has moved far beyond ‘if’ to ‘when’. It’s time to get connected (Tweet this).
You can find out more about SAP’s view on the Internet of Things here.
This blog appeared originally in SAP for Retail on Nov 3, 2014