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Nest’s multichannel European strategy

by Stuart Wilson, Wednesday 5 November 2014

A connected home is simply the first step on the journey towards a truly ‘conscious home’, according to Lionel Paillet, general manager Europe at Nest. The company, which Google purchased for US$3.2 billion at the start of 2014, is developing and deploying a multichannel European strategy as it looks to drive consumer adoption of new smart home technologies.

Channel EMEA caught up with Paillet to learn more about Nest’s European vision that extends far beyond smart thermostats and smoke alarms. The company is pushing hard to extend its channel reach across Europe and open up product availability in new markets.

Paillet commented: “When we started in the US market the primary channel was through DIY retail. Now, we are bringing the connected home vision to Europe and adopting a multichannel approach. Nest is seeing a multichannel strategy develop. It is not a case of going for extensive distribution and signing as many channel partners as quickly as possible. The presentation of the product and solution is too important.”

Consumer retail

“Consumer retail is an important pillar of the multichannel strategy in Europe and we are working closely with major retailers such as MediaMarkt, Fnac, John Lewis and Dixons Carphone. These retailers have already started putting together great in-store presentations of Nest products and solutions. Then we also have an important DIY channel in Europe and we are working with Kingfisher DIY chains in both France and the UK,” he added.

The DIY channel is a natural channel opportunity for Nest, given its position as a vendor of smart thermostats and detectors. The company is also working hard to increase the network of skilled professional installers capable of providing a route-to-market for Nest solutions.

“These two channels [DIY and consumer retail] provide access to different market segments and are quite well balanced in Europe. The DIY channel is a historical route-to-market – it is where consumers have traditionally purchased detectors and thermostats,” explained Paillet. “The consumer retail channel for smart thermostats and detectors is brand new. It is creating an opportunity for the extension of the digital life for this consumer group.”

“In addition, in Europe, we are also working hard to drive the development of the professional channel – skilled engineers, heating experts and home automation specialists - that can visit a customer and install Nest solutions. This professional channel is probably more advanced in the US than it is in Europe at present,” added Paillet.

“Then we also have the energy companies that are an important channel for Nest. There are more than 20 major energy companies already working with Nest – companies like npower in the UK,” he added.

Energy companies not only provide a range of product and services, they also have a key role to play in the affordability and accessibility of Nest products to consumers. By selling Nest products as part of an energy contract they can help to subsidise the upfront cost. npower is currently offering the Nest thermostat free of charge as part of one deal.

“The price of energy is going up and this is a very big issue in major European markets. Nest helps address consumer energy consumption issues,” explained Paillet.

Online channels

Nest is also pushing the development of online sales channels through a number of agreements with major players.

“The online channel is also very strategic to Nest,” said Paillet. “We have an agreement in place with Amazon and also reach consumers through Google Play. We even have an agreement with Apple covering both online and in stores. Retail remains the first pillar of our channel strategy but the professional channel and the energy company channel are becoming more important.”

While demand exists across Europe for Nest solutions, the company is keen to make sure it has made all necessary preparations before launching in a new market.

“We launched in the UK first in Europe and have added France, Ireland, Netherlands and Belgium. It takes a few months to open up a new market because we want it to be done right and we care about the end-to-end customer experience,” explained Paillet.

“There is a due diligence process for each country and we need to make sure everything is ready in terms of the retail experience and merchandising. We are planning to expand into more countries in Europe, but it is a step-by-step process,” he added.

“We also have to look at the regulations in each market. For example, it was not mandatory to have a smoke alarm in a house in France until now, so that creates a massive new opportunity. We are also looking closely at the Nordics but we want to make sure we are really ready before we commit to entering a market. It is not just about how many pieces we can ship right now, it is about making sure we have the right European channel strategy in place,” continued Paillet.

Retail experience

Persuading consumers to invest in smart home technologies and presenting the benefits offered is critical to Nest’s success. The company is working hand-in-hand with major retailers to deliver a compelling in-store experience for consumers.

“We need to make sure retailers are capable of doing the right thing in store and that they fully understand the product and can talk about it intelligently. So, we are investing in retail training and really looking carefully at what we can do to make the in-store experience more fun,” explained Paillet.

