Electronic Commerce Research and Applications 41 (2020) 100967

Contents lists available at ScienceDirect

Electronic Commerce Research and Applications

journal homepage: www.elsevier.com/locate/elerap

A 2020 perspective on “Transformative value of the Internet of Things and T

pricing decisions”
⁎
Xiong Zhanga, , Wei T. Yueb
a
School of Economics and Management, Beijing Jiaotong University, Beijing 100044, China
b
Department of Information Systems, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong Special Administrative Region

A R T I C LE I N FO A B S T R A C T

Keywords: The Internet of Things (IoT) has become increasingly influential, particularly because of the significant new
Internet of Things developments in the technologies of big data, cloud computing, 5G, and artificial intelligence. In this paper, we
Business management briefly explain how these new developments in the IoT may create a new electronic commerce landscape and
Computational social science (CSS) opportunities associated with it; these developments pose interesting questions for future research.
Data analytics

1. Internet of Things and impacts on business
Over the last 20 years, the Internet of Things (IoT) has grown from a
concept into a huge industry worth over USD 745 billion (Torchia and
Shirer, 2019). The IoT comprises network-enabled sensors and actua-
tors connected to computing systems (Wikipedia, 2019). Connected
devices come in various forms, such as wearable devices, cameras,
motion sensors, and global positioning sensors. The data collected by
them can be sent to the backend of the IoT systems for storage and
processing; in these activities, cloud computing plays a critical role
(Exosite, 2016). For example, Rolls Royce designed an engine health-
management system by placing various types of sensors in jet engines to
gather performance data for proactive maintenance in their backend
systems (PWC, 2017).
IoT devices, such as wearable devices and sensors, are capable of
collecting human- or object-related data in real-time, thus capturing a
large volume of data related to all aspects of our daily digital touch-
points. The scope of the data generated from the IoT is expanding
(Singh, 2017); further, the type of data collected in business have
changed drastically—from the traditional transactional data to more
consumer-specific behavioral data, such as park-visiting routes, daily
exercise tasks, facial recognition, and real-time motion (Singh, 2017).
The interconnectivity of IoT devices means that the IoT has a critical
role in integrating data from different sources; this integration is often
conducted at the backend of the central system. This process of data
integration not only significantly expands how we measure things, but
also, ultimately, increases the commercial value of the data (Ray,
2018). Such technology has enabled us to construct a complete view of
various business applications, thereby enabling firms to derive a better
understanding of the dynamic nature of the consumer environment and
consumer preferences. This has also enabled the better integration of
physical products into our daily lives. For example, the use of digital
twin systems and real-time digital replica of physical devices linked to
consumer goods and services is growing; this has many implications,
including how we improve utilization of areas, such as office spaces and
traffic routes.
The IoT has significantly affected how we conduct business at the
operational and strategic levels. For example, collated IoT data helps
firms design new products, particularly those tailored to specific groups
of consumers. The continuous collection of IoT data allows firms to
develop rapid market responses, such as dynamically setting prices and
fine-tuning marketing and selling strategies. The IoT has also been used
to: optimize the customer experience (e.g., personalization experiences
and simplification of the buying process); improve business processes
(e.g., automation and optimization of business processing, improve-
ment of data-based operations, and ensuring tracking and delivery of
products); and to improve management decision making (e.g., simpli-
fication of decision making) (Ray, 2018).
The IoT has received much research attention from the technical
implementation perspective. However, to harness the value of the
technology, we should also consider the problem from the business
perspective. Our article was one of the first to investigate the effect of
the IoT on business from an economic perspective, thus highlighting the
potential of the IoT for use in product targeting and pricing decisions.
Our article conceptualizes two key features of the IoT: (1) better
product targeting; and (2) product valuation improvement via better
consumer understanding. We specifically consider the mutual influence
of IoT-based investment decisions and pricing policies for firms. For

⁎
Corresponding author.
E-mail addresses: xiongzhang@bjtu.edu.cn (X. Zhang), Wei.T.Yue@cityu.edu.hk (W.T. Yue).

