How can IT retailers and resellers make money from the Internet of Things?

"The effects on multichannel retailers will be more disruptive than anything seen to date," says Gartner
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The Internet of Things (IoT) - the idea that most physical objects will be connected online - will be more disruptive to retailers than anything else seen to date, reports Gartner.

The analyst has published a report on the topic, advising retailers to invest in advanced analytics to keep up with the IoT revolution.

However, along with a new release published by managed IT service provider Prism Solutions, it raises interesting questions around how retailers and IT resellers could actually generate revenues from the technology.

Gartner makes the point that with the IoT, more emphasis will be placed on price and availabilty of a product in the future, with brand strength a lot less relevant.

For example, a smart fridge can sense the need to replace its water filter and can order a new one automatically, but won't care where it comes from as much as a customer might.

"While today the retailer may feel confident in that customer's repeat purchase - perhaps because the customer acquired the appliance from the store or is comfortable locating the filter in the physical store - the refrigerator, seeking the replacement on its own, has neither loyalty to the retailer nor concern about finding the item," said Robert Hetu, research director at Gartner.. 

"As a result, the "thing" (in this case the refrigerator) will seek the best combination of price and availability. This change will require the retailer to evaluate the potential transaction in an instant and determine a course of action to save the sale or allow it to pass to others."

While it's not quite the same case in our industry, it does pose questions. We can't imagine a future where a desktop PC would dentify a faulty hardware problem by itself, before ordering a new component automatically, using its owner's credit card details. 

However, as the IoT develops, there's no doubt it will have a bigger impact on the buying process for customers. Will they order new products from other devices? If a component dies, will it inform its vendor it has died via its serial number and an online connection, allowing the vendor to contact the customer and run them through the latest product range? It sounds far fetched, but the technology to allow this is here. 

This is a point already identified by managed IT service provider Prism Solutions.

"How can businesses leverage the IoT?" asked Gary David from Prism Solutions. "If we look at Prism Solutions in this example that provide business-to-business IT support, the obvious adoption of this technology is to make the PC device, which is being supported, smart. 

"By inputting data on the PC's expected usage and life cycle, the device could report back to Prism directly notifying that preventative maintenance is required, much like when your car tells you it needs a service.

"The advantage here is the maintenance can be done to prevent downtime and improve the longevity of that device, saving the client money. This same concept could also be used to trigger a real-time alert, reminding the client and supplier of the need to purchase new equipment based on a predefined hardware replacement plan."

Gartner says that retailers without advanced analytic capabilities may be "toppled" by their inability to capitalize on IoT-driven revenue opportunities.

"As the Internet of Things continues to expand over the next five years, the effects on multichannel retailers will be more disruptive than anything seen to date and will require advanced analytics capabilities to cope with this disruption," commented Hetu.

"In a world where customers are no longer humans, but "things" that band together with other things to negotiate prices, the retailer must reconsider its role," Gartner added in a statement.

"This is an evolutionary step not dissimilar to the disruption of digital media that impacted retailing of books, music and video, creating a myriad of opportunities for disintermediation from Amazon, Netflix and others, while eliminating traditional market leaders such as Borders and Blockbuster.

"Ultimately, the retailer will need to be able to decide in a split second if an opportunity is potentially desirable or should be passed up in favour of the next momentary opportunity. Success will require retailers to use a combination of knowledge, innovation, speed and strategy to maintain and grow market share in the digital economy."

In other IoT news, the Department for Culture, Media and Sport (DCMS) and Innovate UK are offering up to £10 million for a research and development project to demonstrate the capability of IoT in a city region.

The competition is part of a wider £40 million government investment in IoT announced in March 2015.

Examples of IoT at work in cities include smart lighting and sensing, allowing a city to gather information on footfalls, air quality and noise pollution levels, and road sensors measuring passenger journeys. Hamburg was named Europe's first smart city.

A recent report by Arup estimates that the global value of the IoT sector will exceed £255 billion a year by 2020. 

Cisco has previously said that the Internet of Things can boost High Street retail.

Yesterday, Samsung said companies that fail to adopt smart technology may not be around in ten years' time.

Image source: Shutterstock

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