Unlocking the Western Retail Markets for your Hardware

Jeff KatzSenior Practice Lead IT / Engineering

Telefónica Germany NEXT GmbH

» Consumers are ready to spend. Many of them still like brick-and-mortar stores.«

-Sarah Halzack, Bloomberg

Agenda

– Relevant quote

– Agenda

– Speaker Info

– Marketing and Branding

– Sales

– Pricing

– Channels

– Retail deep-dive

– Telefónica

– Geeny

~50 minutes | english

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Jeff Katz

– American living in Germany for five years

– Co-founded several companies in Finance, IT, Security

– Founded hardware accelerator called HARDWARE.co

– Background in Electrical Engineering and Embedded Development

– Has designed and built hardware, firmware

– Currently working for Telefónica NEXT

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You’ve done it! … Now what?• You have a product• People seem to like it / there is a demand• Time to bring it to the market…

Right?

Marketing and Branding

Starting with a disadvantage• 38% of consumers in UK have questioned credibility and

authenticity of Chinese brands in the past• Concerns about quality, counterfeiting, production ethics• Lack of trust

» There is no question that as a Chinese company you have to work harder to prove your intentions are genuine. «

-Josh Gartner, vice-president of international corporate affairs, JD.com

Break through skepticism• Create your Global Identity• Earn word-of-mouth from early adopters• Target the right market• Are you selling to millennials? Businessmen?• Associate yourself with things your target market likes—

sports team and events, celebrities, pop culture• Get used to customer-centric culture• Two years+ warranties in EU, Free Shipping• High quality expectation, low tolerance for underdelivering

Sales!

Really ready to sell?• Certifications• Localization• Packaging• Training• Point-of-Purchase (POP)• Account Manager• Channel Marketing• Capital (Net-90 Payment Terms)

• Samples• Support• Travel• Pricing• … and more

Localization and InternationalizationRank Language TotalSpeakers

1 Mandarin >1Billion

2 English ~1Billion

3 Hindi >500Million

4 Spanish >500Million

5 Arabic >400Million

PricingHow much should the product cost?• Market positioning• Include hidden costs• Bottom-up costing vs Top-down costing• Give yourself plenty of room to make regional adjustments

• Four P’s:• Price, Product, Promotion, Place

• What category are you in? What is your USP? Shop online&in store.

Sales!

How will customers in the west behave?

Source: MKM Partners

Own Website• DON’T UNDERCUT RETAIL PRICING• It should be easy to buy from you• Payment methods preferred in target market• Short process as possible, optimize funnel and messaging

• It should be fast shipping• Customers don’t want to wait• Be aware of holidays in your target market

• Test your messaging and branding

Specialty/Online Shops• Establish relationships with shops in your target market• Utilize their existing customer base

• Typically on consignment, less common drop shipping• They will help you reach your first customers• … bridge any cultural gaps• … deliver a great product experience• … gather feedback and data about your customers• … market and communicate, coordinate with them!

Amazon• Amazon is a Marketplace and also a Platform. Either you let

them handle fulfilment (FBA), or they just list and you ship.• 43% of all online retail sales in the US went through Amazon in

2016—only grows YoY• Lower margin than other options

Amazon• Fulfillment by Amazon (FBA)• Enables reach to Amazon Prime• No need to handle packing and shipping (and reverse)• Customer Service handled by Amazon• Sell through Ebay FBA as well

• But, be careful:• Out of stock? Amazon notifies other sellers of your problem• Individual labeling requirements, (UPC) other rules• Customer Service handled by Amazon

Amazon

How do customers in the west behave?

91.5%Source: US Census

Retail Models• Wholesale• They buy from you, assume all risk. Big margin.

• Drop Ship / Direct Vendor • They show, you fulfil. Shipped directly to customer by you.

• Consignment• You are paid as products are sold, less margin, more risk.

Retailers in General• Between the customers and you

there is a whole organization• You need to meet and

convince the buyer• Trade shows > Sales Reps > *

• Retailers will not market for you They are a “dumb” shelf where your product sits. If you do not drive customers to retail stores, customers will not buy your product.

Retailers in General• You can (and should) get help approaching retailers• Sales Agencies / Rep Firms / Manufacturer’s Reps• Trusted by the buyer• Local to HQ (Target/Best Buy will be in Minneapolis)• Relationship based• Pricing: anywhere from 3-8% of net sales

• Branding/Marketing Agencies• Don’t forget: You have to generate demand

Retailers in General• If you get a meeting with a buyer, they are already convinced• You are now competing with the other appointments they

have on the same day. Try to be first. Make a good impression. Be the one they choose. Say YES to everything.

• Contract terms:Slotting Fees How much does the dumb shelf cost?

Promotions You pay for the discount, the retailer keeps their cut

Returns You pay for the returns, up to 15% normal

Margin 20-45% Typical for connected devices

Payment Terms Up to Net 90

Retailers in General• Total process from buyer interest to shelf time: 6-12 months!

1. Buyer requests samples2. Samples added to proposal for category update3. Proposal is pitched for approval (1-2 times a year)4. Lots of contracts and paperwork for you5. Retailer guesses demand and writes purchase order6. You ship your product to their warehouses

» For credibility it’s good to work with local partners.«

-Yin Long (殷龙), Project Director (总监), Rafotech

TelefónicaTelefónica, S.A. is a Spanish multinational broadband and telecommunications provider with operations in Europe, Asia, and North, Central and South America.

