Impact of Internet of Things on Major E-

Commerce Retailing Industries

INF3014F

Group F

Bhavi Reddy, Anele Dlamini, Jack Johnson, Tanatswanashe

Mutongoreya, Dhiya Ramadhar, Shewe Tarumbwa

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Table of Contents
Introduction ........................................................................................................ 3
Smart Inventory Management (SIM) ...................................................................... 4
Real time inventory tracking ........................................................................................ 4
Automated Ordering ................................................................................................... 5
Predictive analytics with IoT for e-commerce ............................................................... 5
Supply chain optimization through IoT .................................................................. 6
Integration of IoT and e-Commerce in the e-Commerce supply chain ............................ 6
Supply chain integration in the e-Commerce industry .................................................. 7
Challenges with the use of IoT.............................................................................. 8
Privacy and security .................................................................................................... 8
Architecture and Technical aspect .............................................................................. 8
Common standards .................................................................................................... 9
Hardware of devices ................................................................................................... 9
Conclusion ....................................................................................................... 10
Bibliography ...................................................................................................... 11

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Introduction
The Internet of Things (IoT) is a network of interconnected physical objects (things)
that obtain data from embedded sensors or software and can exchange this data with
systems over the internet. IoT connects over 7 billion objects today. These objects
range from ordinary kitchen appliances to cars to large industrial machinery.

Why would major retailers be interested in this technology? Because it may result in
making better business decisions, optimising efficiency and increased
competitiveness.

IoT can be used to generate data on objects involved in the current e-commerce
business model. Collecting and analysing that data generates critical information that
can be used to ultimately drive revenue growth.

In this paper, we first investigate how large e-commerce retailers in local and
international contexts are starting to utilise IoT and data obtained from it to enhance
their business model. Secondly, we look at some of the challenges it may bring.

The paper is structured as follows:

1. Smart Inventory Management (SIM)
2. Supply chain optimization through IoT
3. Challenges with the use of IoT

The scope of this study is limited by the low availability of relevant case studies on the
topic of IoT within e-commerce, especially within a South African context. Furthermore,
it is constrained by the amount of information online retailers like Takealot may provide
to the public about their IoT technologies. Despite these limitations, this study aims to
be as comprehensive as possible.

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Smart Inventory Management (SIM)

Smart inventory management (SIM) refers to the use of IoT technologies to track,
monitor and optimise stock levels to bring forth a more efficient operating environment.
There are a myriad of ways in which IoT is transforming inventory management in e-
commerce. However, real-time inventory tracking, automated ordering and Predictive
analytics prove to be pivotal to the apparent upwards trajectory in the e-commerce
space.

Real time inventory tracking

Real time inventory tracking is enabling SIM to improve the e-commerce industry.
Traditionally inventory would go through what is called ‘The Blackbox effect’. This
refers to how inventory enters a black box as it moves through various stages of the
supply chain, making it challenging to track and manage in real-time (Sallam et al.,
2023). Retailers are able to get real-time visibility into inventory levels and locations
through the deployment of IoT sensors, Radio Frequency (RFID) tags and barcode
scanners across warehouses at a much cheaper cost than traditional methods.
According to the VP of business development at Newave Sensor Solutions, Don
Taylor, several soft goods retailers are quoting 10-30 percent inventory management
savings using RFID (Adria Security Summit, 2020). This is a significant amount of
savings, and, given that e-commerce is an emerging market, it makes it easier for new
retailers to enter the market and existing retailers to flourish. Harry Feldman, Co-
Founder and CMO of Seeonic stated that using RFID tags is the best method for
counting in-store inventory (Strom, 2020). This is because of how quickly and
accurately it enables retailers to do stock takes, compared to manual methods.

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Automated Ordering
Automated Ordering facilitated by IoT technology revolutionises the way e-commerce
businesses manage their inventory levels. The inventory in the warehouse should be
sufficient to cover continuous demand changes. Therefore, inventory replenishment
policies, inventory review, and ordering quantities should match with changing
demand. (Mashayekhy et al., 2022). On this basis,IoT sensors and RFID tags can be
used to automate ordering by informing the retailer of stock levels and having
automatic protocols put in place to order more stock as deemed necessary.

