Can AI & IoT save retail?

Image Credit: Bloomberg / Credit Suisse

Late Q1 2017 saw a spate of news on the coming “retail apocalypse”:

Business Insider: The retail apocalypse has officially descended on America

Bloomberg: America’s Retailers Are Closing Stores Faster Than Ever

The Atlantic: What in the World Is Causing the Retail Meltdown of 2017?

Bloomberg research indicates that 2017 could see up to 8,640 store closings (extrapolated) in contrast to the peak of 6,200 in 2008. Some of the retail chains such as Payless are declaring bankruptcy and closing many stores, and many others are just closing to stay ahead of bankruptcy. And there is class of retailers such as Kenneth Cole trying to reinvent themselves as e-commerce brands.

BI has a nice chart on store closings by retailer:

 

The Atlantic attributes the decline of brick and mortar to three reasons:

1. Growth of e-commerce – more people buying online
2. Glut of malls – just too many malls especially in the US
3. Rise of the experience – American consumers shifting habits from materialism to experience

And per BI the decline in the fortunes of brick & mortar retailers is not because of the rise of Amazon:

“It’s mathematically impossible for it to be Amazon’s fault,” Stephens said.

Online sales are growing rapidly — up 15% in the most recent quarter compared to 4% for total retail sales.

But total e-commerce sales account for just 8.5% of overall retail sales in the US. The other 91.5% of purchases are still made in brick-and-mortar stores, according to the US Census Bureau.

The same article outlines the three reasons as above (the Atlantic post) for the decline and closings.

The bottomline from all of these reportings is that for retailers to compete, and grow – they have to improve the customer experience both online and offline. It is the offline part that could stand to benefit from both IoT & AI.

At the beginning of the year at the NRF there were a slew of announcements by technology companies – dominated by how IoT – specifically technologies like RFID can improve the in-store experience for consumers. Intel, JDA, Honeywell, Zebra, IBM – and many others made a push for IoT to improve retail business – top and bottom line.

Intel & Honeywell announced a collaborative solution to:

“To succeed in the e-commerce world, retailers need to invest in connected solutions and harness the power of the Internet of Things (IoT) to track inventory and gain insights into customer shopping habits,” said John Waldron, president and CEO, Safety and Productivity Solutions business, Honeywell. “The collaboration between Honeywell and Intel will provide a platform for future technology developments to leverage both firms’ expertise in capturing and analyzing enterprise data. We look forward to working with Intel on industry-leading solutions this year.”

In an interview with Forbes, ex-CEO Baljit Dail of JDA had to say this:

Given these business trends, the things that we focus on, from a technology perspective, are things like machine learning, predictive analytics, trying to understand what the demand is in the market place. We spend a lot of time on IoT, working with a variety of different folks to get signals from different devices. A good example is our partnership with Intel on something called store optimizers. Intel has technology that is sprayed onto the label like an RFID tag. We can put in the chief RFID reader in the store, and then using our in-store technology, we can figure out what is happening to the inventory and direct the store associates.

We work with a some apparel companies. One of their big issues is that they have out of stocks on the shelf, and it is not because the inventory is sitting at the back of the store, and it is not a case of they did not get the shipment from the distribution center. The issue is that the inventory is sitting in the fitting room. What happened is, if people try it on, but they do not purchase it, they leave it in the fitting room. We have the RFID reader talking to our in-store systems, and we can send a note to the store associate and say, “Unless you are serving a customer, you need to go to the fitting room and get three of the green, large sweaters, pack them up, and put them back on the shelf because you are down to one on the shelf.” That’s another example where we’re leveraging IoT.

JDA has had a change of leadership but if you look at their new team – they come extensive IoT-oriented backgrounds – and I believe JDA would continue to look upon both IoT & AI to deliver better retail software solutions to their customers.

Other companies are also foraying to cater their products with IoT-centric solutions for the retail industry. For example, lighting companies such as Acuity Brands are trying to improve the consumer experience as well as help the retailer with proximity solutions:

Acuity Brands delivers embedded Indoor Positioning technology within wirelessly controlled LED luminaires, allowing retailers to save considerable energy and maintenance costs, while deriving highly accurate, real-time location of loyal customers, employees and critical assets. Acuity Brands has leveraged the Microsoft Azure cloud platform to deliver an affordable, scalable and secured IoT infrastructure to address multiple business needs.

Virtually every article, tweet, opinion you read on the future talks about enhancing the consumer experience as a strategy to grow the retail business. Smart Lighting companies such as Acuity are trying to leverage proximity sensing, data analytics to do both – improve the in-store shopping experience and help the retailer things such as stock outs on the shelf.

