(Jack Dempsey/AP Images for LG Electronics)
According to our research at Retail Systems Research, retailers are very bullish on the future of the Internet of Things, or IoT. They are most excited about opportunities to interact with consumers via their mobile phones and even consumers’ own IoT devices (think wearables). For them, IoT is not about saving money. It’s about driving customer experience.
But what they are ignoring is how the IoT ecosystem looks set to evolve. Retailers will in no way be at the center of the IoT ecosystem. Just look at smart home technology: connected refrigerators, lights, ceiling fans, curtains, door locks – you name it – all increasingly connect to some management framework for all of those devices. Think “operating system for the smart home,” even though it’s a little more sophisticated than that.
Beyond the convenience of seeing who is knocking at your door whether you’re home or not, many of the potential uses of the smart home lead back to retail. Your refrigerator will tell you when you need more milk. Your smart lamp might predict or warn you when your light bulb is about to die. Your fitness tracker will make meal recommendations for how to change your diet to meet your fitness goals – meals it will undoubtedly want to help you plan and buy.
And right now there are three main companies capable of carrying on a conversation with such smart devices: Apple, Google and Amazon. If you’re using Amazon’s Alexa, where do you think it’s going to be easiest to buy that milk your refrigerator says you need? You might not even consciously approve the order – when milk gets this low, Alexa will order it and Amazon Pantry will deliver.
Google is investing in this future. It recently connected its Google Home to Google Express, an Amazon Prime-like service that charges consumers $95/month for fast deliveries (from same-day up to three days), from an array of retailers like PetSmart, Whole Foods, Staples and Walgreens. Orders must meet minimums set by each retailer, and may exclude some of the retailer’s assortment. Without the membership, orders have a fee that starts at $4.99 and goes up from there. The connection between Home and Express enables voice ordering similar to Amazon’s Alexa and the Echo or Dot. At least until April, if you order by voice, whether you’re an Express member or not, there will be no order fee.
Google is retailer agnostic. Amazon is not, though the company has enabled Alexa to reach beyond the Amazon ecosystem. You can place Pizza Hut and Starbucks orders by connecting Alexa to those apps. You can use Alexa to order Domino’s or Starbucks or an Uber. It can help you locate places nearby and even help you price compare. But outside of a limited set of services, it cannot complete orders anywhere near the scale of Google or Amazon.
Retailers should be worried about this. With Alexa, Amazon is pushing toward a world where the retailer is determined by your smart home configuration and settings, not by a weekly or daily competition for your attention or your business. Google is behind Amazon in this regard, though any participating retailer is expected to, for example, accept Google Pay as the default payment option. And their setup requires you to order a certain minimum from any retailer, so there’s not a lot of incentive to shop around.