Predictive analytics with IoT for e-commerce

SIM utilises predictive analytics to enhance the e-commerce industry. Using IoT
sensors and RFID tags allows for continuous and easy data collection. This data is
then processed and analysed against historical data using advanced analytic
techniques and algorithms to provide insights and make predictions about things such
as customer behaviour, demand patterns and the potential need for more inventory at
any given time. Inventory distortion is the combined total cost of overstocks and out-
of-stocks of inventory to a given business. This can manifest differently at different
businesses due to factors such as location, price, customer demand etc. and in 2012
was reported to amount to approximately $800 Billion worldwide by the IHL Group
(Solutions, 2012) .To add on, Out-of-Stocks make up 56% of this $8oo billion while
Overstocks account for the remaining 44% (Solutions, 2012) .This staggering amount
could be significantly reduced and avoided through the use of analytical tools to predict
when retailers should have more and when to have less stock of inventory.

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Supply chain optimization through IoT
In today’s supply chain environment, integrating advanced technologies with smart
business strategies is essential for modernising traditional practices. The growth of
technology has had a significant impact on business operations, especially influencing
the restructuring of supply chain management. The integration of Iot and E-commerce
is driving significant change in how we enhance and optimise supply chain
management.

Integration of IoT and e-Commerce in the e-Commerce supply

chain
The accelerated development and widespread implementation of IoT within industries
brought substantial opportunities for advancing the development of e-commerce (Zhu,
2020). While IoT interacts with e-commerce to improve and optimise its applications,
e-commerce, on the other hand, supports IoT in developing new technological features
(Effima, 2017, p.21). This can be observed through the application of IoT to the e-
commerce supply chain. IoT provides a strong information technology support platform
that smoothly integrates information and resources in the e-commerce supply chain,
enabling efficient tracking and monitoring throughout the product life cycle (Zhu, 2020).
By having direct communication between things, the duration of the transfer process
is reduced, boosting the operational efficiency of the entire supply chain within the e-
commerce industry. This improvement allows for practical real-time tracking,
monitoring and management, which are key components in the e-commerce industry
(Zhu, 2020).

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Supply chain integration in the e-Commerce industry
One of a business’s core objectives is to improve its overall performance, which is
achievable through effective integration of the supply chain. This involves measures
such as cost reduction, increased responsiveness, improved service levels, and the
enhancement of decision-making. The key attributes to a successful supply chain
integration, which are vital to achieving the core objective, include information sharing,
collaboration, and agility (Haddud et al., 2017). Within the supply chain environment,
IoT has the capacity to enable decision-making by machines, minimising or removing
the need for human involvement. It deals with the integration and facilitating
information communication technologies such as RFID, wireless sensor networks,
machine-to-machine systems, mobile apps etc. (Haddud et al., 2017); the reported
development of supply chain management indicates a transition from a basic RFID-
based tag for product recognition to the adoption of sensor technology. This transition
then extends to the communication of devices, which signifies the progress of a
smarter supply chain (Kafile & Mbhele, 2023). These technical advancements have
enabled tracking goods and predicting situations to prevent losses within the company.
This ensures the proper safeguarding of goods, allowing the right individuals to collect
information and relay it to the appropriate person at the right time (Kafile & Mbhele,
2023). Information communication technologies play a crucial role in digitally
integrating information within the supply chain (Kafile & Mbhele, 2023). The use of IoT
in supply chain management will lead to an increase in profits, a decrease in product
surplus, a more prompt reaction to changing client needs or shifts in supplier
availability, and more optimization of shipments and a guarantee of complete
deliveries (Haddud et al., 2017).

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Challenges with the use of IoT
The challenges posed by IoT can be categorised into six prevalent areas: privacy,
security, insurance, common standards, technical and social and legal (Effimia,
2017).This section will address these pain-points with the current use of IoT within the
industry.

