The Internet of Things is about to reshape e-commerce
E-commerce as we know it is about to be fundamentally reshaped, as every connected object in the future becomes a potential commerce channel.
Internet of Things – from smart home devices to connected cars – will transform e-commerce and allow it to stretch across the breadth of the customer journey – from awareness, to intent, to purchase. Billions of “things” will double as e-commerce points of sale (PoS), unbundling and extending PoS for e-commerce outside the web, app and product silos controlled by e-commerce players. But how will we get there?
E-commerce is forecast to continue to grow fast, and m-commerce twice as fast for that matter, the latter poised to reach a value of $600 billion by 2018. The Internet of Things (IoT) is at last leaving the hype phase and is becoming a revenue-creating reality. By 2020, there could be as many as five connected objects per every smartphone user. And by then, the IoT market is set to reach a value of $1.7 trillion.
IoT and e-commerce have until now evolved in parallel. They are now embarking on a common journey where every connected object becomes a potential e-commerce real estate. With IoT, washing machines can now not just deliver detergent just in time by knowing when your supplies run out, they can also recommend the right detergent, based on your usage or type of clothes, on demand. Car makers can recommend where you buy your gas, by understanding your drive journey, availability of gas stations, pricing on-demand discounts, and gas station commission – in fact Google’s Waze does this already. Watchmakers can command a commission from health insurers, as they can monitor your heart rate, temperature, fitness habits and determine what risk zone you are in. Moreover, makers of connected devices can now afford a negative BOM (bill of materials) “à la Dell”, by subsidizing the cost of hardware with the revenues from bundled e-commerce services.
E-commerce is already the biggest revenue generator among mobile developers, yet only a small minority have acknowledged it and few have seized it with both hands. Mobile developers using e-commerce (for physical or digital goods) have median monthly revenues of $1,000-$2,000 compared to a measly $200-$350 median monthly revenue for mobile developers across all revenue models.
Yet, only a small share of mobile developers, 9%, have chosen to work with e-commerce, based on our 9th Developer Economics survey wave of May 2015, of more than 13,000 software developers globally.
We expect however that this number will grow as off-the-shelf fulfilment and payment platforms ease the pain of managing inventory, customers and transactions. Scaling up will become easier and therefore e-commerce a less daunting and more appealing option for an increasing number of developers.
Services such as Dash Replenishment Service (DRS) and Pinterest’s buyable buttons are all early, and telling, examples of the commerce things to come. They show how e-commerce is evolving towards letting customers make purchasing choices based on impulse and context instead of having to browse and select among a myriad of items. They also show how a purchasing decision is vastly simplified when discovery and payment friction has been removed.
The e-commerce of things journey has only started but it will have far-reaching consequences for e-commerce, IoT, and overall how goods and services are consumed in the future. For an in-depth analysis of how developers and IoT are shaping e-commerce, download the free VisionMobile report on the Commerce of Things.