NRF16 – The Store Strikes Back

Another cold January in New York City and another NRF Retail Big Show survived! As I have found with the countless times I have attended NRF the event is a whirlwind of insanity, but it is over before you know it. The insights, meetings and seeing old friends makes the entire adventure well worth it. So here are the take aways from the NRF16:

• The STORE IS BACK – okay maybe that is a tad dramatic, the store never went away, but the store in recent years has been down played. No longer is that the case. Many vendors and retailers I met with made a point of discussing their plans and initiatives for transforming their stores. The store is no longer viewed, by most, as simply the physical location that I want to go to in order to transact for an item. It is taking on a host of new responsibilities in the new commerce environment. At the crux of these new characteristics is the focus on the customer experience. Salesforce took us on a two site visit at Design Within Reach and Suitsupply, both in the Soho part of New York City. Other than the “cool” factor of the stores, what was discussed was how each store had meticulously thought of how to maximize the real estate they had and more importantly how they could leverage technology to better address their customers’ needs and experience once in the store. That experience has to go beyond offering you free cappuccinos or coupons, but how to ensure that the customer needs and untapped wants are addressed at the right time and with the right product. Other examples were of how True Religion is working with Aptos to empower the store associates to provide consumers with better experiences when it comes to finding that right pair of jeans. Putting the entire inventory catalog on the wrist of the store associate (via an Apple Watch) allows True Religion to be able to meet that customers’ demand, literally at the touch of
  

  Weather cooperated…albeit cold!

  a finger. There was also Avanade that had a smart grocery store shelf on display. Customers could simply pick up items and the smart displays would provide a host of information from nutritional content to where the food was sourced from. These were some intriguing examples of how retailers were working with service providers to bring exciting new technologies into the store – allowing the store to find its voice in the new commerce landscape.

• What is more important – perfect view of the order or the client? When we say perfect view of the order it really entails having a better understanding of your inventory levels across all channels. When it comes to the client is about truly understanding the context for the customer, what is driving their current, past and future demands. Having that 360 degree view of the customer has been all the rage recently, but are we missing the key element – the view of the order and of the inventory? This question kept ringing in my head as I went from meeting to meeting. What resonated with me was the need to address both, that the success of each was inevitably tied to the other. Service providers ranging from IBM to IFS are challenging the market on how to approach the need to have greater inventory and order visibility. It is not simply about the creative understanding of the customer, but also the ability to truly understand what products where and when that are available within the supply chain to fulfill the customers’ demands. Bottom line – regardless of how sophisticated and creative a retailer is in getting the customer to engage, if the product is not there at the moment of truth, then all those efforts are in vain.
• Smarter and dynamic fulfillment is the key – A major component of modern retail, driven by the consumer, is the push towards accessing orders wherever and whenever they desire. We already see the variety of methods we can access our orders – order on line delivery in store, order on line deliver to home, buy in store deliver to home, browse on line ship to store to name a few. As these forms of delivery continue to take on new dimensions, the business processes and technologies that support these new forms of last mile fulfillment will have to keep pace. This is continuing to place a strain on retail supply chains to meet these demands. Companies like 1800Flower are looking at all the nodes in their supply chain to assist in fulfilling their customer needs, in particular how their warehouses can play a more active role in the customer journey. We are seeing a growing number of retailers looking to redefine how they can meet the last mile in the retail supply chain. 2016 will continue to see these parts of the supply chain being leaned on to meet growing customer demands.
• Cool technologies are the future: smart displays, IoT, virtual reality and robots – Last year
  

  Great catching up with old friends – Netsuite dinner.

  there were lots of 3D printers on the floor, they seemed to have disappeared this year. Which I found surprising since in 2015 we have seen tangible examples of how retailers are leveraging 3D printers. For example Lowe’s is using the technology to offer customers the ability to procure items, such as door knobs and fixtures, that are no longer being produced. A great example of how retailers can expand their product offerings for their customers.  Of course there remained plenty of examples of disruptive technologies on display on the floor of the Javits Center. Vendors such as Zebra Technologies, IFS, Avanade, Aptos to name a few were showcasing smart displays and how their customers were leveraging the technology. From greater view into their inventory to displaying information or being able to transact view the monitors – these smart displays are only beginning to find an important role within the store. Robotics were on display from the likes of Wipro – assisting with store navigation and shelf maintenance. IoT also was a theme that ran throughout the meetings I attended – companies like Checkpoint are continuing to add increased sensors and beacons within the store. They highlighted a timely use case in leveraging RFID and readers within a meat department of a grocer to allow greater and more efficient monitoring of the high margin but perishable product. In light of the recent news with Chipotle the use case is addressing headline news. Look towards 2016 as a continuation of disruptive technology growth within the retail landscape.