Privacy and security

Data, encompassing crucial business information spanning operations, supply chain,
customer behaviour, security and safety, financial transactions, and energy
consumption, is collected from IoT devices and transferred through the web. While this
information empowers producers, it triggers apprehensions about privacy and security
amongst users of the devices. According to the 2014 TRUSTe Internet of Things
Privacy Index, only 22% of Internet customers agreed that the benefits of smart
devices outweighed any privacy concerns (TRUSTe, 2014). A study in 2014 by
Hewlett Packard revealed that 70% of the most commonly used IoT devices contain
serious vulnerabilities.

Architecture and Technical aspect

The sheer volume of data needs efficient processing and storing methods, yet current
architecture cannot meet these demands and very few businesses can afford the
investment needed for adequate data storage (Lee & Lee, 2015). As a result, there is

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a need for infrastructure capable of handling large data volumes, demanding high
technical specifications.

Common standards
In the absence of common standards, IoT devices lack a unified set of security
protocols, rendering them susceptible to cyber-attacks (Effimia, 2017). The lack of
control over ownership increases the risk, as users may neglect security measures or
expose devices to threats. Thus, despite the identified categories, numerous
challenges persist in integrating IoT seamlessly into e-commerce fields.

Hardware of devices
Turning our attention to the hardware of IoT devices, a primary concern centres around
computational and energy constraints (Hossain et al., 2015). Most devices rely on
batteries and utilise low-energy CPUs, meaning that algorithms that need quick
computation cannot act (Effimia, 2017). Devices with restricted memory pose further
challenges to security algorithms, creating opportunities for attackers to engage in
malicious activities by accessing and altering device functions.

The transformative potential of IoT in e-commerce is undeniably vast, yet the industry
grapples with multifaceted challenges ranging from privacy and security concerns to
technical limitations. As businesses strive to harness the benefits of IoT, addressing
these issues through innovative solutions and industry-wide collaboration becomes
key for sustained growth and advancement in the e-commerce industry.

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Conclusion
The impact of IoT on e-commerce and, more specifically, the large e-commerce
retailer industry is definite and major, as it has ushered in a new era of efficiency,
optimization and innovation. Both fields have undergone tremendous transformations
as the technologies involved have developed, allowing these businesses to address
the challenges they face by utilising IoT through smart inventory management, supply
chain optimization and other tools that IoT provides.

A key takeaway is how IoT is used to innovate and transform businesses to handle
the long-standing challenges they have faced. By harnessing real-time data insights,
businesses can make informed decisions that streamline their operations and enhance
customer experience. IoT-enabled solutions are providing these businesses with the
tools they need to handle the developing challenges they face.

The nature of this streamlined process is that it results in the replacement of human
jobs with automated systems or other technological solutions. This is a matter of
discussion as while the improvements to their operations result in the growth of the
business and industry and a better end service for its users it does result in lost jobs.
Thus there is a dilemma of what is best for society and how can one utilize IoT
technologies to improve their business ethically.

Another key issue addressed is the concerns surrounding IoT of data privacy and
security and the ethical implications of the use of the user data IoT provides. Data is
the lifeblood of e-commerce, particularly user data, and IoT provides great access to
user data but there are great issues and concerns about this both with how it is
acquired and how it is used.

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While this data may be used to bring great profit, it is done at a cost to people's privacy,
especially due to a great amount of security issues IoT faces. Thus, this has become
a major discussion point as IoT develops more and more in the e-commerce field and
the greater economic field. As IoT spreads through e-commerce, the stakeholders
involved need to develop the right ethical practices and cyber security protocols to
ensure the safe and secure use of user data.

As the technologies in IoT develop, as well as its use in e-commerce and wider society,
it provides vast opportunities for the industries involved to grow and expand, and as
they evolve, so should people’s understanding of them so that businesses can utilise
the new tools with great efficiency while maintaining good ethical practices of their use
and impact. As the next new technological development is on the horizon, it is
important to prepare for any possible use and impact in IoT and e-commerce to ensure
the success of those industries and all affected by them.

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