The Business Value of the Internet-of-Things: Evidence from an Online Retailer
Posted: 20 Dec 2017
Date Written: August 18, 2017
The “Internet of Things” (IoT) is rapidly becoming one of the most popular emerging technologies in business and society. One of the major verticals that has recently begun to effectively utilize IoT technologies is the retail industry. Given the unpreceded opportunities IoT generates for brands and retailers, it is of paramount importance to generate timely insights regarding the business value of IoT and understand whether the adoption of an IoT technology as an alternative purchase channel for consumers affects the volume of sales of physical products. In this paper, using empirical data from an online retailer who adopted an IoT technology that automates the consumers’ purchasing process and utilizing a quasi-experimental framework, we study the effect of the adoption of the IoT technology on product sales and demonstrate the business value of IoT for retailers and brands. Our analyses reveal a significant increase in sales due to the IoT technology. Besides, we delve into the effect heterogeneity by examining the impact of IoT for products in different price range and different product taxonomies (i.e., search versus experience goods). Our analyses reveal that less expensive products as well as experience goods, rather than search goods, can accrue the highest benefits leveraging more effectively the novel IoT technologies. We validate the robustness of our findings using several robustness checks and falsification tests. To the best of our knowledge, this is the first paper to study the impact of an IoT technology on product sales making significant theoretical contributions while drawing important managerial implications.
Keywords: Internet of Things, Electronic Commerce, Channels, Sales Growth, Retailing, Econometrics
JEL Classification: M15
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