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The commerce of things (IRM52)

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James Gagliardi, Vice President of Product and Innovation at Digital River, explores the Internet of Things and why it’s the next big revolution in how we sell.

Over the last few years the Internet of Things has been one of the IT industry’s most talked about trends, and rightly so. Already, the proliferation of connectivity is changing lives and industries in profound ways; and with an estimated 75 billion individual objects to be connected to the internet by 2020, the world of connected devices is still in its infancy.

To date, companies are still largely focused on getting their existing devices connected to the internet and launching new product lines to take advantage of the growing interest in connected goods. However, connected devices are merely curiosities if they don’t make human lives appreciably better.

From that perspective, we are just starting to glimpse the potential of the Internet of Things. The real transformative power of this paradigm, however, resides in its next evolution, which is called the Commerce of Things – a new type of retail where connected objects will decide on and make commercial transactions by themselves.

Within just a few years, the objects we use will start to free us from the tedious and costly business of replacing the things in our lives that get used up or worn out or spoiled. They will do this by themselves, with our permission and on our behalf, in order to make our lives better. And we’ll be glad they do. It might seem a little unsettling to imagine that our stuff will engage in commercial transactions without our intervention. However, history shows that, although technology often unnerves us at first, we quickly get used to innovations that can make a difference to our quality of life.

The Commerce of Things can free up our time. Every time you need coffee, you have to do something: order more coffee beans online or pick some up at the supermarket. The time you spend buying coffee beans seems inconsequential until you start adding up all the little errands that quietly eat up your life – getting food for the dog, dishwasher tablets, razor blades. Once objects are smart enough to enable commercial transactions on their own, all these tiny to-dos will simply take care of themselves – freeing us to spend more time doing more meaningful things.

The Commerce of Things offers a cure for procrastination. Many of us put off necessary purchases for too long because we’re preoccupied with a thousand other more important things. For example, most people don’t change their electric toothbrush heads regularly enough. Right now, connected toothbrushes can report on how much and how hard we brush. However, we still need to go and order replacement heads whenever we need them. Because of that extra step, many of us go too long with a worn-out brush. If a new brush simply arrived in the mail every time you needed one, your dentist would be happier and you’d be healthier. The Commerce of Things can help us make sure that important tasks don’t become urgent tasks at the last minute.

The Commerce of Things will lead to smarter purchases. Many of our purchasing decisions are, frankly, unwise. We make impulse purchases in the checkout line, and we succumb to the allure of the overpriced luxury item merely for the label. Connected devices will take advantage of the power of big data analytics to take the human frailty out of consumer decisions, saving us money and improving our lives.

If I know my running shoes will replace themselves at exactly the right time with exactly the right model for my feet, I won’t be tempted to splurge on an overpriced new pair that I don’t really need. If my smart smoke detector can tactfully send a replacement battery in the post at exactly the right time, it can make my home safer.

INVITE NEW OPPORTUNITIES

Right now, subscription services from Amazon’s ‘Subscribe and Save’ to Adobe’s Creative Cloud allow us to automate some of the transactions our lives require – but in the future, connected objects will take this one step further. Rather than sending me coffee approximately when I need it, a smart coffee maker will send me a fresh supply exactly when I run out – never too late, and never when I’m away on holiday.

However, there is no doubt that making the Commerce of Things a reality will require an immense effort of innovation. To make daily purchases effortless for consumers, manufacturers will need to assume the effort of commerce themselves. Merchants will face significant challenges to traditional business models – most significantly, the challenge of adapting to the constant pressure of object-mediated micro transactions.

When a company sells replacement toothbrush heads through traditional retail channels, it might sell a thousand products in a single transaction. But what happens when a thousand smart toothbrushes order their own replacement brushes individually? Rather than making a single sale, the toothbrush manufacturer will have to process a thousand tiny transactions – each of which comes with its own regulatory challenges, its own security risks, and its own payment-processing costs.