Once again I survived NRF and the cold New York City weather…it was actually a great trip…albeit I am still fighting some germs I picked up from the trip. I am very excited with the prospects for 2016 in the retail and supply chain space. Evolution is continuing to emerge at a rapid pace. Retailers cannot afford to take their eyes off the ball, they have to look internally to ensure they have the right business processes and mentality to keep pace. Service providers and vendors must also strive to act as true partners for this journey.

It is not going to be any easier in 2016, but it will continue to be exciting times.

You can also view my video from the show – click here.

The hidden dark side of connected vehicles – Volkswagen’s electronic tinkering

The big bombshell news today on the IoT (internet of things) front was that Volkswagen was caught programming their diesel vehicles to behave better during emission testing. I guess that is much more sophisticated then when a car dealer would roll back the odometer on a used car! The fall out of this news was immediate. The company’s stock tumbled as much as 20%, seeing almost $17b of market value disappearing from Volkswagen AG. Unfortunately for the German automotive giant the pain is not about to end. The United States Environmental Protection Agency, warned that it could levy a fine as high as $18billion for the infractions. Ouch.

This will be a severe blow to Volkswagen, but it will have some other repercussions as well.  A new reason for some to pooh pooh IoT. I recently wrote a blog post that called out some backlash we are seeing when it comes to connected things. While some may scoff and laugh at such connected items as cat water bowls, jars and socks, I would argue the business plans behind those are not as silly as one might think. Click here for my post. But the cause of that backlash is real. Over-hyped and overpriced connected objects for the sake of it, does not make sense. There has to be a business model associated with the connected item.

It is the same with the stories that come out about someone’s connected skate board being hacked. Yes there is the potential for mischievous acts being perpetrated. But remember that over a decade ago online banking and shopping also fell under the fear mongering – your accounts and credit cards are not safe!!!!! And yes…some breaches have occurred. But as I recall Jesse James and Billy the Kid robbed brick and mortar banks long before the internet. That created a lot of fear, yet people in modern society still having bank accounts…in brick and mortar banks as well as do plenty of on line banking and shopping.

Now I am sure we will hear fear mongering about the companies that are doing the connecting finding some way to “get away” with something. And from the looks of it Volkswagen is guilty of doing so. But this just means that regulators and governments will have to do a better job monitoring. This does not mean that a connected car is now a bad thing. With all new technologies there is a learning curve: for consumers, the creators of the technology, the oversight of the usage and the business models best served. We are only beginning to scratch the surface when it comes to IoT. There will be bumps and abuses of the technology, but there continues to be great promise. Let’s not let the worry mongering detract from the possible.

Instacart at the edges of the retail IoT network with help from a humble device

The on demand retail economy is in full bloom. Companies from AirBnB, Washio, Favor, Shortcut to Lyft are all offering consumers a new retailing experience when it comes to services or procuring goods. These new business models are also pushing the edges of the retailing envelope – changing how retailers look at servicing the end customer. One shift that is taking place as well is how the physical stores are being leveraged. eCommerce giants such as Amazon and Alibaba began to drive the conversation around why have stores at all? With large logistic networks, strategically placed distribution centers and savvy order capture systems the need for physical stores for customers to come and look at products and then purchase were a relic of the past. Not so fast. Stores are making a come back. As they should. The reality remains, that as a percentage of all retail, the dollars spent via online are still dwarfed by those spent in stores. For every $11 spent in retail, more than $10 of that sum is transacted within a physical store. However retailers are facing the challenge of how to leverage the physical stores in new ways.

