Four Reasons Why Big-Box Retailers Need a Connected Home Strategy
By Mike Harris, [email protected]
To remain competitive in today’s digital world, big-box retailers need to capitalize upon new opportunities that connect the online and offline portions of their business. Retail executives understand the need for engaging consumers throughout the purchase cycle across all channels; from initial inquiry and online research, to in-store experience and post-purchase follow up.
Today, the “connected home” concept is heating up and presents a major opportunity for retailers to bridge the online/offline divide. Whether you refer to it as "smart home," "connected home," or the "Internet of Things," this category creates significant opportunities for retailers to establish unique and ongoing connections with their customers, from in-store education to delivery of a central in-home portal that drives "one-click" purchases and ongoing revenue.
The battle lines are being drawn, with various industry sectors realizing the strategic value of “owning” an integrated and centralized customer experience inside the connected home. First generation mass-market solutions are currently being delivered by security companies, telcos, and cable TV companies. These offerings are primarily built around home security, with expensive monthly fees.
However, big-box retailers hold the most strategic position from which to seize market share in this growing ecosystem. Lowe’s has already invested in a solution and online retailer Amazon is getting serious as well. The time for retail executives to act is now.
Here are four strategic reasons why retail executives should stake out their connected home strategy today.
1. Retailers have motives aligned with connected home success
By their nature, large retailers are in the business of offering consumers a wide variety of product choice. Today, there are currently thousands of connected devices on the market using common wireless protocols like Wi-Fi, Z-Wave, and ZigBee.
However, early entrants to this market like telcos and cable companies are typically providing pre-defined “packages” of a few connected home devices focused on security. Their goal is to not only drive revenue but to keep customers from switching their “triple play” services to the other guys. Conversely, product companies who offer a connected home solution typically have an inherent bias to promote (or protect) their own branded devices, and as a result also limit device options for consumers.
The goal of retail has always been to provide a wide variety of products that consumers want — or will want soon. This underlying philosophy of diverse inventory — versus the protectionist agendas outlined above — positions retailers as the ideal channel for delivering connected home solutions that most benefit the consumer.
Furthermore, brick and mortar stores become valuable assets for educating consumers on what is possible in the brave new world of connected devices and homes. Using hands-on displays and interactive media, retailers can bring the concept to life in ways that just cannot be accomplished online. This type of in-store education also goes a long way towards building brand loyalty for the retailer that delivers that knowledge.
2. The hub becomes the consumer retail portal
Consumers who purchase connected home technologies and devices will connect those devices to a central control device or "hub" that coordinates the dozens of devices and sub-systems in the home. Studies show that consumers do not want to deal with multiple apps to control multiple devices. As a result, whoever supplies and supports that central control hub with Web services essentially creates a centralized home dashboard for the consumer, while also creating a powerful portal.
Just as billions of dollars have been spent by online companies to secure their website as a consumer’s de facto portal or home page on the web, the connected home hub plays the same role for consumers’ “physical” home. The business case for facilitating this 24/7 direct line of two-way communication with the consumer and their home via smartphone, tablets and TV interfaces is profound.
3. Persistent product sales made easy
The rise of smartphones and tablets has challenged retail brands to provide a cohesive shopping experience across all channels. However, many retailers lack robust CRM systems that can effectively leverage customer value personalization after the initial sale or outside the store across fragmented channels.
Large retailers are in an ideal position to generate ongoing sales of both products and services with a connected home commerce portal. Via the central hub, retailers have a dedicated and highly visible customer relationship and outreach platform. By providing recommendations built upon the consumer’s lifestyle, interests, preferences and usage patterns, retailers can help consumers leverage the value among their current devices, and make suggestions for new ones.
This approach enables consumers to start small with one simple lifestyle application (i.e. peace-of-mind for their kids, pets or elders; energy savings; convenience, etc.) in order to derive immediate benefit. From there, consumers will grow their network of devices and retailers will be positioned to take advantage of all those future sales via simple “one click” purchases.
4. Revenue opportunities through services
With so many smart devices coming into the market, there arises a massive opportunity for retailers to add value to the experience of owning these products by wrapping software and services around the hardware to make them work together in a cohesive system. In the connected home, previously “boring” products like wireless routers, lighting systems, cameras, locks, and more can become the centerpiece for a wide range of recurring monthly services that add value.
