Insight and imagination for tomorrow and beyond

INDUSTRYREPORT

Consumer Electronics

Use this guide to obtain a deeper understanding of the state

of the consumer electronics industry the trends impacting

its direction and the technologies that will influence how you

position market and sell tomorrow and beyond

Executive Summary

The industry snapshots shifts in consumer behavior and emerging technologies briefly illustrated in this guide have been included solely to provide you with actionable insight you can use to make data driven decisions that powerfully differentiate your brand and help you intelligently chart a strategic course for the future

Oh absolutely I wish we had switched to Shopify Plus

sooner Itrsquos just so easy Itrsquos heaven with Shopify man

ldquo

ldquo

BRIAN LIM

Founder of Emazing Lights

Use this guide to obtain a deeper understanding of the state

of the consumer electronics industry the trends impacting

its direction and the technologies that will influence how you

position market and sell tomorrow and beyond

Executive Summary

The industry snapshots shifts in consumer behavior and emerging technologies briefly illustrated in this guide have been included solely to provide you with actionable insight you can use to make data driven decisions that powerfully differentiate your brand and help you intelligently chart a strategic course for the future

Oh absolutely I wish we had switched to Shopify Plus

sooner Itrsquos just so easy Itrsquos heaven with Shopify man

ldquo

ldquo

BRIAN LIM

Founder of Emazing Lights

Oh absolutely I wish we had switched to Shopify Plus

sooner Itrsquos just so easy Itrsquos heaven with Shopify man

ldquo

ldquo

BRIAN LIM

Founder of Emazing Lights

CONSUMER ELECTRONICS

4

01 Consumer Electronics

03 Industry Snapshot

06 Sales amp Growth Outlook

07 User Growth Margins amp Mix Growth by Region

14 Target Market Demographics

17 Industry Trends

45 Tomorrow amp Beyond

60 Technology Friend or Foe

65 The Replatforming Myth

68 Objections to Replatforming

70 When Technology Fades Away

Contents

01

Consumer Electronics

We had to make money right out of the gate and Shopify

was the tool we used to do that Shopify helped us

quickly scale in different parts of the world provides the

reporting we need to make data-driven decisions and has

been a great solution for us

ldquo

ldquoMARTIN CIESZEWSKI

Chief Marketing Officer of InteraXon

01

Consumer Electronics

We had to make money right out of the gate and Shopify

was the tool we used to do that Shopify helped us

quickly scale in different parts of the world provides the

reporting we need to make data-driven decisions and has

been a great solution for us

ldquo

ldquoMARTIN CIESZEWSKI

Chief Marketing Officer of InteraXon

We had to make money right out of the gate and Shopify

was the tool we used to do that Shopify helped us

quickly scale in different parts of the world provides the

reporting we need to make data-driven decisions and has

been a great solution for us

ldquo

ldquoMARTIN CIESZEWSKI

Chief Marketing Officer of InteraXon

CONSUMER ELECTRONICS

03

Industry SnapshotAfter nearly a decade of turbocharged growth in a variety of segments the $285 billion

USD consumer electronics industry appears to be slowing on several fronts Despite

consumers telling pollsters that their smartphones are more important to them than

sex the smartphone market is maturing especially in developed markets which analysts

suggest will likely hamper overall industry growth barring major innovation

While industry growth in the US is expected to decrease from 46 in 2012 to 15 in 2016 demand for new electronics and technologies such as virtual reality wearables and the Internet of Things (IoT) is expected to increase dramatically though not fast enough according to research to offset stalling growth in traditional segments

CONSUMER ELECTRONICS

04

While the industry will continue to battle cannibalization such as tablets replacing laptop

computers high growth and high margin opportunities will likely exists as smart cars

smart homes and even smart cities become increasingly connected and personalized

Emerging markets such as China and India assuming manufactures can offer electronics

at affordable prices are expected to grow at double-digit rates in the coming years

However consumer electronics manufactures will also likely confront strong headwinds

currently impacting developed markets such as

Relatively short product life spans

Rapid price declines Economic employment and currency impacts on consumer spending