https://doi.org/10.1016/j.elerap.2020.100967
Received 29 January 2020; Received in revised form 5 March 2020; Accepted 7 March 2020
Available online 12 March 2020
1567-4223/ © 2020 Elsevier B.V. All rights reserved.
X. Zhang and W.T. Yue
example, firms can use a pricing strategy to address demand un-
certainty and simultaneously improve consumer targeting, which con-
tradicts the common wisdom that the IoT and contingent pricing are
mutually exclusive. Two substituting strategies and technologies can
thus be used simultaneously to generate higher profits (Zhang and Yue,
2019).
2. A post-2020 perspective on IoT impacts
The significant and ever-expanding effects of the IoT technology
have led academics in the business domain to pay close attention to the
role of the IoT in the overlapping spheres of technology and manage-
ment.
From a technology perspective, Kaur and Deep Kaur (2018) de-
signed and implemented a new retail business model based on the use
of sensor-based measurement containers that can assist cloud IoT-en-
abled grocery management systems for household commodities.
Zeadally and Bello (2019) carefully reviewed technologies and IT ar-
chitectures that could be adopted for healthcare applications. The true
value of IoT in healthcare systems is in the continuous real-time col-
lection of data on, and monitoring of, patients. The IoT also has ap-
plications in the management of energy and emergency services, among
others. Such IoT adoption is becoming increasingly common in various
sectors in the Industry 4.0 environment.
From a business perspective, a deep understanding of the business
model specifically designed for IoT would be of great importance to
fully exploit the value generated from IoT. Dijkman et al. (2015) pro-
posed a framework to define the key building blocks and types of op-
tions, besides evaluating the relative importance of these building
blocks and types. This framework could help to facilitate business
models, especially for IoT applications. Similarly, Lee (2019) derived
key elements for the business model in enterprise IoT services and il-
lustrated such a model with a real case of smart hotel room develop-
ment. With the significant development of IoT technology and its pe-
netration into business, we expect to see more applications in various
industries. Thus, research on business models for IoT applications is one
of the key research directions in the future.
The IoT has also supplemented supply chain management activities,
such as cost-saving, inventory accuracy, and product tracking.
However, most existing literature focuses on the production and de-
livery of supply chain processes, while sourcing and return remain re-
latively ignored (Ben-Daya et al., 2019). Moreover, there is still a lack
of models addressing supply chain problems in an IoT environment. The
application of the IoT in the food supply chain is another very inter-
esting area of study.
Given the continuous accumulation of data with the deployment of
the IoT, machine learning techniques will also increasingly get in-
tegrated into IoT systems, thereby enabling the collection of more va-
luable data. However, this has rarely been discussed from a business
perspective in the literature. The adoption of the IoT has significantly
changed how consumer needs are fulfilled in terms of time, location,
and manner. Thus, new marketing theories and models are needed to
understand consumer experiences. How marketing theory and eco-
nomic theory can be tested by using IoT data could be an interesting
research direction (Ng and Wakenshaw, 2017).
For example, as self-driving cars, smart factories, and supermarkets
emerge, we must understand such systems from a socio-technical per-
spective. In academia, we expect to see more research into this tech-
nological trend using diverse methodologies. Economic modeling re-
search possesses predictive power and can generate empirically
verifiable policies and strategies for pricing, selling, marketing, and
management. Machine learning techniques will, thus, be widely
adopted to mine hidden but valuable information within a huge
quantity of data across various domains; this will benefit both managers
and policymakers as well as consumers (Dartmann et al., 2019). Thus,
the IoT has created extensive research opportunities for management
2
Electronic Commerce Research and Applications 41 (2020) 100967
scientists.
The significant and ongoing development of machine learning, ar-
tificial intelligence (AI), and 5G has led to IoT-based systems becoming
ever more powerful. Thus, AI is adept at processing and analyzing vo-
lumes of data far more rapidly than humans, and can return synthesized
courses of action that aid the decision-making processes handled by
human users (Uzialko, 2019). 5G can aid in the seamless transmission
of data, and can lead to more efficient data collection and system
communication. The combination of AI and the IoT has recently led to
the advent of the Artificial Intelligence of Things, which refers to in-
telligent and connected systems with the self-correcting and self-re-
pairing abilities (MSV, 2019). Such applications have been used in
healthcare (Dhanvijay and Patil, 2019; Jia, Ren, and Cai, 2020). The
IoT has been used along with other auxiliary technologies. Thus, op-
timal resource allocation is a critical strategic issue for firms when fa-
cing the innovation, development, and implementation of multiple
technologies.
Although the IoT has created numerous opportunities, practitioners
are also facing challenges in the IoT industry. For example, the inter-
connectivity of devices means that data protection and security will
become an extremely important issue for management teams.
Cybersecurity and privacy have been the main barriers to the adoption
of IoT in various industries. From a cybersecurity perspective, Zarpelão
et al. (2017) summarized the intrusion detection systems proposed in
the literature and discussed their effectiveness in IoT applications. El-
Haddadeha et al. (2019) investigated the role of the IoT in improving
citizens’ engagement with public services in smart cities and found that
the perceived value of the IoT is strongly influenced by its perceived
usefulness and ability to empower citizens, as well privacy-related is-
sues related to its use. Further attention should be paid to this in future
research. Dynamically designed and appropriate policies for IoT se-
curity are urgently required. Moreover, although the IoT can assist
firms in designing better business applications, the preponderance of
data with firms could exacerbate the problem of information asym-
metry; thus, a better market design that can prevent the erosion of
consumer welfare is needed.
In the future, we can expect to see much more business-related re-
search examining how the IoT can address the issues that are important
to consumers, firms, and policymakers in multiple industries; these is-
sues include product design, advertising, dynamic pricing, personalized
marketing, health management, energy consumption management,
energy saving, and emissions reduction.
CRediT authorship contribution statement
Xiong Zhang: Writing - original draft. Wei T. Yue: Writing - review
& editing, Supervision.
Declaration of Competing Interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influ-
ence the work reported in this paper.
Acknowledgements
This work was partially supported by grants from National Natural
Science Foundation of China (Grant 71801014), Beijing Social Science
Foundation (Grant 17GLC069), the Research Grants Council of the
Hong Kong Special administrative Region, China (Project No. CityU
11507117).
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