IoT World 2016 took place10-12 May in Silicon Valley, the USA, being traditionally organized by Informa Group. Within the event, JSON.TV team managed to speak with John White, CEO at Powershelf. How its solutions, based on Smart Retail Labels and IoT sensors helps American retailers reduce their costs and OOS level (Out of Stock) radically, how Powershelf builds own partner ecosystem, who are main customers for such smart shelves, current stage of this IoT project and its global prospects.
John, thank you for sharing time with JSON.TV. First of all, please, tell our readers what significant new IoT brings to retail business? What is a current stage of deployment your IoT project.
- Well, thanks for this interview too. We’re pretty excited about the current stage. Our company Powershelf brings the internet to the edge of shelves in grocery stores predominantly. And then the Internet can send and receive information back and forth live and real time, so the retailers can adopt different measurements than they do today. As a rule, everything is done manually today and it's pretty archaic. So, pricing is done with paper price tags like our badges, and sure nobody knows when the shelf is empty or going to be. And when you're using your mobile phone you're not actually interacting with the products from the shelf. So on the contrarily with IoT we're bringing internet right to the shelf edge to manage pricing, inventory and digital communications.
We use two types of device, working in pair – OOS-sensor, signalizing when the shelf is empty and Smart Retail Labels with Bluetooth beacons, able to interact with your smartphone, when you are passing by the shelf. And overall we have about 0.5 million devices today throughout stores in the USA. Every day we receive and communicate back to this half a million devices and we're pretty excited that it covers different brands so we're in Whole Foods or in Giant Eagle etc. we're going into our first Wal-Mart soon. We've got partnerships with all of the consumer products companies that have their products there. Procter & Gamble, Pepsi, Colgate... Pretty excited about the momentum. I think the future is really exciting and that half a million will grow to hundreds of millions here pretty soon.
It is already very significant amount, right. What could you say about the same disruptive trends in retail as IoT – Virtual and Argument Reality?
- So virtual reality is a little bit different to what we have, that's on the labeling on products where you can enhance what you see through your phone. Ours uses low energy Bluetooth beacons to actually communicate your phone based on your proximity. So as you walk by a bottle of ketchup or a bottle of beer you'll get a specific advertisement on your mobile phone about that product. It could be a recipe, it could be a coupon etc. And so we're using the Internet and your exact location to give you customized messaging about the products that you're trying to buy.
Ok, got it. So, John, what could you tell about partner ecosystem, you are building around this project?
- Sure, yeah. First of all, we own and operate the entire network today, so we install and maintain all out 0.5 million devices ourselves. The software we own, but we also work with Microsoft for their cloud based Azure service, where we're managing everything linked to Internet. Also we're working with SAP on their data analytics. We're actually analyzing what happens at the shelf level, and then they integrate this data into the systems that retailers use. Also we’re partnering with Ernest & Young who measures the impact of this IoT system on the supply chain costs and on labor cost savings. They've just published a study on it which is very interesting.
John White, Powershelf's CEO, with one of his Smart Retail Labels during IoT World 2016 conference in Santa Clara (CA), 10-12 May, orginized by Informa Group
So, where are the sources for reducing retailers’ cost and increasing operation efficiency?
- Firstly, we're certain that reduction in labor cost is very significant. Let’s take only one our solution as example - Smart Retail Labels. Today price tags are put up manually on the shelf and then you have to change them every time you have a promotion, and there are hundreds thousand of it. So we do that electronically versus having to do that ordinary, due to that labor cost goes way down. The accuracy of what that price is and what you get scanned at the front goes way up. Because as a rule today, it's about 6% wrong. So ours ties into the front, we've got the digital electronic pricing that let's us electronically lock in.
And now imagine than we work with about fifty different stores throughout the U.S. It's predominantly the Southwest U.S. which is Dallas and Oklahoma, Tulsa, a whole bunch of cities. And if you come in, you would see there are no batteries. So we power it and we communicate to it through magnetic induction, you don't have to plug it in. Such device has e-Link, chip and module of magnetic induction for energy supply. That digital label works in pair with OOS-sensor nearby, which already plug into electricity and has own rechargeable battery. This sensor also gives an ability to operate and change digits on digital label, next to it. Overall, from one location and with one person we can change prices in fifty stores and we do it every day and we manage it. That gives us a radical shift in efficiency and labor costs decreasing.
Moreover, we reduce a frustration factor which shoppers have when they come to buy something and that's not on the shelf. That's really frustrating, that happens about eight percent of the time in the US, we call it OOS or Out of Stock level. On the contrarily in our case, when the shelf goes empty, we have a little weight sensor (OOS sensor) that measures weight. As soon as it's empty it sends out an alert right back to the clerk and sends it to the manufacturer of the ketchup. And so someone can go in the back and put it out on the shelf.
