The Optimal Retail Experience for Consumer IoT Products   

Sachin Mahajan, (TELUS & MobileLive)

             Until and unless you have been hiding under a rock, odds are that you have heard about the fascinating world of IoT and the transformational impact it is going to have on our lives. As more and more consumer companies realize the benefit too, and start offering their connected products & services, they will more often than not have to tackle the question of the optimized retail & channel strategy for an IoT product. Ten years from now, it might not be a relevant question as the underlying premise would be that all devices would be “smart” or “connected”. Quite like a few years back it was common to refer to a mobile device with applications and advanced data features as a “smartphone” -which now has been replaced by just a “phone” as we expect them to be inherently smart.  Similarly all consumer electronic devices, homes & cars would be smart & connected- but until utopia is reached, let’s analyse what companies are currently doing to sell these devices through the retail channel…. and what’s working and what’s not.

Every product has unique marketing and channel needs based on its evolutionary phase on the technological lifecycle.  Looking at where consumer IoT stands today, what really is needed is an effective way to humanize the story or bring it to life through tangible real retail experiences.  Consumers need to see them, touch them and have a compelling desire to own one these fascinating (sometimes overpriced) devices. We need to collectively find a way to help make the leap from B2G (Business to Geek) to a real B2C story and not just having an endless aisle of products with no one to discuss them with!  To better understand how these connected products were being promoted I went mystery shopping on one of my trips to SFO. There was a lot of chatter around Best Buy, Sears & Targets’ concentrated efforts in this space and hence I visited them to make a mental note of the best in class approach.

Best BuyBest Buy has singled out IoT and the Apple watch as the 2 drivers for its success this year. By their own admission, the combination of these two helped fuel consumer demand and resulted in the firm posting expectation-busting numbers last month, which increased the share price by 14%. Full marks to them for giving the “connected category” prime real estate and investing in customer experience. The store I visited, much to my delight, had the “connected section” right at the front of the store but what made the experience so much more meaningful was the fact that they had miniature rooms created which helped visualize the product experience and the art of the possible. The store rep was informative (but not insightful) and looked a little bit out of his depth, although he did a good job with up to date infn on most of the products.

To be honest, the connected ecosystem is quite confusing. The market is overcrowded, products are sold piece meal and there are a plethora of choices on technology- with no clear winner. A lot of people find out the hard way, including yours truly, that they have invested $400-500 in a proprietary technology or a hub which has limited to no interoperability with other expensive goodies.  Where companies could help a lot more is through specialist reps who understand the ecosystem extremely well and can recommend products meeting the customer’s unique needs. That’s where Sears has hit the ball out of the park!

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                I had the opportunity to visit their much hyped San Bruno flagship store, which essentially has 4,000 Sq Ft dedicated section to the connected consumer experience.  As the pictures and this virtual video illustrates they have actually got real estate dedicated to each room of the house with live use cases and products being highlighted. In a way Sears is forcing customers to explore, learn and interact with connected products and see them working in the context of the home. To top it up the customer rep I interacted with clearly understood the complexities of the products showcased – he was extremely helpful and actually suggested alternatives to setup my home automation system with the best in breed (compatible) products at the least cost! Truly a memorable experience!  Hoping to see more wide scale rollout of similar “experience centers” from other retailers.

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Unfortunately, I wasn’t able to visit Target’s experimental store called “Open House” where not only are they experimenting with some of the most advanced Consumer IoT devices but also new ways of retailing in general. From what I read, they seem to be focussed on helping customers discover new products, getting them to understand what their own unique needs are and also in capturing feedback to optimize the experience! The target store I visited really dint have much to write home about as some of the reps didn’t  know if they had a “connected section”, to begin with. Waiting on David Newman to have a wider rollout of the connected store experience.

In a nutshell, the increasing complexity and interoperability challenges for IoT products are making the Sears/Apples’/Best Buy’s operating model increasingly relevant as customers want and need more help selecting, installing, connecting, integrating, using, maintaining and taking full advantage of their products. These companies have already invested heavily in the real estate and now need to make Customer’s physical experience and education around IoT front & centre of their strategy to ensure they can get back into the game and compete long term with the Amazon’s of the world.

Based on what I just witnessed it seems to be game on!

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The promise of M2M/IoT…

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Sachin Mahajan, TELUS

It’s 1998 all over again- the technology hype of IoT/M2M is hitting it’s peak! There is intense excitement at all levels from CEO’s to analysts to grass roots developers; expecting a windfall overnight, so to speak.  Well, I really wouldn’t blame them given the hype created by the latest acquisitions of Google Nest,Thingworx (IoT Platform)and a few others. The ecosystem and all other external/internal factors are coming together to make it a tangible reality in the short term- but let’s peel the onion a little bit to better understand how we monetize it and make a decent return on invested capital.

Like building a house where you have different contractors come do the flooring, wiring, painting etc in the M2M world we have 4 different components- the app provider, system integrator, connectivity provider and hardware manufacturer. Off the lot the hardware manufacturers take home abt 30-40% of the revenue, and the rest split 3 ways for the other 3 today. Going fwd., given the fast commoditization of the bit pipe the connectivity providers will be left with 2-3% of the ecosystem’s revenues and hence the large scramble from operators to move up or down the value chain- namely fabricating solutions/apps for their customers.Clearly, ‎the smarts lie in choosing the right application group to cater to. At last count we had 12 different industries, 58 application groups and thousands of use cases to tap into. Despite all the hype and the choices, the majority of the revenue is coming from a few applications, namely in the IIoT space.
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Outside of logistics, fleet and asset tracking there is not a significant revenue stream today, but in the next 3-4 years, the hope is nearly 50-60% would be attributed to healthcare, public safety and connected buildings. Secondly, when i first started talking to clients to know what they wanted…the common feedback was that we love IoT but feel as if we are standing in an Ikea without a wrench or a manual trying to put together a solution which we have no idea about. Wouldn’t it be great if the traditional telcos sold as IoT in a box, and charged us a monthly subscription fee which we were used to paying. The third learning I had was that there are certain IoT solutions which are not vertical specific but more horizontal-ized and cut across almost all industries, and that really is the sweet spot most companies should focus on.
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Regardless, its a very exciting time. The power of IoT has not necessarily been unleashed completely, but we are getting there. Things which were considered science projects a few years back are now coming to life and everyone wants a part of it. Drones are delivering couriers, a tap on a phone and a cab shows up and chances are it might not even have a driver. Imagine the look on the face of a cop who pulled up a driverless car a few months back to give them a ticket for impeding traffic, just to find out that it was driven by an algorithm. My plants text me when they need to be watered.…my house tweets whenever there is a knock on the door…what a fascinating fascinating world, wit IoT truly unlocking “The Art of the Possible”!