The internet of things - the idea that everyday physical objects are digitally connected, share data and are able to identify themselves to other devices - remains a nebulous concept to most of us.

The internet of things - the idea that everyday physical objects are digitally connected, share data and are able to identify themselves to other devices - remains a nebulous concept to most of us. Yet it is a driving force behind talks that could result in the merger of two of the biggest names in British retail.

Preliminary discussions between Dixons and Carphone Warehouse, which were formally announced this week, would lead to a company worth around £3.5bn with more than 1,300 shops in the UK. And there are some compelling reasons why this merger would make sense, including many of the traditional drivers of M&A activity.

Estimates already suggest that synergies between the two electricals specialists could deliver cost savings of up to £270m, while the buying power of the combined entities would leverage new efficiencies in sourcing from key suppliers.

On a physical level too the two groups are a strong fit, with complementary store estates and little crossover in their overseas footprints.

“There are some compelling reasons why this merger would make sense”

Far more revealing, however, is what these talks tell us about how Dixons boss Seb James and Carphone chairman Charles Dunstone see the consumer landscape evolving and the position of their businesses within it.

The product offerings of both retailers are certainly mutually attractive. Dixons has been underexposed in mobile technology, which is increasingly central to all our lives, and Carphone Warehouse has a longstanding interest in broadening its offer into larger devices. But it is how these products connect that is driving the thinking.

We already exist in a world that is connected by computers, tablets and smartphones. A logical next step is an environment where everyday objects, from appliances to packaging and even clothing are connected and communicate intelligently - an internet of things.

In that future, the boundaries between the core product offerings of both retailers blur. We can already see it in the increasingly indistinguishable role our phones, PCs and tablets play in our lives. But it is also evident in music systems such as Sonos, or the ability to control TVs and other aspects of our domestic environment through apps on our phones.

Positioning Carphone Warehouse and Dixons for this future while it remains undefined is an audacious move but, if successful, could ultimately see the combined organisation at the vanguard of retailers meeting the needs of tomorrow’s consumer.