How IoT brings ROI to e-Commerce

Create: 12/16/2015 - 12:00

E-commerce is no doubt a reliable retail strategy that connects sales to ROI.  One can look at the success of Amazon for the obvious example.  Amazon holds the most market capitalization value among US retailers, including Wal-Mart. Its astonishing growth has also established fertile ground for Internet of Things (IoT) strategies to influence how current ecommerce retailers achieve ROI.

The planning of IoT sensors is meant for establishing the right degree of automation and convenience tailored to customer experience and business operations. Addressing customer experience and operations was how Amazon became successful.  But Amazon also was buoyed by heavy investment while maintaining a business plan where it would not see a ROI within 4 to 5 years of its launch.

The ecommerce marketplace has evolved since Amazon’s introduction.  Ecommerce retail vying to be “the next Amazon” have to be nimble to scale into profitability. The 24-7 “always open” nature of online retail is no longer a novelty like it was when Amazon first launched. It is coveted from customers.  Amazon has shown the value of “always open”, with other major retailers like Wal-Mart finding ways to emulate it.

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Another change has been the scale of online customer response.  Online retail is buoyed by major holiday sales. While this tactic is not new – for years retailers have relied on Christmas shopping seasons to cap annual revenue – the volatility of the sales is. USA Today, for example, reported that Black Friday sales are influencing Cyber Monday deals – to the point where Target’s website failed with  high demand at its site.  Such periods of extreme revenue require better management of marketing assets and supporting operations. 

Here's how IoT sensor strategies address the “always open” phenomenon and revenue volatility.

Duplicating the Convenience of “Always Open”

IoT-ready sensors can coordinate agile marketing and information content to duplicate the customer expectations from a “always open” online experience.  Seeing store information in a tablet or smartphone in proximity to a beacon should feel as effortless as being online at home.  Luxury brands rely on this speedy effortless as a quintessential quality in blending their retail store experiences with what customers see online.  For example, Nordstrom tracks Pinterest pins to identify trending products, then uses in-store displays to show consumers what interests their peers. The displays are aimed at encouraging shoppers to purchase on-trend merchandise.

Preparing for Volatility

IoT-ready product and shelf sensors can produce data metrics that reflects how a retailer’s supply chain responds to massive inventory swings.  Retailers with stock-out issues can deploy predictive analytics to understand optimization models. The end result is better resources that account for seasonality and make the customer experience better. 

Retailers have relied on RFID sensors have been used for several years.  But much of the usage has involved more one-way monitoring or manual verification when used.  New sensor applications and messaging protocols have increased two-way communication, influencing other operations behind an ecommerce site.  The shift to take advantage of two-way communication is underway - eMarketer noted that 29% of retailers have incorporated beacons into their stores. 

Naturally, IoT usage creates more data that reveal customers interests and needs. Unlocking those needs also means retail competitors must invest in advanced analytics solutions to remain relevant with those customers. Such increased competition means ramping up corporate assets in luxury firms that have long relied on brand recognitions and isolated scales of quality. Ferrari’s recent IPO announcement implies such escalation from a bird’s eye view of corporate strategy.

Fortunately, most retailers will not have to issue publicly traded stock to be better. Instead, they should take advantage of falling sensor and computing prices and align their support for online sales.  Recognizing that success is more than products sold on a website is what made Amazon successful. The Internet of Things has ushered in the next generation of what that success will look like.

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Pierre DeBois

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