Other technology companies are helping reduce cost by optimizing their supply chain – solutions from Intel and Honeywell fall into this category. And these solutions are being driven by IoT and Big Data / AI.

Yes, IoT & AI can help retailers but it’s a Catch-22 situation. Retailers need to invest in technology – and with shrinking revenue & profits they have limited funds to do so. This, of course, puts the investments being made by technology companies in jeopardy.

 

Advertisement

IoT Click Bait: Be Wary of Investing Advice

I am generally accustomed to Click Bait especially related to Internet of Things – after all it has been the buzzword in the Technology industry for the last few years:

However I was surprised to find investment advice being provided at a reputed site like Fool.com. It is titled: “Intel Corporation’s New Internet of Things Chip Looks Like a Powerhouse“. I read through the entire article, and found the following justification for why the new chip is an “IoT Powerhouse”:

I suspect these new chips should help Intel further grow its already rapidly rising Internet of Things business, as the substantially better performance in both graphics and computing should be quite attractive to potential customers.

Clearly the Click Bait worked because it made my weekly Google Alert – it probably has enough shares or enough page rank that it made it my list of weekly alerts.

Now don’t get me wrong – Intel is investing heavily in IoT, and all the news indicates that they are serious about IoT. What I am taken aback is that the article is encouraging readers to invest on the basis of this new chip – indicating that it will change the “game” but no real evidence on how the attributes of this chip are suited for the IoT market. No discussion if it will be used in the 50 Billion things connected, and if so how do the “graphics” core help the IoT scenario.

 

 

 

3 Internet of Everything Trends from 2013

We are well past the customary Happy New Year greetings timeframe into 2014, and on the heels of the first big acquisition in the IoT/IoE space, I wanted to recap key announcements and initiatives from 2013 that have set the stage for 2014:

Formation of Dedicated Divisions

One trend in 2013 was for major companies to re-organize themselves to create groups or divisions within for Internet of Everything – chief among them were Cisco Systems and Intel. They joined IBM, I think, was the pioneer to organize itself around the Smarter Planet initiative. It is not clear to me if the group is formed around Wind River which it had acquired or Wind River has been moved to this new group. GE made several announcements and is heavily investing in their initiative that they have tagged as Industrial Internet.

Bosch followed at CES 2014 with its announcement forming Bosch Connected Devices & Solutions.

Alliances & Standards

The second observable trend was groups forming as a part of Standards Development Organizations (SDOs) and Open Source Initiatives. Two major announcements were the formation of a Smarthome alliance by ABB, Bosch, Cisco and LG and Qualcomm releasing its AllJoyn framework to the Open Source Community and forming the AllSeen alliance.

IBM had open-sourced the MQTT standard and in 2013 it was adopted by Oasis and bunch of companies to be advanced as a reliable messaging protocol for IoT.

Money Flow: Crowd-funding, Exits & Investments

Corporate investors ranked high in investments made in the IoT/IoE space in 2013.

Crowd-funding sites like Kickstarter and Indiegogo continued to be major sources of funding for IoT startups likes Canary. Lifx which was funded in 2012 on Kickstarter, launched their bulbs in 2013.

Crowd-funded companies from 2012 brought in VC-led investments in 2013 – chief among them SmartThings and Variable Inc. (Node).

Tado, Revolv, Arrayent, Zoneoff, Ayla, Fitbit, Dropcam, Estimote, Withings, and Netatmo are some of the key startups in the IoT/IoE space raising money in 2013.

Sensinode was acquired by ARM – an interesting case signaling ARM wants to be in the IoT/IoE market beyond providing semiconductor IP. ThingWorx was acquired by PTC.

In summary, the three trends above will increase the momentum making 2014 a watershed year in IoT/IoE.

Peacetime & Wartime CEOs

Ben Horowitz @bhorowitz on the type of CEOs needed during expansion vs. war. Google is entering a “war” and that couldn’t be truer! Gives high accolades to Andy Grove & Steve Jobs for being great Wartime CEOs.

Amplify’d from blogs.forbes.com

Interestingly, most management books describe peacetime CEO techniques while very few describe wartime.

In peacetime, leaders must maximize and broaden the current opportunity. As a result, peacetime leaders employ techniques to encourage broad-based creativity and contribution across a diverse set of possible objectives. In wartime, by contrast, the company typically has a single bullet in the chamber and must, at all costs, hit the target. The company’s survival in wartime depends upon strict adherence and alignment to the mission.

Wartime CEO is too busy fighting the enemy to read management books written by consultants who have never managed a fruit stand.