An example of this is the services Instacart is offering. The basic premise for the service is to offer consumers the flexibility of having someone else do their grocery shopping and having the items delivered within a finite time. Instacart has partnerships with the likes of Whole Foods, Safeway and Costco. So the grocery store is where the inventory is being held, no carrying costs for Instacart. However, Instacart relies on their pickers as well as their mobile devices to ensure that orders are properly received and most importantly properly picked and packed. This is where problems arise for such a service. The service is similar to a warehouse pick and pack operation, but a warehouse is staffed by professional warehouse employees and is…well a warehouse! Whole Foods is not configured like your local distribution center. So how can you ensure the order is properly handled? This is where the promise of IoT comes into play.

While these grocers are not going to become fully IoT operational overnight – having sensors throughout store infrastructure (shelves, aisles, freezers, carts etc), on certain inventory as well as on other essential assets – the ground work is beginning, in large part driven by the services provided by Instacart. Instacart is really similar to a store within a store – or personal shoppers within stores. And with that they also need their own systems in place to manage their business. While they can lean on the mobile assets their pickers carry, they require a more robust and industrial strength solution. This is where they are working with Zebra Technologies to place printers within certain Whole Foods. Printers? You may look at this as a non-digital play, but on the contrary this is a perfect example of how IoT can start being infused into retail.

Retailers do not need to invest in snazzy new beacons, cameras, sensors, smart shelves or RFID but rather can look at items such as label printers as a foray into IoT. Zebra printers are being rolled out into Whole Foods where they are tied to the Zatar IoT platform. The Zatar platform is able to tie these printers into a greater IoT platform. Currently the system is handling the order processing for the pick and pack of groceries. Through simple printing and labeling, it is targeting a more efficient and proper order.

This is addressing a current need for the grocer and Instacart – making sure orders are error free. But think about how this could evolve. The printer is but one item that is becoming smarter. Instacart is able to place this smart, IoT enabled device, in the property of another entity and run their business within someone else’s store. As the printer becomes “smarter” for example adding camera technology, this innocuous looking device now becomes part of an IoT infrastructure within a grocer’s store. The platform that it is tied can now take on new IoT enabled devices – suddenly the network effect takes off.

The long-term impact of relationships between the likes of Instacart and Zebra is in the ability of companies like Zebra to begin to plant the seeds for connectivity, tied back to their platform, within these physical locations. The promise of IoT will not happen overnight, but will start on the foundation created by the infusion of connecting humble machines such as printers into a greater IoT network.

IoT – don’t focus on the hype, keep the use cases in mind.

An interesting article came out end of August that looked at some “gadgets” that should have just stayed dumb. A good read that highlights some everyday items that probably should have stayed out of the IoT spot light. Click here for the article.

But are we missing the bigger picture with IoT? I agree with Christopher Mims from the Wall Street Journal about the over smartening of banal items – plates, pans, drinking cup to name a few. Click here for the piece. Not every object in our every day lives need to be connected. However, as prices come down, use cases for some of these gadgets might become more appealing. Let’s look at some that @internetofshit called out:

• The connected bottle of wine – yes tracking my $5 bottle of wine is a little silly. But think about the importance of track and trace for items such as your cough syrup or baby formula. Ensuring they have not been tampered with or counterfeited. How about monitoring perishables such dairy. From a distributor stand point, being able to track and trace a bottle of Coke or Pepsi could have long reaching impacts on the supply chain, being much more precise with regards to stocking and inventory management.
• Smart water fountain for pets – do you really need to monitor your pets’ water intake? Probably not. But having access to controlling the dispensing of water and food? There are already plenty of products on the market that have timers to dispense these items. Why not make that smarter? The pet business is a $55b + annual market in the United States alone, with over 3% growth annually. Providing customers with a smart pet food/water dispenser where the pets’ intake could offer an alternative for those who are not always home but still want to ensure their loved pets get the necessary food and water. Consumers spend money on their pets, as if they were their children. In many ways they are. That $55b market doesn’t seem too silly, that seems like real money.
• Connected socks – Wow, $199 socks…yikes. Even someone like me who loves their socks (just check my instagram page – @gcourtin – for my sock selection) that is a high price tag. But let’s imagine that price tag comes down. At $20 – $50 consumers might start purchasing these items. Why? Companies like Adidas are already putting connected devices in their soccer boots to provide players and coaches with a large amount of data to craft better training regimes. Think it is silly? Click here to read a great piece on how the German national soccer team used this to win the World Cup. Runners, soccer players, basketball players, football teams and the list goes on, of athletes that could gravitate to this type of performance data. Granted this might already become available via the shoes, but if the socks are less expensive they might get to that market first.
• Smart jars and water bottles – These could fall under the connected kitchen/home category. Do I need to know exactly how much water I drink a day? Or exactly what the nutrition content of the items in my jars? It might sound like a little overkill. What about a use case of tying in your water intake with your Fitbit or Apple Watch or smart phone? Does anyone not believe that personal health tracking devices are not firmly entrenched? Extending this into our consumption does not seem like a big stretch. The smart jar might one day be connected to a larger food supply chain. Large CPG companies such as P&G and Unilever are always interested in getting better data on the actual usage of their products. Even players such as Amazon and Google might want to find a way to have customers use these smart containers so they can better replenish items at the home.