SOURCE STATISTA

CONSUMER ELECTRONICS

05

While large international brands with established distribution systems and robust ecommerce presences may be better positioned to take advantage of anticipated emerging market demand theyrsquoll likely be forced to innovate quickly or risk losing market share to smaller startup companies more narrowly focused on a nicheThe always-on connectivity demanded by tomorrowrsquos consumer of electronics is also

expected to nudge manufactures to more closely work with one another to create

ecosystems that allow consumers to remain seamlessly connected regardless of device

or platform choice and without performance sacrifices as they navigate among various

electronics in the home vehicle and beyond

The compound annual growth rate for global consumer electronics shipments is expected

to be 06 through 2018 down from a compound annual growth rate of 25 between

2014-15 This trajectory presents a relatively challenging environment for the last half

of the decade However opportunities exist to potentially exceed current projections if

the industry can find ways to creatively pair new technologies with shifts in consumer

behavior to create consumer electronics that add value to an increasingly omnipresent

IoT world

CONSUMER ELECTRONICS

06

Sales amp Growth OutlookWorldwide ecommerce sales of consumer electronics are expected to grow at a compound

annual rate of 102 through 2021 from more than $290 million USD in 2016 to more than

$472 million USD in 2021

in million US dollars

0

50000

100000

150000

200000

250000

300000

2021202020192018201720162015

$261966$290611

$327478$369208

$410062$445853

$472615

Global consumer electronics revenue Books Movies Music and Games

Consumer Electronics

SOURCE STATISTA

CONSUMER ELECTRONICS

07

SOURCE STATISTA

USER GROWTH in millions (worldwide)

User Growth Margins amp Mix Growth by RegionThe concern regarding margin pressure comes into focus when you

examine the industryrsquos revenue growth projections in the context of

exploding user growth Speci ically more than 850 million people are

expected to purchase consumer electronics in 2016 compared with

an estimated 11 billion in 2020

2015 2016 2017 2018 2019 2020 2021

78908500

9150

983310540

11221

11799

1000

750

500

250

0

1250

CONSUMER ELECTRONICS

08

Despite a dramatic increase in forecasted user the average revenue per person is

ultimately projected to plateau at the end of the decade from $267 USD per user in 2017

to $321 by 2021

Average revenue per userin US dollars (worldwide)

220

240

260

280

300

320

340

2021202020192018201720162015

$23402

$24801

$26794

$28906

$30582

$31674$32188

SOURCE STATISTA

CONSUMER ELECTRONICS

09

Similarly worldwide shipments of consumer electronics are expected to be relatively

flat during the second half of the decade down from $396 billion USD in 2007 to an

estimated $347 billion USD in 2018

SOURCE STATISTA

CONSUMER ELECTRONICS

10

Partially offsetting slowing growth in the maturing smartphone market are emerging

technologies including wearables drones 3D printers and connected homes

The mix of consumer electronics being sold is changing as well Industry sales leaders

include smartphones automobile electronics and flat panel televisions

SOURCE BUSINESS WIRE

SOURCE BUSINESS WIRE

2015 tech industry outlookSales leaders

CE SALESLEADERSSmartphones$53 billion in revenue177 million units

Tablets$226 billion in revenue73 million units

RIDING HIGH ON NEW VEHICLES

Automotive electronics$145 billion in revenue

TVrsquos larger than 40 inches will account for 6 of TV shipments in 2015 up 8

BIGGER IS BETTER4K ultra HD$52 billion in revenue44 million shipments expected

LCD flat panels$186 in revenue

$53B(+5)

$145B(+68)

$52B(+136)

2015 tech industry outlookEmerging technologies

WEARABLESA DEVICE REVOLUTIONFitness and activity trackersReach $18 billion in revenue in 2015 203 million units

WORLD CHANGERSDrones

$105 million in revenue700000 units

3D printers$210 million in revenue

CONNECTED HOME TECHNOLOGIES

$967 million in revenue

$18B(+20)

$967M(+32)

85 of consumers agree that using a fitness and activity tracker is motivating them to reach their fitness goals according to CEArsquos Wearable Activity Trackers Engaging Consumers to Monitor their Health

Drones could reach 1 Million US flights a day in 20 years according to CEA economic research

Includes smart thermostats smart smoke detectors and CO2 detectors Wi-Fi cameras smart home systems smart locks connected switches dimmers and outlets

CONSUMER ELECTRONICS

11

Growth By RegionThe United States is now the second largest market for consumer electronics with a user

base that is forecast to spend more than $55 billion USD in 2016 significantly less than

China which is forecast to spend more than $64 billion USD

SOURCE STATISTA

Revenue in the consumer electronics market2016 global comparison in million US dollars

