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European retailers eye IoT potential for 2015

by Stuart Wilson, Wednesday 7 January 2015

European electronics and technology retailers continue to face challenging conditions in 2015, with fierce pricing pressure from online retailers. Major retailers such as Euronics and Darty are looking for new ways to utilise their vast chains of physical stores to get closer to customers and provide a level of service and interaction that online retailers cannot match. Could the Internet of Things (IoT) be the answer?

During a breakfast briefing at International CES in Las Vegas hosted by data tracking specialists CONTEXT, some of Europe’s leading consumer technology retail executives gave their view on market trends for 2015. With smart home solutions and connected devices highly prominent at CES, could this be the solution space that gives bricks and mortar retailers an opportunity to revitalise and reinvigorate their relationships with customers?

Hans Carpels, president at Euronics International, stated: “IoT is one of the main topics for 2015, but the IoT landscape is complex, fragmented and in full motion. It is not an easy area to serve as a retailer.”

IoT refers to a multitude of connected devices and products that together combine to create smart home environments for consumers. Strategy Analytics research cited by Carpels claims that the global market for smart home solutions will be worth US$100 billion per annum by 2018.

Euronics has underlined its commitment to IoT by joining the AllSeen Alliance – a consortium of companies dedicated to promoting interoperability in smart home products and solutions. For consumer technology retailers, smart home solutions cut across multiple product categories, from home security and control (think wireless security cameras and smart bulbs) through to energy management with smart thermostats.

In addition, a whole wealth of audio-visual products are becoming smart with connected capabilities and smart appliances like fridges and washing machines are also beginning to hit the market. In addition, connected fitness and wellbeing devices such as activity trackers and even smart scales are becoming more commonplace.

With so many categories fusing together to create the smart home environment, there is inevitably a degree of complexity. The challenge for retailers is to help consumers overcome the complexity and purchase the products.

Carpels explained: “The real value of these products to the consumer has to be clear and easy to understand. We need to explain the efficiency and the economic advantages.”

Physical retailers increasingly understand that they cannot compete on price against pure-play online retailers. They need to find a differentiating factor, which allows them to get closer to customers and justify the operating expenses associated with running physical stores.

Regis Schultz, chief executive at Darty, said: “How you define great retail service in the internet world is much more complex. The whole raison d’etre of retail is to transform the ‘consumer’ into a ‘customer’- that’s where the real value lies.”

“If physical retail is nothing more than a supply chain the only possible future outcome will be making no profit,” he added. “Our challenge is to recapture what makes our industry profitable by moving the mass of consumers to become customers that we truly know and understand.”

This week’s CES is full of vendor mock-ups of smart homes showing exactly how the products work and the various usage case scenarios that will appeal to customers. The challenge for retailers is working out how to re-create this in-store.

Carpels explained: “How will we sell the connected home and IoT products in stores? Do we put in a working kitchen in each store or an office mock-up to showcase them? That’s all added costs for us and we need to determine if it will bring value.”

“IoT has huge potential but it is a vast area to cover. We can be face-to-face with the customers whereas the pure online e-tailers are not. That could be an advantage,” he continued.

What is becoming clear is that displaying IoT solutions and connected devices as a separate category in retail stores in not a long-term solution. These technologies will eventually be embedded in products across all categories – from kettles to TVs to washing machines.

Despite the challenges that exist for physical retail in Europe, both Euronics and Darty remain relatively upbeat. Carpels explained: “From a product and solution side, we’re really upbeat. There are many new products and areas where we can add value.”

“But we have to be realistic,” he continued. “There are two markets – France and Italy – that are still under stress. The UK, Germany, Poland and Nordics look relatively solid, but there are issues in Russia and Ukraine.”

Schultz concluded: “There are smart products and smart retailers, but we always need to keep in mind the political and economic situation as well.”

DISTREE Events has partnered with CONTEXT to launch a new summit focused on how the European retail channel will evolve to deliver smart technologies, solutions and services to consumers. The new session, entitled ‘Smart Channels: Retailing Connected Devices, Wearables and Internet of Things (IoT)’, will take place at DISTREE EMEA in Monaco from 24-27th February 2015.

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