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Will the internet of things mean big things for retail?

March 26, 2014

Smart cities full of smart appliances, dubbed the Internet of Things (IoT), could offer retailers unlimited opportunities to sell new appliances. Everything from heating to lighting and appliances will one day be connected to the internet in the name of efficiency and it will all be managed by remote control.

Swedish firm Linkafy specializes in apps to control internet-enabled appliances. GE Brillon appliances (ovens only at the moment, more in the works) can be controlled via smartphone with a hefty emphasis on ensuring security. Samsung has big plans, as does Google, which purchased connected-home appliance company Nest in January.

Security is a crucial concern in this brave, newly connected world. In a report on an early security breach, CA-based Proofpoint identified "more than 750,000 phishing and spam emails launched from ... conventional household 'smart' appliances" during two weeks from December 2013 to January 2014.

Appliances, just as PCs and mobile devices, can be used to carry out malicious activity such as identity theft. Proofpoint, citing Osterman Research's principal analyst as its source, concluded that the IoT offers "great promise for cybercriminals."

Others are concerned about information gathered by the likes of Google for marketing purposes. A Nest co-founder assured that privacy would be protected, but questions about Google's reasons for acquiring Nest arose immediately. Previous attempts — Android@Home for phones, Nexus Q streamer and Chromecast — haven't persuaded consumers to get on board, according to CNN.

Forrester Research, sourced in a New York Times blog, maintains that just one or two percent of people have connected devices to control lighting, climate, energy, appliances and home monitoring, with security devices the most popular. One analyst concluded, "We're at the beginning of the industry hype cycle but not at the beginning of mainstream consumer adoption."

Discussion Questions:

What will the arrival of internet-connected home appliances and other devices mean for retailers? What security safeguards and/or restrictions on data gathering will consumers demand?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How long before the internet of things becomes a mainstream reality in American households?

Comments:

These kinds of devices are definitely in the "early adapter" phase, and have a long way to go before they reach popular price points. But this will drive consumer electronics and appliance business in the future, just as the "smart TV" idea is gaining some serious traction right now. Companies like Best Buy who have gained in the past from major CE innovations will be among the winners again.

The other "winner" to keep an eye on is the "broadband provider" industry. Surely Comcast bought Time Warner Cable for its broadband capacity, not necessarily for the additional households watching TV. And Google is starting to accelerate its Fiber initiative into more and more cities.

Bottom line: Within ten years, the typical household's consumption of WiFi (mostly to drive entertainment devices today) will be far bigger and broader.

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Dick Seesel, Principal, Retailing In Focus LLC

It will mean nothing to retailers in the short-term future.

Consumers have adopted mobility into their lifestyle, especially smartphones. But as the article points out, only 1 to 2% have another appliance connected to the internet. We are not even at an early adopter phase.

Consumers have to be able to see real value in their personal lives before they begin to spend time trying to connect home appliances to the internet. Most internet capable TVs in homes are still not hooked up in ways to enable interactive communication. Seriously doubt that many "average" consumers will spend the time or money to hook up the frig.

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Chris Petersen, PhD, President, Integrated Marketing Solutions

"We're at the beginning of the industry hype cycle but not at the beginning of mainstream consumer adoption." That is an accurate summary.

The media and tech world are always looking for new things to hype and IoT fits the bill perfectly. In time it will come to be (with or without security issues) and there will be benefits for companies like Cisco and maybe appliance manufacturers to some degree, but I don't see it being too big of a windfall for retailers.

Not many people will ditch a working appliance like a stove or refrigerator just to get an IoT version of it. Sure, when their appliance goes bad and they have to replace it, they may opt for the shiny new IoT model if it's a reasonably priced up-sell.

So for retailers, I wouldn't suggest altering their sales/marketing/CX strategy over this. They will get the most benefit from doing the basics right and going with the flow as IoT slowly filters into their product mix.

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Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive

What will IoT mean to retailers? In a nutshell, unparalleled shopper insight and supply chain efficiencies. The former is all about real-time, even highly accurate anticipatory, demand from the bottom up and will open up a whole new vista for shopper engagement and context-driven promotions. As to efficiencies, with an exponential growth and accuracy of demand signals, inventory performance will get a boost as will more efficient use of existing supply chain assets and better planning.