Retailers who control the hub experience can deliver (or simply receive commissions on) a wide variety of services that drive more long-term value from the hardware devices themselves. Service revenue examples include hosting of streaming video captured by IP cameras; semi-annual maintenance services for HVAC systems; referrals to service providers such as plumbers, electricians, or locksmiths; and a host of other services that add value to physical products. Much in the same way the iTunes Store adds value to Apple’s hardware products, or GM’s OnStar service adds value to their automobiles, retailers can generate synergistic revenue with these types of services. Whether the retailer supplies the services itself, or simply serves as a referral point, there is new money on the table for retailers to capture.
Home automation presents business opportunities
In the highly competitive retail space, connected home products and services will open up significant new lines of business for big-box retailers who choose to act. The time is now for retail executives to get serious about the opportunities offered by the connected home and the Internet of Things. Those that seize this moment will provide significant value to their business over the long term.
Mike Harris is CEO of Zonoff, which provides a comprehensive software platform that enables retailers, device manufacturers, and service providers to deliver new connected products and services to the consumer mass market. The Zonoff Connected Home Platform consists of Home, Cloud, and App software and powers everything from entry level point solutions to comprehensive home automation, remote control, and energy management. He can be reached at [email protected].
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Men’s Wearhouse expands brand porfolio
FREMONT, Calif. — Men’s Wearhouse has signed a definitive agreement to acquire JA Holding, the parent company of American clothing brand Joseph Abboud, for approximately $97.5 million in cash, subject to certain adjustments.
JA Holding is currently majority-owned by funds affiliated with J.W. Childs Associates, L.P. The transaction is expected to close in the third quarter of 2013.
JA Holding brand names include Joseph Abboud, Joe Joseph Abboud, Joseph Abboud Boys and Joseph Abboud Home. Joseph Abboud-branded products are available in fine department stores and specialty stores throughout the United States, and more than 50 countries worldwide. This transaction includes ownership of JA Holding’s exclusive U.S. tailored clothing factory that employs 450 people.
Joseph Abboud, the founder and creator of the brand and a leading menswear designer, has served as chief creative director of Men’s Wearhouse since December 2012.
"We are thrilled to reunite Joseph with his iconic brand at Men’s Wearhouse,” said president and CEO Doug Ewert. “This transaction accelerates our strategy of offering exclusive brands with broad appeal at attractive prices. Current and future customers will benefit from authentic American designer clothing, manufactured in the USA, at unparalleled value."
"Becoming a part of Men’s Wearhouse with its powerful U.S. retail presence and talented management team, I believe the Joseph Abboud brand will not only thrive but will also reach new heights by offering amazing style and quality at an incredible value,” said Abboud. “I am very proud of this modern American brand that I launched in 1987 and I am excited to continue the evolution of the Joseph Abboud design aesthetic for our existing customers while also attracting a new consumer who will experience the level of quality and exceptional service that Men’s Wearhouse offers."
"We are proud of the progress that we have made during our nine-year partnership with J.W. Childs in building Joseph Abboud into a modern, sophisticated menswear and lifestyle brand. We look forward to continued growth in the brand at Men’s Wearhouse," said Anthony Sapienza, president and CEO at JA Holding.
Men’s Wearhouse remains committed to its $200 million share repurchase program, as previously announced in March 2013. The company expects to finance this acquisition and its share repurchase program with cash on hand and/or proceeds from its existing credit facility.
J.P. Morgan Securities LLC is serving as financial adviser to Men’s Wearhouse, and Willkie Farr & Gallagher LLP is serving as legal adviser. Kaye Scholer LLP is serving as legal adviser to JA Holding and North Point Advisors is serving as financial adviser.
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ICSC: Consumers expect to spend $285 on back-to-school shopping
New York — The average household expenditure on all types of back-to-school items is expected to be about $285 this year, with 39% of consumers planning to spend more than last year and 45% planning to spend about the same. According to a new study from the International Council of Shopping Centers and Goldman-Sachs, 29% of households surveyed have started to shop for back-to-school items, which is lower than the 33% that had started at this time last year but more than in any other year since 2004.
In addition, of consumers who plan to increase spending, nearly three-fifths indicated that the bulk of their shopping will be to replace wardrobes and school supplies. The number one item that consumers need for the coming school year is school supplies (89%), followed by apparel (79%). Two-thirds of households reported that August is when they will do most of their back-to-school shopping.
“Consumers typically view back-to-school merchandise as an essential expenditure, which is likely a key reason that so many consumers plan to increase spending this year,” said Michael P. Niemira, ICSC VP of research and chief economist. “However, this year consumers plan to do considerably more of that shopping at discount stores (90% versus 83% in 2012) than anywhere else, followed by office supply (44%) and traditional department stores (41%).”
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