110th biggest company in the world as of May

Telefónica

Telefónica's open IoT platform Geeny connects users, developers and businesses to create smarter products

- Global IoT platform

Global customer base:

- Global communications operator

• The open Geeny ecosystem connects apps and devices world-wide

• Geeny.io is a 100% subsidiary of TelefónicaGermany and bundles the expansion in the IoTbusiness

• Geeny enables consumers to take ownership of their data and developers to create innovative services on top of existing devices

Open Geeny ecosystem:

Users

DevelopersSmart devices

• Leading mobile operator in Germany and across Latin America

• Worldwide coverage – Availably in 650+ international networks, owned networks in 25 countries

• 350mn customers world-wide

The consumer IoT market exists for years, but has not taken off yet

There are forecast to be 28 billion connected devices worldwide by 2021

Almost 16 billion of them will be loTdevices

loT devices will over-take mobile phones as the largest category of connected devices in2018

This will be driven by the spread of smartmeters and connected cars, as well as by consumer devices

The number of loTdevices in WesternEurope is projected to quadruplebetween 2015 and 2021

Bad UXClosed ecosystem

End-to-end thinking

Fragmented island solutions

… but has not been realized yet due to poor value propositions of existing IoT productsThe consumer IoT opportunity is massive…

Geeny revolutionizes consumer IoT and establishes an open IoT ecosystem

GeenyValue Prop

Current IoT products could be smarter

Light

Controls Data

AlgorithmsPrivate Data Lake

Formula providers

Digital services(Applications)

Non-digital services

Light

E.g., insuran-ces

B2C – Consumers have full transparency who they share their data with

Access via API integration

Access via gateway

Direct access

Element providers

Consumer

Data

Each device works with just one service (formula)and the usage of open APIs is just starting

Data

B2B – Geeny enables IoT solutions to be connected with 3rd services and devices

The IoT world tomorrow, enabled by GeenyThe IoT world today

How our platform worksGeenyValue Prop

Kafka

REST API

HTTP, TCP

Customer Code

DevOps Practice

Application Deployment

Device Integration

Micro Service

State

Cert Manager DB

Devices

Subscriber Shim

Scala, Stateless

External Token Manager

Clojure, Highly concurrent

Cloud APIs (e.g., fitbit)

Runtime Env 2(k8s)

Runtime Env 1(Swarm)

Customer App 1

Customer App 2

Application Connection Service

KAFKA

GRE (Geeny Runtime Environment)

Write logs

App ownership check

Application logs

Credentials check

Docker push

HTTPS

HTTP

HTTP

HTTP

HTTPS

HTTPSHTTP

HTTP

HTTP

HTTPS

Employee

Developer(desktop first)

Subscription response

Refresh token

Autherisation code exchange

Get API KEY

Subscription response

New token notification

Notification queueAPI Specific

Ingress data

PROD2

Scala

Persistent Storage + Per

User Logic

Runtime EnvGateway

Nginx+

Docker Swarm API

Notification Handfler(webhook endpoint)

Scala, Highly concurrent, Stateless

Geeny API gateway

Same as ther other

Fetcher

Scala, Stateless

Subscriber

Scala, Stateless

Proxy

AWS EC2

MQTTIngress/Egress

Rust

MQTT Fetcher

Node.js

MQTT Sender

Go

Thing DB Postgress

Proxy TLS Terminator

Docker registry

Runtime Manager (RTM)

Go

Application Deployer

Clojure

Application Connection Service

B2C Marketplace Backend

Elixr, EriangVM

Static Webserver for Thing Manager

Nginx

Static Webserver for B2C Marketplace

Nginx

Static Webserver for Marketplace CMS/ Developer Dashboard

Nginx

Static Webserver for Customer Support Tool

Nginx, AWS ECS

Geeny Static LB

Nginx+ AWS EC2 with LB

Connect Backend

Django, Gunicom

Things Manager

Node.js

Thing Certificate Manager

Go

Geeny API Gateway

Nginx AWS EC2 with LB

VPN

Docker User-Auth

Go

Geeny API Gateway

Same as the other

Application broker Subscriber

Go

Application broker Publisher

Go

Consumer(mobile first)

Aapp, or backend

Geeny platform architecture Geeny benefits

App providers can develop new formulas on top of popular 3rd party devices without the need to invest in own hardwareDevices providers benefit from the open Geeny ecosystem –enabling their devices to be connected to 3rd party formulas and devicesConsumers store data in their private data lake and have full transparency who they share their data with

Customers can decide how to connect to Geeny – via APIs, SDKs or full backend integration

Geeny is fully technology agnostic – select software and hardware based on best fit for the use case

We generate revenue by providing PaaS and selling services through our B2C and B2B app stores. We share the revenue with our element (data) providers

Money

Data

Money

ValueData

Money

Data

Money

B2B Partner

GeenyValue Prop How our business model works

Elements Formulas

Value-added services

Geeny revolutionizes smart home and establishes an open IoT ecosystem

…..and leverage different apps on top of the devices to enable different use cases

Keyless access – open doors via smart door lock

Warm Welcome at home – Pre-heat home remotely

Keep home save – get alarm, if somebody breaks into your home

Kids are safe – get notification, when kids are home

Consumers have full transparency who they share their data with

Data Data

Consumers can connect their favorite smart home products with each other…

Energy consultant – help save energy costs

How a smart home proposition could look

Smart homeE2E Offering for Customers

End consumers can add popular smart home devices – on a 'Connect What You Want' basis

End consumers can add solutions to devices outside smart home –heating starts as soon as the consumer reaches a 30km radius of his home

Different use cases

Thank you. Let’s talk!

Jeff KatzSenior Practice Lead IT / EngineeringTelefónica Germany NEXT GmbH

jeff@geeny.io • jeff.katz@telefonica.com • @kraln

https://developers.geeny.io

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