I agree that sometimes these devices appear to be technology looking for a problem to solve. But with some aspects of IoT it might be just that at some level. We are still in the early stages of IoT. And with that there remains many skeptics, issues that still need resolution (privacy and security being two of them) and at times too many things being made “smart” for the sake of it. What we need to focus on is not the devices and gadgets that are being connected, rather the use cases that these connected devices might open up.

Now where are my connected socks?

Lifesciences IoT opportunity – will privacy issues slow it down?

This week I met with an executive from Biogen. We spent time discussing their business, the usual areas where covered: how they were dealing with the patent cliff, their diversification of offerings, how they were working internationally to name a few. But the one area that really got my juices flowing was when we touched upon how IoT impacts the pharmaceutical space. From my discussion it appears that there are two interesting plays for IoT in pharmaceuticals.

• The first is in their supply chain. From manufacturing, to storage and distribution, IoT holds great promise. No surprise as we see a large majority of manufacturers across a large spectrum, leaning on IoT to provide data that leads to greater efficiencies within their supply chains. For heavily regulated industries such as pharmaceuticals, the promise IoT holds out with regards to greater visibility as well as enhanced track and trace addresses a key issue these companies must address. Unlike a clothing manufacturer where a defect lot can lead to lost sales or a public relations night mare (think Lululemon’s recall with transparent yoga pants) if a pharmaceutical company has a defective batch of products the potential results are much more serious. They could have dangerous even fatal consequences for the end user. For the manufacturer or distributor they are under threat of heavy fines and even arrest. Not what either the end consumer of the manufacturer wants. Pharmaceutical companies, if they aren’t already, should be looking at IoT solutions that can allow them to secure the handling of their products. For example leveraging sensors that can monitor how product is handled through the transportation nodes: was it maintained at the proper temperature or was the container properly handled: Sensors could also be leveraged to ensure that there was no tampering with the product. Of course sensors can also be used in the manufacturing process to measure and optimize the factory process.
• The second potential usage of IoT is with the product itself. Now this is where there is the potential for some great insights and good, but also raises a potential red flag. Companies like Merck are already talking about and exploring the development of “digestables.” That is right, IoT enabled drugs or devices that consumers would eat. The hope is that the data that we can extract from these products revolves around how the drugs interact with our bodies, how are they truly interacting and simply if they are being taken properly (read as doctors tell us to!). From a medical devices perspective we already see companies like Boston Scientific who make pace makers that are IoT enabled. Anyone who is a fan of the HBO show, Homeland, knows the potential risk that poses! Much of this is only being tested in the labs or thought about in development meetings, but it does bring up the question about privacy. An enormity that might hold back IoT is how is the data going to be handled and protected? There are already rumblings around simple data that our iPhones or Fitbits collect about how many steps we took today, our heart rates or how many calories we burned. What happens when there are devices that are throwing off data about the health of our intestines, how often we go to the bathroom or if we are showing early signs of diabetes? Richie Etwaru has a wonderful model for IoT where as the IoT enabled product gets physically closer to a person’s heart, the greater the possible issues, especially around privacy. Digestables might be just a few inches away from the heart…from the inside.

Pharmaceutical companies should absolutely be exploring how to leverage IoT. When it comes to managing their supply chain, they are a prime industry to unlock the greater visibility and monitoring of the processes within the supply chain. The real issue is when pharmaceuticals start to productize IoT what will the privacy ramifications be? They better start thinking and preparing for this issue today.