Internet of Things Has Potential to Transform the Consumer Products Industry

The internet of things (IoT) is already beginning to change how consumers shop and how consumer and packaged goods (CPG) companies do business. The industry is using the IoT to streamline manufacturing processes and supply chain management as it seeks new revenue opportunities. Brands are also exploring ways to build upon these efforts and use the IoT to deliver more personalized customer experiences.

Whether it’s monitoring the supply chain, tracking how products are used or gaining more insight into shopper preferences, the IoT is ushering in an era in which “smart” things can seamlessly collect, share and analyze real-time data. In turn, this data can be used to personalize consumer experiences and deliver proactive services, as explored in a new eMarketer report, “The Internet of CPG Things: What Consumer Products Marketers Need to Know Now.”

Studies that assess the market size of the IoT in the consumer products industry generally agree that budgets remain comparatively low. CPG brands have made modest investments in manufacturing, supply chain and inventory management operations, but the industry lags behind most others when it comes to IoT spending as a percentage of revenues. An April 2015 survey of global executives across a variety of industries conducted by Tata Consultancy Services (TCS) found that CPG respondents anticipated that average IoT per-company spending for their sector would grow modestly between 2015 and 2018, from $41.2 million to $67.6 million. And as a percentage of average company revenues, this spending was just 0.24%.

Part of this lower-than-average investment can be attributed to industry brands benefiting from early IoT initiatives by retailers, with which they have symbiotic relationships. But while retailers have invested a higher percentage of their average revenues to meet their shoppers’ needs, consumer products companies have been slower to take the plunge.

While the IoT may not immediately have as dramatic an effect on CPG as it does on retail, there are signs that both investments and applications are increasing. An October 2014 multi-industry survey of IT decision-makers worldwide by Forrester Consulting found that 22% of respondents from the consumer products industry had already implemented IoT solutions, while 39% said they were in the process of rolling them out. And a September 2015 KPMG poll of global technology business executives found that consumer/retail topped the list of industries with the greatest monetization potential over the next several years.

According to an August 2015 report by Retail Systems Research, 80% of retailers worldwide agreed that the IoT would have a dramatic effect on consumer products in the next three years. This makes sense, given the many new and exciting ecommerce developments and the opportunities that retailers and CPG companies will have to gather and share IoT data and use it to their mutual benefit.

Courtesy of eMarketer