Weighing the Risks and Benefits of IoT in Ecommerce

Today’s internet of things (IoT) technology is poised to make life even easier for consumers and merchants.

When it works well, technology is a great thing. It keeps us connected with friends and family, helps us stay healthy, and facilitates business.

As IoT continues to grow, so does online shopping. Enter IoT Commerce.

According to Statista, worldwide e-commerce sales were right around $1.34 trillion in 2014, doubled to $2.84 trillion by 2018, and are anticipated to scale to $5 trillion by 2021.

IoT takes this world of e-commerce to a whole new level. Rather than “traditional” online shopping via website or mobile app, customers can now order pizza with a simple voice command to Google Home or reorder laundry detergent with one press of an Amazon Dash button. Clothing merchants have even created yoga pants fitted with IoT sensors that capture the wearer’s measurements in seconds and then use those measurements to select the perfect pair of pants.

As these IoT-enabled devices exchange data over the internet and help automate our lives, the ease and efficiency of e-commerce are certain to improve. But there’s also a darker side to IoT Commerce: increased security and privacy risks.

With the retail spend on IoT devices projected to top $2.5 billion by 2020, it’s important for merchants to weigh the pros and cons of this technology before integrating it into their marketing and sales strategies.

How IoT Can Benefit E-Commerce Merchants

IoT doesn’t just make it easier for consumers to shop online. It also simplifies the purchase, order and delivery process for merchants. Here’s how.

IoT Commerce Offers Insights Into Customer Preferences

IoT Commerce gives merchants unique insights into customers’ shopping habits, seasonal purchasing patterns and consumer preferences, which help merchants sell the right products at the right time to the right people. As a result, e-commerce merchants have begun to use IoT technology as a way to differentiate themselves from their competition. Online retailers can use the vast amount of data IoT generates to deliver a more personalized experience to customers, helping to increase long-term loyalty and satisfaction.

IoT Enhances Fulfillment and Operations

Merchants who use RFID and GPS technology can track an order’s every move, from where it sits on the warehouse floor to its progress toward the delivery address — even projecting ultra-accurate delivery times. Larger companies like Amazon have even begun to use IoT-enabled robots in their warehouse to pick and pack orders, minimizing the chance of human error in selecting and delivering the wrong product.

When customers and staff can see exactly where an order is at any time of the day or night, less corporate manpower must be spent tracking down orders and responding to customer inquiries.

IoT Simplifies Inventory Management

IoT sensors and RFID tags can help e-commerce businesses more accurately manage inventory. Now, smart shelves can automatically reorder merchandise when it hits a predetermined level, ensuring there are never any empty shelves or frustrated customers waiting for backordered items.

IoT Can Help Improve Product Quality

The latest IoT technology can even ensure warehouse temperatures stay at optimal levels for perishable products and alert staff when temperatures fall outside the acceptable range.

How IoT Commerce Introduces Risks for Merchants

As technology advances, it’s no surprise that the associated risks do, too. Here are some of the biggest risks to e-commerce merchants using IoT technology and why they can be problematic.

IoT Brings Diverse Security Issues

More online access points can lead to more vulnerabilities that make merchants and customers susceptible to hackers and fraudsters. In fact, each IoT device has an average of 25 vulnerabilities — ranging from easy-to-hack passwords to unencrypted data transmission.

With so many pieces of home and work life being digitally collected, merchants must ensure they’re doing all they can to protect and secure the data against breaches.

IoT Can Mean Compromised Privacy

What’s said at home (or even at work) doesn’t always stay there. Consider the 2018 incident in which an Amazon Echo device recorded a private conversation and then sent it to a random number in the customer’s address book without the customer’s permission.

While Amazon insists its devices aren’t always listening — and that the error was instead due to Amazon’s Alexa mishearing the conversation and prompts — Amazon does confirm that employees regularly listen to devices’ recordings. Although the company does so to ostensibly improve its products’ performance, it should also concern merchants that the devices aren’t always as innocuous or passive as they appear.

IoT Is Vulnerable to Fraudsters

Thanks to the cloud-based nature of IoT, these devices are exceptionally vulnerable to denial of service attacks and malware. To protect customers and sensitive data against hackers who are trying to intercept and capture data, merchants must ensure they’re keeping firmware up to date with the latest security patches.

IoT Lacks a Common Language

Currently, there’s no common IoT language, which means that products are not necessarily compatible with each other. This lack of a common coding language can frustrate merchants who are trying to get all their smart products to sync up and play nicely with each other. Although there’s a push for establishing a single IoT communication standard, there’s no projected timeframe or plan for establishing that standard.

As the world becomes more digital, merchants must adopt the IoT strategies that will help them stay competitive in the ever-more-connected marketplace. But IoT isn’t the only technology trend that’s posed to transform e-commerce. Download our free white paper, The E-Commerce Technology Trends That Will Shape 2019, today to learn what else is on the horizon for online retailers.New call-to-action