Lowe’s Sees Value in Connected Home Via Expandable Platform

SAN ANTONIO -- Following an initial rollout in 500 stores of its Iris connected home platform last year, Lowe’s will expand the concept to nearly all of its 1,700 stores nationwide by end of summer, Kevin Meagher, vice president and general manager of smart home products, said at Parks Associates’ Smart Energy Summit. The retailer also is expanding its distribution into 118 Verizon Wireless stores, following a trial run with stores in Georgia and New York that was announced last fall, Meagher said.

The fact that Lowe’s, a high-volume retailer, attended the summit, indicates that smart energy is about a “much broader vision; what people are calling the Internet of Things,” Meagher said. “It’s about the fact that everything in the home is going to be connected,” he said. The program at Lowe’s, built around the Iris platform developed by remote monitoring company AlertMe, isn’t an experiment, Meagher told Consumer Electronics Daily. “We're not talking about three years or five years,” Meagher said. “This is the future. There’s no backing away from it."

The decision to embrace the connected home market -- Lowe’s fully launched in 500 stores with 15-18 SKUs rather than running a trial -- came from learning the hard way about the need to keep apace of changing technology, Meagher said. “The Internet caught the retailer once before,” he told us. Lots of retailers felt no threat when e-commerce came on the scene and said consumers would still want to go to stores to touch and feel products and “kick them around,” he said. “How wrong were they?” he said.

The same held true for hardware, Meagher said. Lowe’s recognized that connected home technology could be a threat to its business early on, he said. He cited Schlage’s electronic door lock, which Meagher called “a fabulous innovation.” Lowe’s began working with Schlage three years ago after it realized that the consumer could buy the lock at Lowe’s, get home, open a Schlage app and establish a relationship directly with the manufacturer, Meagher said. The consumer would then have two choices if he wanted to buy a second lock for the back door: He could get back in the car and drive back to Lowe’s or click a buy button via the app and have it delivered in a day. “We didn’t want to find out the answer to that” decision tree, Meagher said.

Instead of worrying about technology and connectivity as a threat to its light bulb or switch business, Lowe’s decided to embrace connectivity and use it to “engage with our customers and deliver real value,” Meagher said. Lowe’s sells the full line of Iris products online as well, he said, and the company is looking for additional partnerships with telcos, cable companies and utilities to extend the reach of the Iris ecosystem.

The key interfaces for Iris are the smartphone, tablet and TV, Meagher said. The Iris gateway is compatible with Wi-Fi, ZigBee and Z-Wave protocols. “We're not asking manufacturers to make anything special for Lowe’s,” he said. “I don’t care which standard you pick,” unless it’s not one of those standards, he said. Another connectivity standard would require bridge technology that would run up the cost, he said. On lack of compatibility among standards in the market, Meagher said, “Work it out. Police yourselves.” He acknowledged that there are applications that aren’t well suited to the top three standards but said, “We can cope with that."

While much of the Smart Energy conference focused on debates about which home control system -- the thermostat or security -- would drive the connected home market, Meagher said both technologies would eventually become byproducts of the connected home. “We're all looking for the killer application” where one thing will drive the connected home market, he said. The problem with the connected home market now is that “it’s all about the security app, but security is not the killer app,” he said. Thirty years into the home security market, only 20 percent of households have a security system, he noted. “It’s definitely a core proposition but we have to do more than that if we're going to reach all consumers,” he said.

Lowe’s isn’t waiting for a killer app to emerge. Instead, it’s offering customers choice and even encouraging customers to develop their own applications based on Iris software and sensors. Some customers will want to use device connectivity so they receive a text when their kids arrive home from school. The same sensors that enable that application can be applied to elder care to notify designated family members if an elderly parent has gotten out of bed or opened the refrigerator door. The company announced a connected pet door at CES for customers who want to know if their dog came in from the garden. One consumer has set up an alert for himself through software and a sensor in his mailbox to let him know when the mail carrier arrives, Meagher said.

"We don’t believe this market will take off because of energy or security,” Meagher said. “It will take off because of the breadth of devices” that are available, he said. “The more things are connected, the more different ways people will come into the market,” he said, and that’s when energy and security products can benefit from the platform. If the retailer can pique a customer’s interest in the connected home by announcing when the dog came into the house, “they may come back to buy security sensors or a controllable thermostat because they'll save money,” he said.

As a retailer of do-it-yourself home solutions, Lowe’s has to make sure the products it sells are simple enough for its core customer, but it’s also announcing next month an installation partnership with a nationwide company for customers who don’t want to tackle technology themselves, Meagher said. He wouldn’t name the company. Keeping costs minimal is part of the Lowe’s strategy. The starter kit with a gateway, keypad, and motion and contact sensors is $179, which includes basic monitoring and access. Consumers can add services such as remote monitoring for more family members, additional access to notifications and longer video streaming for $9.99, but there’s no monthly contract, part of Lowe’s mandate to “keep it simple,” Meagher said.

Lowe’s hopes keeping costs down will lead to more revenue down the road. Free basic service has made customers “really happy,” Meagher said. Company market analysis has shown “we're charging too little,” he said, “but we think the data is wrong.” The $9.99 monthly bill hits a “sweet spot,” Meagher said, but it may go lower if the retailer achieves scale. “If we get volume and get secondary benefits of more footfalls in stores, we'll bring the price down, down and down,” he said. Connecting devices and having access to the usage and other household data from those devices can be a revenue stream in itself, and a way to save the retailer money, he said. “When we roll out with appliances, a huge value-add for the consumer is that we get the data and give it back to the appliance maker,” he said. Then when there’s a service issue, Lowe’s doesn’t have to roll a truck to diagnose the problem because it already has the data from the connected device. “We know enough to be able to try and fix it remotely,” he said. If Lowe’s does have to send a technician, “we show up with the right part because we know exactly what the problem is, and we only have to make one visit,” he said.

Lowe’s view is to get the sensors and gateways in homes first and then mine the data for its value to others. “There will come the day that we're collecting so much data that I'll be selling it to you,” he said, referring to utilities and device makers. That scenario presents its own set of privacy issues, he conceded. “We have to be really careful about that,” Meagher said. “We could spook you by giving you recommendations about the front window,” he said, by telling a homeowner if they double-glazed a window they could save “X” amount on a heating bill. The homeowner would want to know how Lowe’s knew it wasn’t double-glazed, he said. From sensors, “we know the size of the room, the temperature from the thermostat, we know when the furnace is on and how the rest of the house is performing, and we know from your ZIP code when the house was built,” he said. Lowe’s sees that information as valuable, but consumers would have to opt in to make the data available, he said. “We have to be very careful about how we use that data and where it goes,” he said.