As to consumers, convenience will be redefined at the same time when consumers will become more selective in how and with whom they share their personal data. We may even find a whole new set of applications pop up that help consumers control distribution (and sale?) of their own private data to specific retailers or CP companies.

IoT will be the next chapter in delivering a new definition of "value" for consumers while challenging retail (and CP) companies to take analytics as seriously as they do merchandising and assortments or new product development. While this is a technology-enabled topic, retailers will need to continuously earn and keep the trust of their customers in order to fully leverage their technology investment.

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Mohamed Amer, Vice President, Global Integrated Retail Unit, SAP

Don't get all caught up in the awesomeness of TIoT...the most important message is the one about security. The whole world runs on code. Illogically, it takes 7 million lines of code to fly a Boeing 777 but 100 million to run your Ford Taurus. 50 million for your laptop, about 1.25 million for your phone and 75,000 for your watch. Every single line is an invitation to cyber criminals. The number of faults in that code are estimated to be between 7 and 20 per 1,000 lines. Tech guru Capers Jones suggests that in a typical application of 100,000 source code statements there are 750 faults with 1/3 or 250 of them capable of producing erroneous results or shutting the thing down entirely. It's already been documented that a company's data base was accessed through the code in a refrigerator.

I was recently introduce to a company callee VIA International - your "digital concierge" - that connects devices, this internet of things, in high-end homes. Very cool stuff to say the least. Usually there are in excess of 200 devices and appliances all running on code. But remember...those high end homes are often owned by people who own large businesses.

Great opportunity for retailers who get it, a bigger one for security companies. And I still remember arguing with my brother as to who should get up to change the channel.

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Ian Percy, President, The Ian Percy Corporation

Yeah, normally I'd one of those bleeding edgers, but in this case, I'm skeptical that retailers need to do anything at all. I bought a Kevo when it first came out. It lasted six days before we ripped it out. Theoretically, it would let us lock and unlock the door with an app on our phones. Theoretically, we would be able to get alerts when our kids got home from school or if someone unauthorized unlocked the door (you know, with that analog throwback, the key). Theoretically, we would be able to give pass codes to people like house cleaners or plumbers or whatever. The operative word here is "theoretically."

I'm sorry, but the technology is just not there yet. When you're standing in front of your door, feeling like an idiot because your lock won't connect to your phone in order to let you in to your own ever-loving house, the fantasy of the Internet of Things is a Not So Much reality. Can you imagine having to "reboot" your refrigerator or your microwave? Forget about what companies like Google must be salivating over in terms of getting their hands on the data. If it impedes the basic usability functions, it just ain't gonna fly. And my personal experience is that right now, it just ain't gonna fly.

And besides, Chinese hackers installing cameras in your tea kettles isn't what we really have to worry about. Isn't this the basic premise behind the Terminator movies? Welcome your robot overlords: they are not robots shaped like Arnold Schwarzenegger. They are your microwave, which instead of cooking your meal like it used to, now alternates between 404 errors and Google ads for Best Buy's Geek Squad for home microwave repair.

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Nikki Baird, Managing Partner, RSR Research

Internet-connected home appliances and other devises will give retailers a chance to whip up both sunshine and dust for the insatiable thirst of young adults, i.e., "Don't live without internet connection." Such folks love newfangled things and retailers are a prime source for their acquisition.

Security safeguards will come into being, but they will not dampen the prevailing consumer thirst of that generation. The following generation will create the next technological hula hoop, retailers will rally and some of us will write about that situation in about ten years. That suggests that the marketplace's mightiest law is change.

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Gene Hoffman, President/CEO, Corporate Strategies International

Certainly the smart home is not yet close to the tipping point. However, the human universals of saving money, saving time, and simplifying tasks suggest this will be big, even ubiquitous. As the smart home via IoT starts moving towards the consciousness of the early majority, people will seek guidance from retailers who "have it figured out." Retailers will fight for this perception via store within a store concepts. You will also see service models opening up as IoT appliances can be connected to services that retailers offer such as servicing diagnostics or automated replenishment.

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Joel Rubinson, President, Rubinson Partners, Inc.

We were talking about the advent of "smart homes" back in 1989 when I was in charge of marketing and store merchandising for a national wholesaler of electronic security products. We're closer than we were back then, but it appears as though there is still a ways go to. Right now it looks as though security firms along with cable companies are best positioned to take advantage when the technology eventually moves into the mainstream.

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George Anderson, Editor-in-Chief/Associate Publisher, RetailWire LLC

Products come and go, with new lines appearing regularly. The internet connected devices offer a new segment for retailers.

I don't expect consumers to demand safeguards from retailers; I do expect it from manufacturers.

With new studies showing how Internet enabled devices are easier to hack, and through those hacks gain access to a family's data, the demand for security and privacy should rise.

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Max Goldberg, President, Max Goldberg & Associates

I'm old fashioned. I like the idea of the walls of my home shutting out the rest of the world. I say that, however, from my home office hooked up to the internet.

Then again, it's one thing to voluntarily open the door and another to allow 24/7 access through a home appliance.

'RetailRetell'

In order for Internet connected home appliances to be adopted by consumers, the value proposition for those consumers must be clear and evident. Most people do not need to adjust their lights when they are not home, and traditional thermostats permit temperature scheduling already. The vast majority of consumers are not going to jump on board a new technology just because it's new. The risk is that Internet connected appliances fall into the chasm and never reach broad adoption.

The greatest benefit to consumers of Internet connected appliances is the ability to predict and manage repairs and upgrades proactively. In that case, the benefits will be clear and adoption much more rapid.

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Mark Price, Managing Partner, LiftPoint Consulting, Inc.

I would guess it gives us something new to talk about, just like those "energy efficient" stickers had their differentiating kick at the can for larger appliances some years back. Security is becoming interesting. For phone apps, eventually you have to just say yes to all the terrible sounding things that app has permission to do, or you don't get anything at all to use on your phone.

I suspect people are just pressing the "agree" button to most things these days. (Does candy crush really need to find accounts on the device and have full network access?). So maybe you would be willing to give your fridge permission to monitor your consumption in exchange for locking up the ice cream section after 8 p.m. when you have withdrawn your daily calorie quota....

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Peter J. Charness, SVP America, Global CMO, TXT Group

The most significant barrier to harnessing automation at store level has been the inability to maintain an accurate "model" of the store in the computer(s). Anyone who has implemented warehouse automation at the distribution center level understands the discipline required to keep the virtual model within the computer in sync with the physical reality of the warehouse. Every broken case, every short receipt, every carton put in the wrong storage location, every extra carton loaded on an outbound pallet...they have the effect of distorting the virtual model. This type of discipline simply doesn't exist in the store.

The day is coming where RFID (or serialization of each item in inventory) and smart devices will combine to automatically maintain the virtual model of the physical store. So the internet of things will become the biggest facilitator of store level automation. This is easy to envision, but it will also apply to the consumer.

As stores become more intelligent, the automation we use at store level will soon become available for consumers. The important thing here is that retailers have to be ready to make the connection with the consumers. It will be the high-end consumer who first has the appliances that are able to take inventory and keep the household supplied. They will want their devices to talk to the retailer's devices in order to generate shopping lists or even arrange for delivery. The question is whether this will follow an Apple model with a closed distribution network straight from the manufacturer to the consumer, or will it be an Android model with applications and content coming from a variety of sources? It could also end up with the consumers ordering directly from the manufacturer.

Probably the biggest concern in all this is Amazon. We talk frequently about Amazon, but when you consider who is best placed to have their technology talk to the consumer's technology, Amazon can't be far from the top. Whether the delivery arrives by drone is probably still "up in the air" but Amazon is certainly ready to connect their services to any devices that become available.

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Bill Bittner, Principal, BWH Consulting

From a retail standpoint, TIoT represents a play-to-participate opportunity for retailers (if not a play-to-win at this point), one that will further blur the lines between consumer electronics and other categories like white goods. That means that any retailer in the "consumer electronics" business will have some decisions to make regarding which categories to emphasize or add. For example, h.h. gregg decided to pump up its appliance business and reduce consumer electronics not long ago. Now they are becoming one and the same. Should Walmart carry white goods in the back of the store? Maybe online only, but with tie-ins to TIoT presented in stores? If the TIoT movement gains any traction (and it will if only because of the huge investments now being made in it), then retailers won't be able to sit on the sidelines.

In terms of security and privacy, I've been thinking a lot about the delicate balance that Google will have to strike (or at least consider) on the heels of its acquisition of Nest Labs. Google received quite a bit of flak earlier this year for linking its email service to social media, for example, upping the privacy quease factor already associated with the platform. Google can't afford to have a cavalier attitude or to assume that users won't make connections between its various business units if it hopes to enter consumers' homes.