Top Countries

China

United States

Japan

United Kingdom

Germany

647623

558504

160421

132156

129833

in mUSD

CONSUMER ELECTRONICS

12

However opportunities begin to take shape when you examine user penetration In the

US user penetration is just 525 which indicates additional growth opportunities exist

User penetration in the consumer electronics marketin percent in 2016 (worldwide)

Top Countries

United States

United Kingdom

Germany

Denmark

Japan

525

453

340

301

294

SOURCE STATISTA

CONSUMER ELECTRONICS

13

The biggest growth opportunity in the second half of the decade appears to be in

emerging markets where growing middle classes are developing alongside relatively

affluent upper classes in the Asia-Pacific region Interestingly though while China is the

largest emerging market for the tech industry India is actually growing the fastest

Whereas sales of tech devices in China are forecast to grow by $18 billion USD in 2015

tech device sales in India are forecast to reach $348 billion USD in 2015 an increase of

$48 billion USD Smartphones are driving growth in India as some manufactures have cut

prices to increase share

SOURCE STATISTA

CONSUMER ELECTRONICS

14

Target Market DemographicsSeveral economic tailwinds are expected to stimulate ecommerce and help consumer

electronics manufactures offset slowing growth overall These tailwinds include forecasted

increases in GDP per capita as well as internet and smartphone penetration

Additionally expect the industry to focus intensely on the 25-34 age demographic as it is

forecast to grow significantly between now and 2021

User by age groups in the consumer electronics marketin millions (worldwide)

2021202020192018201720162015

1250

1000

750

500

250

0

11799

78908500

91509833

1054011221

16-24

25-34

35-4445-54

55+

SOURCE STATISTA

SOURCE STATISTA

CONSUMER ELECTRONICS

15

Specifically within the aforementioned demographic the projected number of male consumers

in the 25-34 age group is expected to be nearly double that of female users in 2016

By 2021 male consumers between 25-34 are again projected to be nearly double the size

of female consumers However the total addressable market between the age of 25-34 is

expected to grow to nearly 300 million

User by age groups and gender in the consumer electronics marketin millions in 2016 (worldwide)

250300 200 150 100 50 0 100 150 200 250 300

55+

45-54

35-44

25-34

16-24

50

Male

Female

User by age groups and gender in the consumer electronics marketin millions in 2021 (worldwide)

250300 200 150 100 50 0 100 150 200 250 300

55+

45-54

35-44

25-34

16-24

50

Male

Female

SOURCE STATISTA

SOURCE STATISTA

CONSUMER ELECTRONICS

16

Regardless of age the majority of consumer electronics forecast to be sold in 2016 are

expected to be purchased by low and medium income consumers

User by age groups and income splitin millions in 2016

1967m

4464m

2069m

Low

Medium

High

Total

55+

45-54

35-44

25-34

16-24

SOURCE STATISTA

17

Industry Trends

PAGE 18 INTRODUCTION

PAGE 19 TREND 01

The Smartphone Matures

PAGE 22 TREND 02

Emerging Markets Drive Demand

PAGE 25 TREND 03

Home Automation Spikes as the loT Grows

PAGE 30 TREND 04

The Connected Car Evolves

PAGE 37 TREND 05

Commercial Drones Take (Test) Flight

PAGE 43 TREND 06

3D Printing Evolves Beyond Just Prototyping

CONSUMER ELECTRONICS

CONSUMER ELECTRONICS

18

The trends impacting the consumer electronics industry are creating opportunistic yet

challenging environments in which to operate Besides increased competition currency

concerns and economic headwinds in Europe and Asia-Pacific are making it increasingly

difficult for manufacturers of consumer electronics to grow their top lines while also

protecting margins

While demand for some traditional tech devices appears to be slowing demand for newer products in the car home and beyond is helping to offset some of the lost revenue How those trends combine with future technologies the ability to continue investing in RampD and whether the worldrsquos economies will position consumers to pay for expensive tech products will dictate how the following five trends play out the second half of the decade

