Monthly Update

A new retail model for a new class of devices

Heading into CES I’ve been thinking about all of the connected consumer devices flooding the market, some of them from established manufacturers like Whirlpool, many more crowd funded experiments in hardware design. It’s that second group—the droves of folks with bright ideas, like connected bike locks and smart water heaters, that could improve our lives, but which essentially exist outside of standard retail channels.

One of the core issues with all of these products that are effectively being developed by small businesses is that there’s no way to get the products into the hands of customers. Shelf space in retail electronics stores is a precious commodity, reserved for products that represent large revenue drivers for big box stores.

But perhaps a larger issue with where we are in the evolution of consumer IoT products is that there is no way to get many of these products into the hands of consumers so they can try them, so they can see why connectivity might make a difference in their user experience, and then make the purchase. We operate on the assumption that everything can be sold via eretailers. And it can. But I still think in store experiences help, particularly in the early stages of a product launch.

On December 11th, b8ta launched in Palo Alto. Founded by a group of ex Nest employees, b8ta is a small (1400 square feet) physical store that features approximately fifty of the most exciting products in IoT. You can walk in, give that smart thermostat or connected light bulb a spin, and see if it’s for you.

If the prevailing response to the ecommerce revolution among brick and mortar retailers has been to create experiences for customers ala Tesla and the Apple Store rather than sell goods, b8ta represents the epitomy of such a strategy. Come in. Try. Play. Learn about connected products.

The problem, of course, is that stores need to sell goods and not everyone’s a tech darling like Apple and Tesla. And while I’m curious to see how well b8ta is able to actually move product, what’s even more compelling about the startup is its business model.

The company has no inventory risk because it takes everything on consignment. It pays its suppliers once sales have been made minus a commission plus monthly subscription fees. B8ta built a software system that allows companies to onboard their product into the system, see where the product is in the store, track sales, as well as access in store iPads that allow companies to control their merchandising by remotely updating the iPad.

Thought of a different way, b8ta is not a store in the way that we think of stores as purely sales channels. Rather, the b8ta store is effectively a marketing platform that gives small business IoT startups a chance to get their products displayed in retail, something that will be nearly impossible for them in the Best Buys and Apple Stores of the world.

Creating experiences for customers is clearly a premium brand type strategy but given that consumer IoT, to my mind, still requires a certain degree of interest in technology on the side of the consumer, this strategy is actually timely. Not to mention the location in Palo Alto is the right demographic to start with.

The other thread that runs through the b8ta store concept is scalability and elasticity, to borrow some of the themes from the cloud, the share economy and really the modern trend in business and consumer behavior. When I spoke with b8ta co-founder Vibhu Norby, he noted “we needed to be agile enough to be able to ramp up inventory for a really good company, and ramp down for ones that weren’t succeeding.”

The ability to provide product manufacturers access to data on sales and give them greater control of their products in store should help them manage their production runs, at least at the early small scale stages. And in a consumer IoT world where hundreds, if not thousands, of connected products are coming and going, a company like b8ta has to be in a position of rapidly moving products on and off its shelves depending on what connects with its customers.

Scalability, viewing retail as an experience, consignment rather than inventory, marketing platform rather than a sales channel. These all represent a new wave of thinking about how consumers and the retail outlets serving them need to behave.

And with consumer IoT representing a fundamentally new way that consumers are being asked to interact with the electronics products in their lives, it stands to reason that we might just need a new retail model for a new generation of hardware developers.