Currently you need bluetooth between your smartphone and the IoT device just to set it up. Maybe with the help of this, bluetooth could be removed.

No, a lot of WiFi IoT devices create a hotspot that your phone connects to. It's hacky as hell - you have to do the connection manually on iOS (unless it uses Homekit), and some devices only support one WiFi connection so they have to disconnect from your phone before attempting to connect to your network so you get zero feedback.

But it saves $2 on the BOM.

most wifi SoC support peer-to-peer over wifi, now-a-days you don't really need bluetooth.

From a user standpoint they lack the profiles that bluetooth has baked in, that ensures that devices can talk to each other with little to no extra software.

And if the IoT device is using Wi-Fi anyway there is no need for low power demand of Bluetooth.