John Chambers had a great run as peacetime CEO of Cisco, but has struggled as Cisco has moved into war with Juniper, HP, and a range of new competitors.

Be aware that management books tend to be written by management consultants who study successful companies during their times of peace. As a result, the resulting books describe the methods of peacetime CEOs. In fact, other than the books written by Andy Grove, I don’t know of any management books that teach you how to manage in wartime like Steve Jobs or Andy Grove.

Peacetime CEO aims to expand the market. Wartime CEO aims to win the market. Read more at blogs.forbes.com

 

See this Amp at http://bit.ly/e90Owo

Intel in the Living Room

Intel has been attempting to enter the living year for over a decade now – and finally it is beginning to happen.  Their dream has been for an Intel-powered CE device to be the center of the living room. They tried with the StrongARM line of processors right after their acquisition from DEC (late 1997). The StrongARM business was sold to Marvell in 2006. Intel, then followed by launching Viiv, to create an Entertainment PC for the living room. Sadly that effort also went nowhere …

Things are beginning to change. Intel is finally entering the living room – I can say this is true for my home and any of the households who have bought any of the following: the Boxee box, Logitech Revue, Sony GoogleTV products. All three of these are powered by the Intel 4100CE chip – code named Sodaville. The Sodaville chip has an Intel Atom processor.

The thrust is not only on the consumer front but also via service providers such as Comcast. There have been reports of Comcast running trials with a Set Top Box (STB) being powered by the CE4100 (you can read a review of the SOC by Anandtech).

The one thing that history does tell us in this case – Intel will not give up!

 

Making the case for Intel and Smartphones

Intel’s Paul Otellini in the keynote at the Barclays Capital Global Technology Conference 2010 claimed they will have multiple tablets and smartphones being introduced in 2011. The slides and webcast is available on the Intel’s website. Otellini claims that Intel is getting ready to challenge ARM on both the tablet and the smartphone fronts. Otellini said the smartphone venture is “a marathon, not a sprint.” He went on to reveal that Intel’s smartphone processor is currently in the customer sampling stage and should begin popping up in smartphones during the second half of 2011 and into 2012.

 

The slides and webcast reveal an interesting postulation on why Intel can challenge the dominance of ARM in both tablets and smartphones – and that argument is being made on Slides 13 and 14:

 

 

Listening to Otellini on the webcast – the argument is that architectural changes take time typically a decade – the message to the world being ” Wait, have patience. Intel will prevail. We have the scale, capital and technology.” This is the first I have heard on why Intel can take on ARM in the mobile market. Time will tell, the next 12 to 24 months how it plays out but for the first time Intel seems to be making credible arguments on why they would succeed.

 

Disclosure: I am long $INTC but also invested for long in ARM-core semiconductor providers such as $MRVL. I guess I am hedging my bets!

 

 

Intel & WindRiver: A Different Reason on Why It Makes Absolute Sense!

Intel is going to acquire Wind River – it is all over the news & blogosphere. Some articles make the claim, such as this one in WSJ , that this acquisition will be a threat to Microsoft. The article also claims the acquisition will lead to a new source of revenue – selling software! Even if that is true, it is too far out to have a significant shareholder value – let’s not forget the real cash cow is in selling Processors and all other silicon they make!

I think it finally gives Intel the software expertise and hence control to add value to its processors & chips, and to out-rival the competition.

Here is why:

There is a growing need to have low-level software (a.k.a. firmware), the right Operating System (OS) support and the software tools for the specialized processors (System on Chip – SOC) Intel i s building for the new markets it is entering – one such example is Intel CE 3100 (code-name Canmore) designed for video devices such as Set Top Boxes (STB) and TVs. Intel’s thrust is evident in articles, a sampling of which you can read here, here, here,  and here.

And in this market for specialized processors, Intel is competing head on with the likes of Broadcom, Marvell, and Qualcomm. This market is sensitive to pricing plus needs bundling of the low-level firmware.  The inability to provide the enabling software would lead to the Intel chips being not used in favor of the competition. Without Wind River – Intel has to more or less rely on partners to support expanding range of software that needs to run on the specialized processors such as Adobe FlashLite, Google Android, Windows Mobile and may be in future the the new Palm WebOS being launched with Palm Pre.

Let me state the obvious – the real money is in creating and selling a device that adds value the higher end of the software stack – the Applications & Services a consumer would use.  And let’s not forget in the era of Web 2.0 time to market and service velocity is a must! So if I am a CE company and I want to design a product, I want a Processor that allows me to get to adding value quickly instead of spending time on doing the nitty-gritty embedded stuff.

Having Wind River in its portfolio enables Intel to out-compete and provide the complete solution to build CE devices…