Imagine a time when your retail purchases are curated, refined and personalized by your previous purchasing habits. You receive a package of ink in the mail when your printer runs low and a new toothbrush head just before it’s time to change yours. This is the Commerce of Things, according to James Gagliardi, Vice President of Strategy and Innovation at Digital River, and it’s coming to your home and workplace.
I sat down and spoke to James about the role of e-commerce in the IoT space.
ReadWrite: How has the e-commerce platform geared towards IoT evolved?
James Gagliardi: Firstly, Digital River has been around for over 20 years. We’re a multi-tenant e-commerce platform and services company. We’ve been cloud-based before cloud became a popular term for describing our capabilities. Over that period, we’ve seen the shift from digital downloads to subscriptions. First, it started with the anti-virus software company where you have to pay an annual fee in order to have your product updated. And now we’re moving to a space where we’re not just seeing annual subscriptions but monthly subscriptions, and companies are turning their products into services. For example, Abode Creative Cloud is now a subscription-based product.
We’re seeing a movement of companies creating products that are really platforms to deliver services (like smart devices) so your traditional company creating physical goods is now offering services and those services at some point need to be monetized . Here we’ve seen the entire space grow and evolve, not only from a tech standpoint but from a global perspective.
RW: So monetizing services is the key?
JG: Absolutely, it’s about taking your smart product and monetizing. For example, Nest decided to stop making the Revolv smart home hub (which some people called The Abandonment of Things) but ultimately to me the main reason why they decided to end it was they didn’t have a strong monetization strategy in place for that product. Personally, I have over 50 connected devices in my house, from toothbrush to lightbulb to wearables, but they’re not monetizing those devices. I spent the $200 for the Nest product but that’s all Nest (gets) in terms of getting dollars from me. With Revolv, customers were spending their $150, but there’s a service behind the scenes of data analytics that essentially – with every customer they’re gaining – they’re also losing money because of the services they’re providing without monetizing.
Think of the Oral B smart toothbrush. It’s connected and has the ability to provide feedback on how effective you are in brushing your teeth, effectively gamefying the brushing process. The problem they have is they don’t have the smart technology to say ‘Hey, we know you’ve been brushing your teeth for twice a day for two minutes so now its time to replace the toothbrush head.’ They haven’t made the connection to really provide that effective experience.
Will Samsung’s smart fridge be able to determine when our most purchased groceries run low and replenish supplies?
RW: So, monetization, when utilized effectively, could really change the notion of repeat customers.
JG: Yeah, think of the cheap printers. They’ve historically been really cheap to buy, with the most money made on consumables like printer ink. The same rules can apply in this new world. For example, we have one customer that is offering a leased printer and are charging per print and for the printer cartridge.
If you are a keen runner with connected shoes, it means the shoe manufacturer will have the opportunity to provide feedback based on your gait and stride in running and assist in buying the right pair of shoes, thus the data they acquire will improve the business to consumer relationship.
RW: What will the challenges be? Data security is a huge issue for many customers, especially if they are sharing it with retailers.
JG: It’s a very legitimate big concern, especially in the case – for example – that Google, which owns Nest and variety of other connected devices, probably knows more about my habits than I do. I do think that there likely will be some backlash to this, and I think there will be some level of regulation that will need to happen. I can almost guarantee you that there will be a security breach of some of the data for one of these companies, whether it’s your sleeping habits, how much you walk, and so on. So many people use wearables without contemplating what’s happening with that data.
Short of that, if there’s value coming back to the end customer, then people are probably going to be ok with shared data. Your mobile phone is probably the most invasive personal device that we could have, we are all basically are ok with that because of the benefit the mobile phone brings.
The downside is, again, these companies are trying to offer a service, a connection with the individual consumer unlike we’ve ever had before. Even if I bought my Fitbit at Best Buy or from Fitbit directly, I still have a relationship with Fitbit because I register the product with them. The downside of all this is the sheer number of relationships that I have to maintain, hence the number of companies that I have to store my credit card information with, where I’m being charged incremental amounts. At some point there will be an overburdening amount of passwords and management that will need to be addressed.
RW: Lastly how will e-commerce look in, say, 20 years?
JG: E-commerce will look completely different. The amount of analytics, personalization, and predictive analysis means we will be in a more predictive state than today. Even with traditional impulse buys, they will be determined by our previous shopping history, like “We think you’ll like this product so we’re going to ship it to you.” Also obviously VR and AR will come further into play. I still think there will still be bricks-and-mortar locations, people still like the art of discovery, but when I walk into a store, it knows who I am, and I will get specific offers and recommendations, features and feedback.