Digital commerce infrastructure will be vital to manufacturers as they make the shift to the Commerce of Things. Digital wallets will make it possible for our fridges to buy milk while minimising the risk of fraud. Servers that process payments will scale to accommodate tens of millions of transactions rather than thousands. Tax calculators will evolve to comply with local laws without requiring a human being to click a button every time. Developing this infrastructure is costly and demanding.

It is important for businesses to remember that, like all revolutionary changes in commerce, the Commerce of Things will not come without casualties. However, we believe that the new world of connected devices will enable nimble and forward-looking brands to thrive as never before.




 

ADDITIONAL INFORMATION:

Mobile merchandising

Despite the fact that many retailers are now lagging behind where their omnichannel customers are, there are some notable examples of retailers who really are getting to grips with mobile merchandising – either as pure plays or as increasingly multi and omnichannel players.

On-demand t-shirt printing company Spreadshirt saw conversions via mobile double in December and basket size go up five-fold, showing that consumers are not just using their mobiles to browse, but can be converted into enthusiastic buyers.

The stand-out trend in Spreadshirt’s Christmas sales data is the rise of conversions via mobile phones. Spreadshirt CEO, Philip Rooke, explains: “the unexpected news from our December mobile trading is that globally, purchases over a phone are at 58% (up from 47% for Christmas 2013), whereas the tablet share is 42%. We expected the tablet to be the most appropriate device for shopping, especially with our create-your-own t-shirt offering. Even in Europe however, where tablet sales were 53% of our December mobile orders, phone sales are on the rise, up to 47% from 35% in 2013”.

Rooke continues: “We set out to make 2014 our year of the mobile experience, and we think these numbers prove that we got something right! During the year we discovered that the key to converting mobile visitors into buyers includes three things; visuals, features and payments. We simplified the user-interface and search facilities, to have less text and a stronger focus on design. We also added a wish list feature and created a responsive, single page check-out to make payments easier”.

Taking a more omnichannel approach, shoppers may soon be able to avoid the make-up counter in stores, testing products over their own phone instead, using new face-tracking technology.

Face by Holition aims to provide a virtual cosmetic experience, enabling shoppers to use their smartphone or tablet as a mirror to try on and experiment with colours, shades and textures of makeup.

“Trying out cosmetic products in a shop can be frustrating – wrong colour, wrong look and a hand smothered with endless lipsticks and powder,” said Holition, a creative agency that uses emerging technologies and whose female developers have led development of the new technology. “The virtual makeup application allows the user to try before they buy. As it is real time, users can be as playful and creative as they like trying out the different makeup combinations: it’s not a selfie but a real-time video feed from a phone or iPad.”

Face by Holition uses face tracking technology to ‘see’ the features on a face. Virtual makeup, promises Holition, stays in place even when the user smiles, talks or nods.

Retailers can see how shoppers search for, try on and buy new products. Meanwhile, the shoppers themselves can save the results and share them with friends.

The rise of technology is also seeing new retailers emerge from surprising quarters. Marie Claire UK, a magazine and part of the Time Inc group, is set to launch an ecommerce business in partnership with Ocado. The deal will see the Marie Claire-branded ecommerce business, led by Managing Director Amanda Scott, currently head of buying for beauty and accessories at John Lewis, run from Marie Claire’s central London offices. Scott will work closely with Marie Claire Publishing Director Justine Southall.

Southall explains “This launch will be the perfect combination of content provider, consumer and commerce. Marie Claire’s brand authority, Amanda’s talent and the world-leading technology, logistics and ecommerce expertise of Ocado means I couldn’t be more excited about the potential of this launch.”

Scott adds: “Marie Claire has extensive knowledge and influence in the world of beauty that is widely respected; the trust consumers have in this brand gives it natural leverage to move into retail, particularly within this category.”

This is the sort of play that retailers should be worried about. New entrants are starting to use technology to leverage opportunities in retail and as the stats show, technology is where the consumers are.
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