Innovative Use Cases of IoT in the FMCG Sector

Revenue-generating Business Models

The FMCG sector in APAC comprises food retail and toiletries. Food retail dominates the sector with 94% share in terms of revenue. The APAC FMCG revenue in 2016 was $2,545 billion. The sector has been enjoying healthy growth, driven by higher spending power among the middle-income class and declining cost of production which was a result of commoditization. Hence, uncertain economic prospects for the medium term are not likely to have a significant impact on the sector. With increasing competition from new brands, consumers’ expectation will evolve; customers will demand more personalization and in-store experience.

The brick-and-mortar retail sector has been facing enormous competition from online shopping. While online shopping is gaining acceptance as an alternative to brick-and-mortar stores and the trend will only continue to grow, there is a need for retailers to focus on bringing the digital experience to their physical stores The emergence of IoT-enabling technologies now provides physical retailers with the opportunity to draw consumers from online shopping back to the physical store by enhancing the shopping experience and by converting online browsing to in-store receipts.

IoT on its own is not disruptive in nature; new business models enabled by IoT, however, are set to transform the FMCG sector. While the level of interest in IoT is generally high, many participants in the FMCG sector lack the vision of how digital transformation will look like for them. Even those that know lack the ability to deploy, operate, or finance IoT projects. Nevertheless, IoT is gradually evolving out of the hype stage and finally making headway in the form of proof-of-concept deployments on a small scale. And when they reap immediate gains, it is tempting to stop there.

However, it is important to realize that the benefits of IoT go more than tracking inventory and their location. Implementing digital awareness and digital immersion in the physical store provides retailers business insights and enables them to make data-driven decisions on pricing and merchandising. However, making sense of data collected from multiple sources is now emerging as a major challenge for a consistent marketing strategy. IoT technologies available to the FMCG sector are wide ranging; hence, it is important to start by identifying the business outcome and determine key metrics to measure success before deploying technologies to achieve those goals.