Product DesignMobile Strategy

How to make it in the Internet of Things

Pattern of IoT connected devices

IKEA just became the latest large retailer to develop their very own Internet-of-Things product. Introducing (drum roll please…) the TRÅDFRI smart light bulb!

Tradfri image

That’s right—you can now add a smart home lighting kit to your usual IKEA haul of a sofa, meatballs, and a fresh fight with your partner.

IKEA GIF

While connected light bulbs aren’t exactly novel tech, we think IKEA’s launch of Trådfri is a meaningful development. This kind of mainstream application of IoT strategy by large retailers is one of the signs that we might be approaching a tipping point for consumer-facing IoT products.

While IKEA’s getting all the attention, they’re certainly not alone. Everyone from Target to Sears is trying to figure out how to integrate IoT into their product lines.

What strategies are governing these big retailers’ moves in the space? We see three in particular right now:

Strategy #1: Offer existing solutions for less.

Make IoT products similar to what’s already out there, but make them more financially accessible.

Examples

Smart lighting kits are nothing new. But IKEA’s are competitively priced, getting fairly good reviews and, perhaps most importantly, available at an IKEA near you.

Like IKEA, Target has launched their own connected lighting products (under the private-label brand Threshold).

Outlook

Both IKEA and Target have a lot of catch-up to do in terms of raw functionality: Other connected lighting products (most notably Philips’ Hue system) offer more robust functionality and work with Google Home, Amazon’s Alexa, and Apple’s HomeKit. But IKEA in particular has reach, knows retail, and has a knack for bringing products into ‘impulse buy’ territory.

Strategy #2: Let us handle everything.

Become the hub of customers’ entire connected homes.

Examples

Lowes offer a wide range of connected home products, from motion sensors to indoor cameras, under their private-label brand Iris. The core of the system is the Iris Smart Hub and its companion app, which let you control all of your Iris-compatible products in one place.

Now, ‘Iris-compatible’ is where things get interesting—the Iris hub and app don’t just work with Iris-branded devices, they also work with a range of products from other companies that have partnered with Lowe’s, including GE, Whirlpool, and Honeywell.

Staples tried to make a similar play with their Connect hub, which in many ways was ahead of it’s time. Still, it was a big leap for Staples to try to position themselves as the center of your smart home, and they didn’t push hard to continuously update the product and it’s software. They finally discontinued sales in 2016.

Outlook

The ‘be the hub’ approach sounds really good on paper: “Forget lightbulbs—we’ll be the center of the whole system!” In practice, however, achieving hub status is an uphill battle, to say the least. By aiming to be the go-to interface for the smart home, you’re putting yourself in direct and intense competition with some of the most aggressive, powerful companies in the world, including Apple, Google, and Amazon. More on that later.

Strategy #3: Just add sensors.

Augment existing product lines by simply integrating IoT.

Example

Sears took the approach of integrating IoT capabilities into existing products. You can now buy a connected tool chest, garage door opener, or zero-turn mower from Craftsman, and you can buy a connected air conditioner, refrigerator, or washing machine from Kenmore.

Outlook

It’s no secret that Sears’ future as a retailer is in jeopardy. But their private label brands still have lots of loyalty, and this strategy largely seems like an intuitive and savvy attempt to keep those product lines up-to-date (even if I would never pay a premium price for a toolbox that I can lock from my phone).

How to actually break through

With Google, Amazon, and Apple quickly taking over the role of home hub, and with competition for space in the connected home growing daily, what can brick-and-mortar retailers do to compete?

It’s no longer enough to launch an IoT product for the sake of generating buzz - there’s too much noise. Breaking through will require a clear focus. Here are three approaches we’re already seeing in our work on IoT, and in the market more broadly.

Focus on competing to own a niche in line with their core competency.

IKEA started with lighting—a crowded space, but one that fits perfectly with their broader offering of home furnishing products. Similarly, Sears is staying focused on the areas they already excel in, like home appliances. They stand a better chance of competing in those niche areas than they would if they tried to be the hub of the connected home.

Focus on the service layer.

Beyond offering stand-alone devices, look for companies to find opportunities to provide services enabled by connected devices. While the future of Lowe’s Iris as a connected home hub is questionable, they are offering what is perhaps a viable service: a subscription for home monitoring, starting at $14.95/month.

Focus on incorporating IoT into the business.

Walmart hasn’t yet offered any of their own IoT products (though it’s likely only a matter of time). In short, rather than selling their own IoT products, they’re focusing on using connected tech to help support the customer experience. (Cue robotic grocery carts.)

As the consumer IoT space continues to grow, it’ll also continue to get more competitive. Companies looking to get involved will have to be intensely focused on finding an opening in the market that aligns with their core strengths (and, of course, adds real value for users).

Need help figuring out your next IoT move? Give us a call.

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