When the Internet first arrived, retailers were slow to see the threat it posed to their business and most failed to recognize the opportunity it offered to reinvent their channel strategies. This opened the door to new entrants such as Amazon who, in just 20 years, have become global retail giants.
Ultimately, the internet proved to be hugely disruptive to retailers because they fundamentally failed to understand the threat and were slow to react. It was almost with disbelief that retailers watched on as consumer behavior changed and they realized that, despite all their instincts, consumers would ‘click and buy’. Retailers spent years and billions of dollars trying to catch up, but it was too late and they allowed new entrants like Amazon to get a foothold and begin to steal the market lead.
The IoT is the next phase of growth for the internet and, once again, it will game changer so retailers really need to avoid repeating the same mistake and underestimating the impact on their business. Analysts are estimating the market in $Trillions. The IoT has opened the floodgates to innovation with every manufacturer racing to exploit internet connectivity to reinvent their products and business models. In the home, everything from the faucet to the toothbrush is being connected and generating new data.
Ultimately, the data from appliances and devices in the home will redefine how consumers interact with their environment it will have a fundamental impact on the way they make their buying decisions. More significantly, instead of focusing the physical attributes of a product, the apps and services that are enabled by data will drive purchasing decisions. In this new world of connected devices the focus will shift from product to services. Consequently, retailers need to worry about securing access and control of the data from the devices they sell to consumers.
There have been some early movers in retail. Traditional home improvement retailers like Lowe’s, Sodimac, Hornbach and online retailers like Amazon have used the IoT to launch smart home solutions. Although they have adopted different approaches to market entry, their strategic goals are the same. They have been quietly working to secure access to the data that will be the future life-blood of their consumer relationship. Each offer a central hub that acts as a key node in the home and these could be considered a Trojan Horse. They quietly collect data from the devices and pass it to the cloud where it is used to support new services delivered through branded UXs. The hubs act as a bridge into the home enabling each to cross sell and upsell new, products and services. Moreover, the quality of the data from the consumers allows better targeting and improves engagement with many smart home users interacting with their systems and suppliers on a daily basis through choice.
Link to Lowe’s Iris YouTube https://www.youtube.com/watch?v=n8SDjO92jsY
Sodimac Link https://www.youtube.com/user/MiOzom
In short, retailers need to think strategically and look at how they could exploit the IoT to reinvent their business model and defend their position in the market. This will be challenging because they need to think, act, and behave differently. Exploiting the IoT requires broader strategic thinking and organizational change to deliver success. It requires a change in mindset. If retailers simply stick to the traditional role of merchant with the focus on pushing volume for margin, they will leave a huge gap in the market for someone to exploit the data from the devices to deliver services that will attract and engage consumers. A gap that Amazon, Google, and Apple are already working to position themselves to fill.
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