New research sheds light on how IoT data sharing transforms supply chain competition

A new study co-authored by professor Yonghua Ji at the Alberta School of Business explores the complex relationship between data sharing and channel competition.

Published in Production and Operations Management, the research examines a scenario where an Internet of Things (IoT) device manufacturer collects usage data and decides whether to share it with a retailer. The retailer can then use this data to target customers with highly personalized product recommendations and cross-selling opportunities.

The study considers the manufacturer's option to "encroach" on the retailer's territory by opening a direct-to-consumer sales channel, alongside their data-sharing decisions.

This dynamic creates a unique form of "co-opetition," where firms simultaneously compete for direct sales and cooperate to maximize retail channel data. The researchers also made a counterintuitive discovery regarding market competition.

"Our result shows that the manufacturer and the retailer could benefit from a higher substitution rate when the manufacturer encroaches and shares IoT data," states Ji. "Policymakers concerned with improving overall supply chain profit, such as those involved in industrial alliances, should offer incentives to increase the substitution rate by making it easier for customers to switch between channels."

Key takeaways

• Data sharing deters direct competition: Without IoT data sharing, a manufacturer will always choose to establish a direct sales channel to compete with a retailer. However, when data is shared, the manufacturer's motivation to encroach weakens, and they may abandon these plans entirely to preserve the retailer's cooperative data-mining efforts.

• Easier channel switching boosts profits: If a manufacturer does open a direct channel and shares data, an increase in the channel substitution rate—meaning customers can easily compare and switch between the retail and direct channels—can actually result in higher profits for both businesses.

• Highly valuable data can backfire on retailers: An unexpected finding reveals that as the cross-selling value of IoT data increases, the retailer’s profits can sometimes decline. This happens because the high data value might tempt the manufacturer to opportunistically set up a direct channel to capitalize on the retailer's success.

Read Ji’s full article in the Production and Operations Management at DOI: 10.1177/10591478251400471

U of A research. Real-World impact.

Bold ideas in action! From reimagining industries to building sustainable infrastructure, the U of A is helping to achieve the UN's goal of creating a more resilient, tech-powered world.

See How We're Igniting Innovation