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Carol Spieckerman, President, newmarketbuilders

Some of the Things in the IoT discussions have been around since the early '70s and continue to be used by home automation hobbyists. I'm one. I believe it was BSR that started it off for the mass market with their X-10 modules and controllers. These have developed into a wide range of Things, which operate in the analog world. They are not hackable in the sense discussed here.

This consumer niche has continued to remain small, even though several manufacturers, retailers and catalogs got involved. Even current digital home automation equipment is safe from hacking if it is not connected to the Internet.

So if security is your issue, then maybe connecting these Things to the Internet is not such a good idea. It is certainly not necessary if all you want is an automated home.

Now, if you want the grocer to see into your pantry, freezer and refrigerator, that is another story. But call me a skeptic, I think the size of that consumer segment is even smaller that us X-10 devotees.

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Dan Raftery, President, Raftery Resource Network Inc.

Retailers need most be concerned about government regulation re: technology. IoT will be a stop along the way. But we are still miles away.

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Christopher P. Ramey, President, Affluent Insights

I tend to jump on concepts when I can see a great potential for moi! In this case, TIoT just doesn't send me. Yes, I love the idea of having remote control for my devices, etc. Want to get that oven warmed up but you're in the middle of something else? Click, done.

I also do like the way I can use my Uverse app to record shows from my phone, if I'm away from the house. But do I really see a compelling reason to connect all my appliances to the internet? Opening up all those new addresses for exposure, corruption, data? What am I going to get from it that would make me want to do that? I just don't see it yet.

As for retailers, this is way too undefined for them yet, and that's my 2 cents.

Lee Kent, Encourages retailers to meet share and learn, YourRetailAuthority

It can be a padlock, a deadbolt or the latest electronic security system; criminals will figure out a way into the building. No different for any cyber-crime. We keep putting up safeguards to ideally prevent someone from "breaking and entering" our space, be it the cloud, computers, cellphones, etc. We can't let crime stop progress. No matter how strong our security system is, someone can find their way around it. It's been that way since the first thief broke into a cave.

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

Since my MBA thesis, a consulting project for LucasArts Entertainment on the then-future of multi-player gaming, I've been observing and predicting adoption cycles for new technology. The number one truth in technology adoption is that successive cycles get faster and faster.

Yes, we're at the early stages of the Internet of Things right now. But remember how quickly the smartphone became commonplace and then consider how the tablet phenomenon gained global dominance in less than half that time. For over a century, consumer technology adoption cycles have halved every few years; it's like the tech adoption corollary to Moore's Law.

So how will this affect retailers?

I suspect the complexity of IoT products will increase the challenge of information asymmetry between retail employees and retail customers. Consumers continue to be better and better informed because they have such rich access to product information, customer reviews, comparative specs and competitive pricing. Yet retail associates already get low marks from consumers who feel the associates don't add enough information value to the shopping process.

For those retailers that sell connected products, there will be a challenge and a terrific opportunity to improve the level of information and insight their associates can offer shoppers. In our experience-driven culture, the winning retailers will be those who can offer a well-informed, high-touch advisory shopping experience (without the in-your-face hard sell of today's wireless carrier and cable provider retail stores).

If someone can crack that nut and allow consumers to get their hands on the products, try out system features and user interfaces, and can provide consultive selling at a low-pressure point of purchase, there's a significant opportunity to do well.

We've got a little time to get all this figured out, but not much, so get busy and figure out how IoT products will fit into your retail product mix. And then start retooling the way your associates are hired, trained and supported. Your front-line associates will make all the difference in your ability to capture a chunk of this market.

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Lance Thornswood, VP/Managing Director, inRetail

Let's think of some use cases:

1. Upsells: "Hey Vahe, I see you are running an older version X, with your newer version Y, if you upgrade X, here are some benefits..."

2. Cross Sells: "Hey Vahe, looks like you are really into A. If you love A, you will love A and B"

3. Replenishment: "That filter on your fridge is on the way out, your water will start to taste lousy, click here for some options."

4. Service: "Hey Vahe, the ambient heat on your air conditioner is high, causes for this include motor fault, but more simply, it could mean your drapes are blocking the vents.

