The recent merger between Dixons and Carphone Warehouse has sent shockwaves reverberating through the UK’s retail sector. Most of the media coverage so far has focused on the size of the newly formed company – it’s one of the largest such deals in recent retail history.
Of much greater long-term significance, however, is that the deal also represents one of the biggest votes of confidence we’ve seen so far in the potential of the Internet of Things to drive enhanced customer insight, incremental revenue streams and higher levels of profitability for commercial businesses.
That appears to be the main rationale behind the deal. Both companies have great confidence in the concept. Indeed, they recently stated: “Ever-increasing data speeds and a broadening range of connected electrical devices will, we believe, enhance revenue streams for the combined group.”
Most analysts seem to share their confidence, with a recent report from IDC suggesting that technology and services revenue for the Internet of Things will go from $4.8 trillion (£2.9 trillion) in 2012 to a staggering $7.3 trillion (£4.4 trillion) in 2017, with a compound annual growth rate of 8.8 per cent.
It is also clearly true from a technical standpoint that the two companies’ complementary strengths leave them well positioned to take advantage of this growth. After all, one company can boast strong links with device manufacturers and the other with network operators.
Yet, all of this will still not be enough in itself to guarantee the success of the approach for Dixons/Carphone Warehouse or indeed for any company placing a stake in the future of the Internet of Things. There are other factors to consider. Will manufacturers warm to the idea in the same way that retailers themselves are beginning to do? Will customers embrace the benefits of the technology rather than seeing it as an intrusion into their privacy?
Dealing with the Data
Even if the answer to the two questions above is yes, and the evidence so far suggests that it will be, capitalising on the Internet of Things remains far from a done deal for retailers.
One of the biggest potential benefits of the technology for the sector is in the opportunities it provides for enhanced customer interaction. Ever expanding usage of connected devices gives retailers a greater opportunity than ever before to collect and analyse information about their customers and use it to drive enhanced customer loyalty and to grow sales.
Today, we are seeing a broad range of different applications for connected devices from smart meters to Internet connected fridges to Radio Frequency ID tracking devices.
In other words, we are already seeing signs of the Internet of Things revolutionising the retail landscape. Together, all this technology is creating vast volumes, variety and velocity of data. And this will in the future inevitably present retailers with some serious questions together with some significant opportunities
Today, the key question for many retailers is how can they deal with the vast quantities of data continuously streaming into their systems? The answer is by employing a total data management approach that enables retailers to bring together all data that is accessible to them, no matter whether it is structured or unstructured; no matter whether it is around consumption habits or level of spend or purely transactional information.
To effectively manage their big data, retailers will also need to make use of Hadoop or other open source processing frameworks, which when coupled with open source data management, data quality, and integration software solutions, helps to lower the technical barrier and make Big Data much more accessible.
Critically too, by making possible massively parallel processing of enormous datasets, they allow retailers to start exploring real-time analytics to analyse stock figures, for example, to drive sales promotions or to improve customer engagement and service offerings.
Of course, other critical concerns around data quality and security for example, will need to be addressed but for retailers including the newly formed Dixons Carphone, it is already clear that while there are still many barriers to cross, the Big Data/Internet of Things intersection will potentially bring huge opportunities in the future.