I first heard the phrase “Internet of Things” (IOT) almost 10 years ago at a conference in San Diego. IOT refers to the growing and inevitable ubiquity and omnipresence of embedded technology in almost every conceivable object and location. These embedded “smart” technologies enable information to be communicated electronically to other devices and people and thus give more control over our daily lives, automating some tasks and providing information on others.
The IOT is a technology infrastructure that uses electronic sensors to collect information and either use that information to intelligently control electronic devices such as tills, traffic lights, radiators, fridges etc and/or transfer data to massive information stores known as “big data” for processing and analysis to improve decision making. This combination of artificial intelligence and two way communications with other devices can either completely remove the need for human intervention (as in co-ordinated traffic light systems and “driverless” cars) or provide humans with the power to remotely control devices (as in mobile phone controlled domestic devices for heating/lighting/security)
How is IOT being used today in Commerce?
Every product today has a bar code that can be recognised by the scanners used in shops and supermarkets. The sensor devices in scanners and their associated technology can not only register a sale of a product at its correct price but can also record the time and place of the sale. Through the use of Loyalty Cards which are also “smart devices” with the potential to not only identify a shopper but also to build a profile of their purchases, this combination of scanned product and the individual who purchased that product is fundamentally important to the future of commerce.
Before the introduction of modern loyalty cards that use NFC (Near Field Communications) to identify the shopper, retailers had all the information needed to control their merchandising and stock levels based on sales trends but limited ability to personalise the shopping experience to the individual shopper. With the loyalty card, it is possible to develop a more personal relationship that not only rewards loyalty but also has the potential to bolt on a whole range of value added services that give competitive advantage. In essence the IOT is trying to deliver the same kind of “local corner shop” service that customers used to enjoy before the days of the internet when shopping options in towns and villages were very limited. This not only reduces the necessity for a lot of back-office functions and improves cost-efficiency but also delivers a better consumer experience.
How will IOT affect Commerce in the Future?
As “smart” sensor technologies become embedded in more devices and physical spaces, the dynamics of commerce are likely to be significantly disrupted. Over the last 30-40 years that electronic commerce has become more common and more sophisticated, we have observed two major trends – Disintermediation and Market Migration.
Disintermediation means “cutting out the middle man” and Market Migration allows companies with strong brands to compete and establish themselves in new markets where they have no previous presence or expertise e.g. Virgin moving from its origins in the Record Industry to Airlines, Mobile Phones and Banking. Technology has not only enabled companies to bring more cost efficiencies into commerce but have been able to use technology to develop more personalised relationships with their customers. The impact of disintermediation initially reduced the number and diversity of retail outlets as the combination of superstores, shopping malls, greater mobility and online shifted shopping patterns away from the High Street. The backlash against this trend was felt in the “Clicks and Mortar” phenomenon when it was realised that physical presence was important to brand visibility.
The ability of the IOT and electronic purchasing via the internet to build personal purchasing profiles for every shopper is also now being augmented by tools that analyse the “big data” collected for each individual and employ “wisdom of the crowd” techniques that prompt purchasers to buy additional products by suggesting “People like you also bought ….” These trends are likely to become ever more sophisticated as IOT provides the tools to capture the hearts and minds and income of the shopper.
The essence of these trends is that human intervention in determining commerce strategies is becoming less of a necessity for commerce operations but creativity, flair and innovation will become increasingly important for differentiation.
Location Based Services and Augmented Reality in IOT
There has been a lot of hype around location based services that have the ability, through the Global Positioning (GPS) technology in phones and portable computers, to provide location specific offers direct to any individual. This hype has increased with augmented reality technologies that can reveal additional information either through special glasses or the camera on the phone. The current state of these technologies does not, in my opinion, encourage sales and is more likely to alienate consumers, at least initially in the same way that unsolicited sales calls do. However, as technology develops and smart tags in products become common place, there will be opportunities to recruit and reward consumers for generating sales to their peers and networks.
The way this would work is that when an item is sold, the smart tag on the item would contain not only information about the product but also who owns it and where it can be bought from. This would then allow the shopper to share that information electronically with other shoppers who see the product and decide to buy one the same in which case the original shopper could be rewarded for stimulating the sale. In this way, loyal shoppers could also be incentivised to become sales ambassadors as the image at the head of this article implies. The overall impact of this, especially in fashion and “big ticket” items is that brand visibility could increasingly be provided by the consumers themselves and that consumers could well become part of the sales network of the future in conceptually the same way as the “sandwich board” men of yesteryear.
David Wortley – Member of IORMA Board … more