CONSUMER ELECTRONICS

19

TREND 01

The Smartphone MaturesResearch suggests some people are more willing to go without sex rather than go without

their mobile phones In fact 26 of those surveyed said they could not live without their

phones versus 20 who said they couldnrsquot live without sex

SOURCE STATISTA

Source Harris Interactive

CONSUMER ELECTRONICS

18

The trends impacting the consumer electronics industry are creating opportunistic yet

challenging environments in which to operate Besides increased competition currency

concerns and economic headwinds in Europe and Asia-Pacific are making it increasingly

difficult for manufacturers of consumer electronics to grow their top lines while also

protecting margins

While demand for some traditional tech devices appears to be slowing demand for newer products in the car home and beyond is helping to offset some of the lost revenue How those trends combine with future technologies the ability to continue investing in RampD and whether the worldrsquos economies will position consumers to pay for expensive tech products will dictate how the following five trends play out the second half of the decade

CONSUMER ELECTRONICS

19

TREND 01

The Smartphone MaturesResearch suggests some people are more willing to go without sex rather than go without

their mobile phones In fact 26 of those surveyed said they could not live without their

phones versus 20 who said they couldnrsquot live without sex

SOURCE STATISTA

Source Harris Interactive

CONSUMER ELECTRONICS

19

TREND 01

The Smartphone MaturesResearch suggests some people are more willing to go without sex rather than go without

their mobile phones In fact 26 of those surveyed said they could not live without their

phones versus 20 who said they couldnrsquot live without sex

SOURCE STATISTA

Source Harris Interactive

CONSUMER ELECTRONICS

20

Despite the opportunity emerging markets provide smartphone makers data indicate

the smartphone market is maturing In 2015 according to Accenture less than half of

smartphone owners plan to purchase a new one

Some analysts argue that phone and data service providers that no longer subsidize the

price of phones may be negatively impacting demand However smartphone makers may

also be victims of their own success and simply unable to innovate or add breathtaking new

features as quickly as consumers have been accustomed Nearly half of the consumers not

planning to purchase a new smartphone say theyrsquore happy with the device they have or

SOURCE ACCENTURE

SOURCE ACCENTURE

CONSUMER ELECTRONICS

21

The data indicate itrsquos not just smartphone demand thatrsquos slowing Consumer demand

for certain televisions laptops and tablets is also expected to be sluggish year over year

As was the case with smartphones consumers appear to be happy with what they

already have

The trend combined with other variables has negatively impacted 2015 holiday sales

at Best Buy prompted Samsung to warn of slower growth in 2016 and could result in

Applersquos first ever year-over-year decline in iPhone sales in Q2 2016 However on the Q1

2016 earnings call Apple CEO Tim Cook revealed the $691 (ASP) iPhone was taking share

from Android and sounded optimistic albeit cautious due to signs of economic strain in

Hong Kong regarding the companyrsquos prospects in emerging markets

SOURCE ACCENTURE

CONSUMER ELECTRONICS

22

Market analysts project sales of consumer electronics in emerging markets to grow at a

compound annual rate of 15 between 2015-2020 Growth is forecast to be most robust

in the Asia-Pacific region excluding Japan Increasingly the focus will be on China where

sales are forecast to grow by $18 billion USD in 2015

Forecasting a surge in the globalmiddle class

Poor

Middle ClassRich

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

9

8

7

6

5

4

3

2

1

0

TREND 02

Emerging Markets Drive DemandResearch suggests the world has lived through two middle class expansions since 1800

during the Industrial Revolution and after World War II Today research analysts argue

wersquore living through a third The data indicate that by 2030 two thirds of the global middle

class will live in the Asia-Pacific region up from just under one-third in 2009

SOURCE EY

CONSUMER ELECTRONICS

23

Lifting the lid on the Chinese consumer suggests consumer electronics manufacturers

may have room to sell products at higher price points Jean-Marc Bellaiche senior partner

and managing director at The Boston Consulting Group argues there are two drivers of

growth in the Chinese economy

1

2

The Emerging Middle ClassldquoAmong the emerging middle class the ldquoaspirational

massesrdquo also called the ldquotrendy metropolitanrdquo

comprises 330 million consumers and 25-27 percent

of the luxury market and the ldquorising middle classrdquo

made up of ldquothe proud business womanrdquo is 70

million consumers and 25-27 percent of the marketrdquo

An Increase In The Number of MillionairesldquoThere are also two types of millionaires new

money and old money New money also called ldquothe

loan traderrdquo or ldquothe Russian climberrdquo is 75 million

people and 30-35 percent of the luxury market

The old money crowd can be generalized as the

ldquonoble Italian entrepreneurrdquo This group is 25 million

consumers and 10-15 percent of the luxury marketrdquo

CONSUMER ELECTRONICS

24

In other words approximately one billion people in China or as much as 70 of the

population are projected to be middle class by 2030

Remember India is poised for explosive middle class growth as well Analysts at EY