It is very interesting. Look like B2B-analog for Amazon Dash button…
- Yeah, absolutely right! You just push a button and it comes back. Same thing. This goes out, and like the Amazon dash, it says alert right to your cell phone or to somebody else's phone as they say "the shelf is empty, somebody should go fix it". So that eight percent of the time that it's empty which is really frustrating, it doesn't happen at all. And so we've kind of eliminated the frustration that a lot of people feel when they're shopping by just sending an alert out right away that this shelf is empty. And then folks like SAP are helping us analyze how often that happens. It doesn't happen at three o'clock every day but it happens on Thursdays particularly. So each particular product has its own unique form of when it leaves the shelf. So the ketchup is different than the mustard, the hot dogs are different than the beer etc. But today it's just random; nobody knows when the shelf is empty or going to be. So we're customizing it, analyzing the history of every single product. And we can determine that on Thursdays at three o'clock you're going to run out of that. So please, put some more on that particular shelf before that happens.
You know this problem is called "out a stocks", and that is a really big problem for the whole retail industry. It costs hundreds of billions dollars and very frustrating for shoppers. So we're virtually eliminating "Out of stocks" through the use of IoT and those immediate devices. So we send that information anywhere the named body wants. I mean I send it to my own phone every day whenever one of the stores is empty. I just like to see it, but we can send it to any stakeholder that wants information about when a show goes empty, we can send it right to them.
Does IoT have impact on current business models in retail industry?
- Yeah well, it first makes everything more efficient in the shopping behavior. So today companies like Amazon have made it a lot easier and more efficient to shop. And so traditional retail stores have to compete with Amazon. So it's making that whole process much more efficient, so that's one. Moreover, It has created a new data analytics industry, which is analyzing how often something sells and when it leaves the shelves. More importantly it lets the makers of products. For instants, the manufacturer of ketchup can talk to me when I walk nearby his product right at the same time when I'm making a decision about buying it. Before they had to convince me through television or my cell phone when I was randomly walking around that I should buy their ketchup. Now they can talk to me right while I'm making a decision about buying the ketchup. So I'm really interested in learning about a product at the point of which I'm about to buy it. It's a new network inside of the retail industry, like television, educates consumers about products, but when they want to learn about them and at the point they're about ready to decide.
So, but probably the main problem around it is the integration IoT into business systems of all participating companies, included into Supply Chain network, right?
- Right. Integration is very important. So the supply chain today is predominately tied to the data that comes from the front of the store, which is the scanners, the UPC. or barcode scans, and the date is compiled. That is what the supply chain is using to determine what to ship into the store and out of the store. The problem is that information is much different than the information about when the shelf is empty or not. So today when we ship stuff into the back of the storage scanned in and you ship it out of the front is scanned in. You would think the difference is what's on the shelf but it's not. A thirty percent of the time that information is inaccurate. So we're giving accurate information about what's on the shelf, which is really all the shopper cares about. They don't care what you shipped in the back or what is up front. They want to know what's in the front. That information needs to be integrated back into the supply chain and help them ship the orders on time, have the warehouse fill them on time, to tell the manufacturers of the consumer products companies when to ship to the retailer. So it goes way back up the supply chain, just reconciling the information about what's on the shelf.
One of Powershelf's OOS-sensors
John, thanks for the answer! What do you suggest to newcomers in IoT? If you started IoT business from the ground level, what would your first steps?
- Well, actually we have started with zero level too, so I can talk that we started with no devices and nothing really to build this from the ground up. It’s been a number of years, almost ten years, where we've been building this. We would put pricing on the shelf and then we were connected through the Internet, but we were probably one of the first in the country to start, I think we're one of the first IoT, we had a live network in the whole country. And then we've improved that and expanded upon it and developed the products further. But have always been a big believer in the IoT and we were glad our competitors are catching up. We’re really excited to lead the initiative on the adoption of the IoT world.
But what kind of problems may embrace such newcomers?
- So, newcomers... I think the first thing you need to start with is the basics. I mean there's a plenty of companies that rely and focus solely on software or on hardware. And they don't think about the integration of either the hardware or the software with all their products. But IoT for us is a bunch of devices all talking at one time. And you've got to be able to manage a lot of those from one location at one time. That's really about collaboration and integration. You need hardware and software folks to be talking to each other, especially as the numbers grow. We have about half a million today, but it's still pretty complicated. And managing makes sure this device works and then makes sure it works with a hundred thousand of other devices and every single day it doesn't wear out. So I think equal amount of energy between hardware and software is a key component for making IoT project successful.
Well, how to chose an IoT platform properly, there are at least three hundreds of them on market…
- Yeah that is a really tough option, and what we've decided to do is: as much as we can build our own, and then only partner with really reputable companies that have experience either cloud based. IBM or SAP or Microsoft, they've got really good cloud based systems to manage the data. And then really deal with the manufacturing of hardware goods and then the processors. You know Texas Instruments, Qualcomm - they make really good processors, so we've adapted to make every piece of the network ourselves. And where we can’t we only partner with really premium brand of companies that have expertise in this space.
And your plans for the future…
We have some pretty big plans to expand internationally. We'll stay grounded in IoT, so we want to manage everything through the IoT and we want to make sure that what we're doing is removing costs from the way people buy and sell groceries today. We think we're actually lowering the price of groceries by removing the cost of distributing this. And we’re going to do it at a global scale.
John, thanks a lot for such modest and practical conversation. We all wish you success in your business!
By Sergei Maltcev & Svetlana Vodianova
See also other interviews from IoT World 2016: