The Alexa Effect: How the internet of things (IoT) is increasing retail sales

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Imagine this scenario. You’re out of coffee but with the click of a button or a simple voice command, you reorder a two months’ supply that will arrive the same day. And that almond milk you like? Well, imagine your fridge already knew you were running low on supplies and independently sent the order to restock before you ran out.

The stuff of science-fiction until only recently, internet of things (IoT) technology is beginning to change the way we live and work. Simply put, IoT is a system of interrelated devices—things that can include gadgets, digital objects, or machines, wearables and so on—which have the capacity to send and receive data over a network without human agency or human interaction. As a technology, IoT is novel, and it’s poised to reconfigure a range of sectors and industries—among them, the world of retail.

Amazon is a leader in the consumer-facing space with an ecosystem of apps like Alexa, Fire TV, and the now-defunct Dash Button. Meanwhile, tech-savvy retailers are using IoT to facilitate operations. Smart shelves in stores can detect the status of perishable goods or inventory requirements; radio frequency identification (RFID) sensors can actively track the progress of produce through the supply chain. Retailers can even use IoT to send customers personalized digital coupons when they walk into the store.

As IoT continues to gain traction around the globe, the potential for efficiency-boosting innovation in retail is clear. Less clear, however, is its actual impact on consumer choices and behaviors. Sure, IoT can save time and mental effort, but how does that translate into real-world business outcomes?

This is the question that underscores new research by Vilma Todri and Panagiotis Adamopoulos, both assistant professors of information systems and operations management at Emory’s Goizueta Business School.

They were keen to understand whether consumer behavior is significantly changed under the regime of this new technology as it continues its roll out across the world. Specifically, they wanted to know if IoT technology actually increases demand for products.

And it turns out that it does.

“IoT technology in retail is really in its infancy, so understanding its impact on users and business is key,” Adamopoulos said. “We wanted to shed light on these dynamics at this early point to spark interest and generate more debate around how retailers can leverage this technology.”

Together with Stern’s Anindya Ghose, he and Todri put together a large data-set with information about sales of certain products in countries with existing IoT retail markets and in others where the technology has not yet been introduced.

“We needed to take into account these sorts of variables to really understand the effect,” Todri said. “So, we had our control group of non-IoT retail markets, and we were able to compare sales data for the same products in countries where the technology has been adopted.”

The researchers also controlled for time trends, looking at the impact on sale prior to and post IoT adoption.

“Looking at the data over time and pinpointing the exact moment when a product has been made available for sale via IoT sales channels across different countries and at different moments, we were able to infer the effect of the technology on product sales,” Todri said.

In total, they looked at sales for the same or similar products in six countries between 2015 and 2017. They also compared sales across different retailers.

“By analyzing the same sales information for different products in different markets using different channels across the world, we can see differences in the data that can only be attributable to this new technological feature,” Adamopoulos said. And the differences are significant.

The concept is fascinating, and if you are interested in learning more, a complete article about this topic is attached:

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Vilma Todri and Panagiotis Adamopoulos, both assistant professors of information systems and operations management at Emory’s Goizueta Business School. Both experts are available to speak with media; simply click on either expert's icon to arrange an interview today.