5. New versions of advertising: "Listen to what our machines are saying about the new Samsung: "We love inter-operating with Livestrong's health tracking system, if you care about your health, there is no better combination."

That was fun...the 2020s will be amazing!

Vahe Katros, Consultant, Plan B

We are worrying here about something that only a very small number of people around the world have to be concerned about. Refrigerators have had internet capabilities for years now, and few, if any people have had to worry about security.

In the short-term, retailers and CPG brands for that matter need to continue to focus on the vast majority of consumers whom are browsing social channels and websites for comments that determine the loyalty of those brands. Being responsive to the existing brand sentiment is a far more real challenge than what is mentioned in this article.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

My husband is a 'bleeding edger' and always is looking for the next cool thing. I am not, and prefer to use the good old fashioned whatever that has always gotten the job done.

We recently renovated our home and installed the Nest thermostat...we call it "Elliot." Actually, it works as advertised and is pretty ingenious the way it learns your habits and responds to temperature and activity in the room without touching it. We have an "old fashioned" electronic thermostat in one area of our house due to a wiring issue. I now find that one annoying and overly complicated compared to the Nest.

Trouble for me came when Google bought the company. Knowing that they now collect all the data unnerves me, but not enough to take it out. I just wear my tin foil hat when I'm at home now...so they can't read my mind.

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Marge Laney, President, Alert Technologies, Inc.

IoT is about to pervade stores and neighborhoods, not just the homes of retail customers.
We are racing headlong into a world in which shelf beacons, digital signs, MAC address trackers, WiFi hotspots, in-store and outdoor video cameras, traffic cams, cars themselves, long-haul trucks, electric, water and gas meters, street lamps, toll booths, subway turnstiles, building security systems, jet engines, trains, farm tractors and more are all connected to the Web and generating massive (some call them Big) data flows.

Privacy within the home is already compromised by our smart TVs, mobile devices and (ironically) home security systems. Not to mention our "voluntary" sharing of lifestyle information while using the Internet.

Connected appliances are as inevitable that those electronic control pads we now can't avoid on new ranges and clothes washers. In a few years IoT will not be an option, just standard equipment. A few folks will trade up early for status or perceived benefit. Many of the rest of us will replace these devices as the old ones reach the end of useful life.

Door locks, lighting controls, power window gates, smoke alarms, home security systems and of course, thermostats, will be upgrades for most present homes with opportunities for long-term contracts. That's why AT&T, Comcast, Cox and others are now running TV ads and promotions to sign up customers now. All these devices will tell a story about our lives to people we may not want to share with, at least some of the time.

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James Tenser, Principal, VSN Strategies

The first question we need to address is the extent to which consumers will be accepting of the potential privacy issues. The issue appears to be almost religious in nature, as there are significant segments who are very concerned about what they see as potential violations of their privacy, and others who see the benefits of the convenience. Privacy issues are particularly challenging as there have been cases that have evoked consumer ire, and others that have blown over (Facebook has provided examples of both).


The second question to be addressed is security. Given the recency of the Target breach, security is obviously going to be forefront in consumers' minds. As such, one of the most important issues to address will be a locktight level of control around consumers' identities and the connection to their purchasing habits.


Assuming the privacy and security issues are addressed satisfactorily, there will be significant opportunities for retailers and likely other yet-to-emerge companies to service convenience-minded consumers with automatic replenishment, and product suggestions. Retailers that have been investing in and cultivating a relationship as opposed to transactional mindset are going to be best poised to take advantage of the new IoT landscape.

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Alexander Rink, CEO, 360pi

In the near term I don't see dramatic changes happening, but at some point this will accelerate. But it has started. For example, I have a Nest thermostat that I love. It helps me be more energy efficient and save money. It lets me check on and change the temperature in my house remotely, which is great when I am away. I can start to warm the house before I get home via my smartphone. Real benefits. This familiarity will make it easier to by the next similarly connected item.

Part of the attraction of the Nest is the simplicity of design and use. Furthermore, it just works. Very Apple-like. Products like this will lead the way to consumer adoption.

One more thing, as Millenials -- comfortable with smart devices and the internet -- age and have more disposable income, they will not be afraid of adopting all of this new-fangled technology.

Jason Boyer, Director, SAP Retail

Large scale adoption definitely needs issues like security and even costs of sensors to be reasonable. I think the summary is perfect.
Please see my thoughts here.

'ajitnarayanan'

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