Demand Effects of the Internet-of-Things Sales Channel: Evidence from Automating the Purchase Process

The internet of things (IoT) is rapidly becoming one of the most popular emerging technologies in business and society. One of the major verticals that has recently begun to effectively use IoT technologies is the retail industry. Given the unprecedented opportunities IoT generates for brands and retailers, it is important to glean timely insights regarding the business value of IoT and understand whether the introduction of an IoT technology as an alternative purchase channel for consumers affects the sales of physical products. In this paper, using empirical data from a multinational online retailer that adopted an IoT technology that largely automates consumers' purchases and a quasi-experimental framework, we study the effect of the introduction of IoT on product sales. Our analyses reveal a statistically and economically significant increase in sales as a result of adopting an IoT technology and demonstrate the business value of the IoT channel for retailers and brands. In addition, we conduct analyses of the IoT phenomenon to also delve into the effect heterogeneity and empirically validate the underlying mechanism by examining the impact of IoT for products in different price ranges, levels of substitutability, and product categories (e.g., search versus experience goods and hedonic versus utilitarian), drawing on mental accounting and automaticity theory. For instance, our analyses reveal that less expensive and more differentiated products as well as experience and utilitarian goods can accrue higher benefits leveraging more effectively novel IoT technologies. We validate the robustness of our findings using an extensive set of robustness checks and falsification tests. This is the first paper to study the impact of an IoT technology on product sales, drawing important theoretical and managerial implications and seeding new future research directions for devices and technologies largely automating the purchase process.