In a store under construction off the University Avenue shopping strip in Palo Alto in Silicon Valley, workmen tinker and tarps cover the walls.
The new retail shop is unlike those around it and will offer unique items: It will sell the Internet of Things.
To the layman, this may sound like tech garble. But the Internet of Things is a real and growing product category that encompasses everyday objects with Internet connectivity. Think connected cars, thermostats you can control from your phone or drones that connect to Wi-Fi.
The Internet of Things is about objects being linked together. But it’s hard to convince anyone this sort of thing works through a website, or through traditional retailers, where products typically are organized by category, not how they relate to one another. It’s harder still when products are sitting in boxes or locked behind glass cases.
B8ta aims to create an environment that shows how all these things link up. And just in time (barely) for the holiday season.
“This area is going to be set up like a kitchen, with bar stools and everything,” said B8ta’s co-founder and chief executive, Vibhu Norby, gesturing at some bare walnut-wood benches and tables.
“And this area will be set up to look like a living room space so we can show products functioning in context.”
B8ta’s founders came from Nest Labs, the Google-owned company best known for its Wi-Fi-enabled modernist-style round thermostats, smoke detectors and other security devices.
Working at Nest Labs, the founders learned how resource-intensive it was for a company selling an Internet of Things product to create environments inside retailers that adequately explain how everything works. Nest Labs could afford it. Microsoft and Apple, too. But what about the thousands of smaller companies creating connected devices?
This is the gap Norby wants B8ta to fill.
The store will primarily stock items that are sold only online and, for some products, B8ta will be the exclusive physical retailer. Products generally will fall into one of four categories: connected home, electric transportation, smart toys — like the BB8 by Sphero — and sensory augmentation devices, such as the Oura Ring, a ring-shaped computer that tracks how the wearer is sleeping.
Every product will be displayed out of the box, in a setting where it might actually be used. Hence the store’s kitchen and living room setups.
The founders see B8ta as a solution to a multitude of problems.
They’re offering a way for creators of Internet of Things products to show and sell their goods in a way that can convince shoppers that, hey, maybe this stuff actually works.
And if they can crack the code, others are bound to follow. While predictions vary wildly, some research firms, such as IDC, believe the Internet of Things market will grow to $1.7 trillion in 2020, up from $655.8 billion in 2014. Research by the McKinsey Global Institute estimates the impact of the Internet of Things on the global economy could be as high as $6.2 trillion by 2025.
Already, retailers such as Target and Verizon Wireless have started experimenting with space that showcases Internet of Things in action, the former with its “Open House” showrooms, and Verizon with its stores that prioritize Internet of Things gadgets over phones.
B8ta’s founders believe showrooms are needed to sell Internet of Things products in high volume; online shopping alone won’t cut it.
“We really felt the pain of online shopping ourselves,” Norby said. “For example, I bought a two-wheel hoverboard online for $350, and I had this vision in my head of riding it to buy groceries,” he said.
“Then it arrived in the mail, and it was so heavy, I could barely lift it, let alone go grocery shopping with it,” he said. “If I had seen it in a store, I would have known that.”
The B8ta founders want to merge the best of the brick and mortar and online worlds. In the former, shoppers can drop in and test the products for themselves, ask questions and have new gadgets demonstrated to them by staff who have been trained to know the ins and outs of every product. In the latter, shoppers can try out the latest tech from smaller companies that might not have the capacity to get their stock into the Targets and Best Buys of the world.
Tech startup Teforia, which makes “the world’s first intelligent tea infuser,” will be among the first companies to have a product in B8ta. The Teforia tea infuser lets tea drinkers control everything about their tea — from the caffeine level to the amount of antioxidants extracted. It is available for preorder online for $1,299 (early birds get a discount, reduced to $699). And while Teforia presents its infuser on a beautiful website with crisp images and high-resolution videos of tea bubbling away, there’s no way for potential customers to taste or smell the cup of tea it makes.
“There’s always going to be a need for people to see products and touch them, and for us, it’s extremely important because we offer an experiential product,” said Teforia Chief Technical Officer Kris Efland. “So it’s critical for us to have that venue to tell our story, and B8ta provides that vehicle for us.”
Plus, if people are going to fork over $1,299 for a tea maker, you can bet they’re gonna want to try it first.
Retail analysts see potential in B8ta, but with some caveats.
“Shopping on the Internet is really efficient, but it’s emotionally flat,” said Craig Johnson, president of retail consulting firm Customer Growth Partners. “In a store, you have tactile sensations, you have salespeople, you have peers you’re shopping with. People get excited. Physical shopping can be a much more emotionally varied experience, whereas the Internet is flat and typically lonely.”
In this sense, Johnson said, B8ta is tapping into the power of retail and giving brands a way to connect with customers offline. It’s not new, he said. Amazon recently opened a physical bookstore in Seattle, and other stores that got their start online, such as Warby Parker and Bonobos, also have physical stores now. Johnson expects it won’t be long until other big brands go “from clicks to bricks” and reverse-integrate their products into physical locations.
But B8ta could face challenges. The company’s business model relies on brands paying a subscription fee to display their products in store (B8ta declined to reveal the price structure), not too different from the practice of slotting allowance in grocery stores. In order to continue attracting vendors, it needs to be able to draw customers into the store.
“Without customers crossing the lease line, the business model falls apart,” Johnson said.
The other challenge: With a grocery store, there’s a preexisting stream of customers because it serves a built-in need — everyone needs to eat.
“But if you’re just selling a bunch of disparate technology, there’s not necessarily a built-in model for, ‘I want to buy a pound of technology this week,’ or ‘I need to pick up two boxes of technology because we’re gonna have guests over,’ ” Johnson said. “So what’s the unifying value proposition this store provides?”
For B8ta’s part, Norby describes the store as being a one-stop shop for early adopters, of which he knows, particularly in Palo Alto, there is no shortage.
But the gamble, he said, is whether consumers will respond.
He looked around the empty store, less than a week out from launch, picturing where the dozens of Internet of Things would be displayed and how they’d work.
“I guess we’ll see on Friday.”