“We’re talking about a real user experience and story in-store. So, rather than hearing from the supplier and manufacturer, consumers hear from real people and their real experiences of using Nest. We will also allow in-store consumers to connect to a demonstration Nest-controlled house,” he added.

“We have a vision in Nest of a ‘conscious home’, which goes beyond a connected home. Home automation is not a new concept and has been around for decades. What has changed is that we’re now at a point where the ‘conscious home’ technology and opportunity gives us the chance to move beyond a business-to-geek (B2G) channel and really start opening up genuine mass business-to-consumer (B2C) channels,” said Paillet.

“The ‘conscious home’ concept is about your home doing more for you than you do for it. Creating products that will actually learn what to do and when. We want to change the way people connect to energy, safety and security in the home. It is all about engagement with the technology, not just passive adoption – and this means making products that are smart,” he added.

The Nest ecosystem

Nest’s vision goes far beyond its own product portfolio. The Nest ecosystem and platform lies at the heart of the ‘conscious home’ idea the company is driving towards.

“We will bring smart products one-by-one into the Nest ecosystem – products that people touch every day. We want to create magical experiences using the algorithms and software that we possess,” said Paillet.

“There are more than 5000 people registered for the Nest developer programme and that shows how much is going on to bring more products and solutions to the Nest platform. It is not just about point products, it is about creating great experiences. The ‘conscious home’ goes beyond the connected home,” he added. “Nest itself is not going to outreach itself. There are areas like fridges, smart bulbs and cars, where of course we partner.”

Competitive landscape

Today, it seems that every consumer-focused hardware, software and services player has a connected home strategy and is jockeying for position in this high growth sector. Paillet believes that very few companies possess the requisite skills to make a real difference in the market.

“Yes, there are many companies that want to be part of the ‘connected home’ growth opportunity, but it is actually hard to do. You need to be great at hardware, software and services to make it happen and to create a ‘conscious home’,” he commented.

“You can’t just make an app or add an extra button to a control. We see some companies trying to innovate by creating a patchwork of apps. You need more vision to create something that is really useful,” said Paillet.

Usefulness has driven Nest since its very inception, taking a product as common as a thermostat and looking at ways to make it more efficient, more interactive and more user-friendly.

“Lots of people fantasise about the size of this market, but there is no getting away from the fact that energy costs are a big problem for many – especially in the UK. It is a problem that these technologies help to solve and that will drive adoption,” Paillet stated. “In the professional channel, it is a cultural shift for many traditional heating installers to suddenly start pushing software and services as part of their offering.”

Are European retailers ready?

Selling the ‘conscious home’ is undoubtedly a new challenge for some of Europe’s largest retailers. Dedicated in-store zones for connected devices and smart home technologies are emerging, and some retailers are beginning to think carefully about the overall consumer experience.

“Some retailers in Europe are already incredibly innovative on smart technologies and heavily committed to it. They need to have the retail footprint and critical mass to justify this commitment,” said Paillet. “The likes of Dixons Carphone, MediaMarkt, Fnac and Darty are really looking carefully at the smart home. It is a case of deciding what products they will focus on and what story they will tell. It is important to make it easier to understand for consumers.”

“Some retailers are surprised by the fact that consumers will visit Fnac or MediaMarkt to buy a thermostat,” he added. “Thermostat and smoke detector sales used to be all about passive adoption by the consumer – they just bought a functional product when they needed it. That is now changing and channels are changing too.”

“Consumers in the Netherlands are now going into MediaMarkt and buying a Nest thermostat and actually purchasing a new energy contract in-store as well. Selling the smart thermostat has been a stepping stone to that wider in-store transaction,” concluded Paillet.

Smart Channels Summit

DISTREE Events has launched a new summit series focused on how the retail channel will evolve to deliver smart technologies, solutions and services to consumers. The new session, entitled ‘Smart Channels: Retailing Connected Devices, Wearables and Internet of Things (IoT)’, made its debut at DISTREE APAC in Singapore, which took place from 8-10th October 2014. The Smart Channels Summit series will continue at DISTREE EMEA in Monaco from 24-27th February 2015. Channel EMEA is a global media partner for DISTREE Events.

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