Originally appeared in Business Matters Magazine
According to Morgan Stanley, 75 billion individual objects will be connected to the Internet by 2020. Our smartphones and fitness trackers are connected. Our toothbrushes are gathering data about our oral hygiene habits. This connected world – this ‘Internet of Things’ – is shaping the way we value products and make future decisions based on facts and data.
While the IoT is certainly interesting and compelling, the real revolution will come about in its next evolution – a concept known as the ‘Commerce of Things’ (CoT) – where connected objects will be able to make commercial transactions by themselves.
It may sound like something better placed in a Sci-Fi movie, but we aren’t actually far away from a time where we will be freed from the tedious business of replacing the essentials in our lives. Without the need for human input, objects will do this by themselves, with our permission and on our behalf, in order to make our lives easier.
Some people might find it a little disconcerting to imagine commercial transactions going on without our intervention, but as history continually shows us, it’s not long before we adapt to the positive changes it can make to our day-to-day lives.
No more tedious purchases
There are those purchases we love – the ones we look forward to – whether it’s a new handbag, new patio furniture to enjoy the summer weather or even a new car. The likes of tea bags, dishwasher tablets and dog food, on the other hand, fill us with indifference at best.
With the increase of smart and connected devices, these less interesting transactions will be completed automatically, leaving us with more time to take care of more meaningful things, rather than running errands.
The right purchases at the right times
Right now, connected toothbrushes can report on how often and effective we brush, but it is still up to us to go and order replacement heads whenever we need them. Even if we know we should exchange them at regular intervals based on recommended guidelines, say every 90 to 120 days, this extra step of going to the shops or ordering online means that we often leave them too long. But what if a new brush simply arrived in the mail when you actually needed one based on your unique usage, which has been tracked? If you are an avid brusher, your connected toothbrush may know to replenish itself after 78 days of use, sooner than standard guidelines state. With a more accurate toothbrush replenishment schedule, your dentist might have better news for you during your checkups.
If your refrigerator knew to order a fresh batch of broccoli when it sensed that you weren’t getting your five-a-day, you’d be far more likely to dine in on greens than tuck into a takeaway.
With a busy lifestyle and packed schedule, it’s easy to forget about important tasks such as changing the batteries in our smoke detectors. But with a smart smoke detector, you would be sent a replacement battery in the post at exactly the right time.
Wave goodbye to impulse buys
Whether it’s boredom, the allure of beautiful packaging or cravings, we are all guilty of succumbing to unnecessary luxury items, while we put off necessary purchases for too long. Connected devices will take advantage of the power of big data analytics to take the human frailty out of consumer decisions. These object-enabled transactions will happen without the influence of emotions or even till-queue boredom.
Customer is king
But what is needed from businesses looking to capitalize on the growing trend for CoT? To really take the CoT from fad to function, major innovations are needed to ensure the customer is being put at the heart of all decisions.
Merchants will face substantial challenges to traditional business models – most significantly, the challenge of adapting to the constant pressure of object-mediated micro transactions. For example, if a company sells replacement razorblade heads through traditional retail channels, it might sell a thousand products in a single transaction to a retailer. But what happens when five thousand smart razors order their own replacement heads individually?
More importantly, how will SMEs cope with processing several thousands of transactions, each having their own regulatory requirements, delivery details, payment-processing costs and security risks?
The biggest change will be the volume of data that SMEs need to adjust to, and with it too, the systems that they will require. There will be more work in handling local regulations, such as specifying regionally-mandated disclosures on credit card charges, as well as financial accounting, and the complexities of mid-term subscription or payment upgrades, downgrades and cancellations. Further, automated payments mean greater security measures need to be put in place to ensure that access to customer data is protected. Although this is something that SMEs already deal with, the CoT will bring about a drastic change in transaction volume.
Servers that currently process payments will have to scale-up to accommodate tens of millions of transactions rather than thousands. Unfortunately, many smaller businesses will face added pressure to scale their resources to start planning for this commercial transformation, especially since the development of infrastructure is both costly and complex.
If you can offer your customers a seamless path to purchase when they are poised to buy and – crucially – before anyone else, it’s likely you will steal a portion of your competitors’ market share. However, it is not simply enough to adopt the CoT purely because you have to or are compelled to be first to market – you should commerce-enable your products in order to add considerable value for your customers.
Despite the costs involved and the potential for challenges, businesses that put their customers at the centre of their digital retail strategy will be the ones that are likely to reap the biggest rewards.