Is IoT a Threat to Retailers?

By Kevin Meagher — September 23, 2016

The IoT has opened the floodgates to innovation. Every manufacturer is racing to exploit internet connectivity to reinvent their products and business models. They have been quick to recognize that the future will be about turning data from their devices into services; services that can add value, generate new revenues, and improve consumer engagement. 

Retailers should worry about what manufacturers are doing and press their own case to control access to data from connected devices. Data from appliances and devices in the home will redefine how consumers interact with their environment and it will have a fundamental impact on the way consumers make their buying decisions in the future. Instead of focusing the physical attributes of a product, the app and services will drive a purchase. These services will become increasingly important to consumers as the IoT develops because they will make homes safer, more energy efficient, and easier to manage.
 
For the retailer, access to data from connected devices will be game changing. They will know exactly who their customers are, where they live, and how they use their products. This will provide deeper insights into consumer behavior, and it also opens the way to deploy new, value added services that can be used to increase brand loyalty and generate new revenues. 
 
With both manufacturers and retailers wanting control of the data to effectively ‘own’ the customer relationship, there is an obvious conflict but it seems that few retailers are aware of the threat. This will be a huge problem if, as most analysts predict, every device in the home is eventually connected to the web. If retailers continue to think ‘business as usual’ with a focus on margin and volume and leave the data and services to the device manufacturers, they will ultimately become disenfranchised from their consumer. 
 
Retailers are in danger of missing a huge opportunity. As the market develops, consumers will move from wanting smart devices, to wanting smart homes, and they will not want to control all their home devices with different apps from different vendors. They will want all the devices in their home to work through a single app so they can program them to behave in set ways. Retailers have the opportunity to solve this problem. Manufacturers cannot offer a unified experience because they compete with each other, but retailers could put themselves firmly in the value chain if they acted as aggregators.
 
To become aggregators, retailers need to be bold and take the lead in the consumer IoT market by developing their own cloud platforms to support the products they sell. They can exploit data to create new services that would reinvigorate the consumer relationship. In an early market, it seems risky to commit to such a strategy, but making a move would, at a minimum, help defend the retailer’s position in the market. This strategy would ultimately provide a way to use the IoT to reinvent the consumer relationship, generate new service revenues, and strengthen their brand. 

In short, retailers need to think strategically and invest in the IoT. The IoT is going to have a profound impact on their business and they if they simply stick to the traditional role of merchant focused on volume and margin, they will leave a huge gap in the market for someone to offer new value added services.  A gap that Amazon, Google and Apple are already working to position themselves to fill.
 
Kevin Meagher is SVP, business development at ROC-Connect .
 

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