recently projected

China total income by band 2010 and 2020annual income thousands of people

50+

30-50

15-30

5-15

0-5

2010 2020

112

2085

2388

933

3137

54

433

1619

499

US$

US$b

ldquoIndiarsquos global middle class meanwhile at around

50 million people or 5 of the population is much

smaller We expect this to grow steadily over the

next decade reaching 200 million by 2020 After

this we expect growth to really accelerate reaching

475 million by 2030 and adding more people than

the Chinese to the global middle class worldwide

after 2027rdquo

SOURCE EY

CONSUMER ELECTRONICS

25

Home automation

Ambient Asissted Living

Security

Energy Management

Home Entertainment

TREND 03

Home Automation Spikes as the loT GrowsThe second half of the decade is poised for explosive growth in the Smart Home market

segment To illustrate the growth potential in this segment wersquoll rely on data from Statista

as itrsquos a bit more conservative than other industry estimates

WARNING You can easily find research reports that contradict one another in terms of

how fast this segment is growing and is projected to grow through 2020 However the

productsincluded in the Smart Home segment varies which means yoursquore not always

comparing apples to apples

When we talk about the Smart Home segment wersquore including

CONSUMER ELECTRONICS

26

Not included in the data wersquoll highlight are devices like smartphones tablets and

television remote controls Herersquos Statistarsquos reasoning

ldquoDevices whose primary function is not for the

automation or remote control of household

equipment eg smartphones and tablets are not

included here Similarly devices whose reason for

purchase is only related to household connection

and remote control to a limited extent such as

Smart-TVs refrigerators or ovens are also not

includedrdquo

Whatrsquos important though is that a $7 billion dollar industry in 2015 is forecast to grow

to a more than $32 billion dollar industry by 2021

CONSUMER ELECTRONICS

27

Revenue in the smart home marketin millions US dollar

2021202020192018201720162015

32191

28468

24249

19495

14649

104327237

40000

30000

20000

10000

0

Home Automation

Security

Home EntertainmentAmbient Assisted Living

Energy Management

Besides new products and a shift toward the IoT the Smart Home segmentrsquos relatively

small penetration rate between 1-18 depending on the segment is expected to

further drive growth

Smart home penetration ratein percent (US)

2020201920182017201620152014

80

60

40

20

0

Home Automation

Security

Home EntertainmentAmbient Assisted Living

Energy ManagementTotal

SOURCE STATISTA

SOURCE STATISTA

CONSUMER ELECTRONICS

28

Connected-home device shipments according to BI Intelligence will grow at a compound

annual rate of 67 over the next five years to 18 billion units shipped in 2019

Global connected-home device annual shipmentsin millions

2000

1800

1600

1400

1200

1000

800

600

400

200

0

2012 2013 2014E 2015E 2016E 2017E 2018E 2019E

We are here

67 CAGR2014-2019

SOURCE BI INTELLIGENCE

CONSUMER ELECTRONICS

29

Despite the fact that a sizable portion of the total addressable market has yet to adopt

Smart Home technology analysts suggest shipment growth is expected to peak in the

coming years While the following chart obviously doesnrsquot take into account the invention

of innovative new Smart Home products decelerating growth towards the back portion of

the decade may also pressure the average revenue per Smart Household

Average revenue per smart home in the smart home marketin US dollar

2021202020192018201720162015

450

400

350

300

250

200

150

100

Home Automation

Security

Home EntertainmentAmbient Assisted Living

Energy ManagementTotal

SOURCE STATISTA

CONSUMER ELECTRONICS

30

TREND 04

The Connected Car EvolvesIndustry estimates suggest more than 380 million connected cars will be on the road

by 2021 and have the ability to stream music surf the web alert drivers to traffic and

weather conditions and possibly even self-park Tech companies will play a significant

role as analysts who routinely upwardly adjust their forecasts for this segment expect

fully autonomous vehicles to be on the market in just a few years

Estimated connected car shipmentsin millions (worldwide)

2015E 2016E 2017E 2018E 2019E 2020E 2021E

50

100

SOURCE BI INTELLIGENCE

CONSUMER ELECTRONICS

31

In addition to autonomous vehicles the connected car market is defined by features

such as

bull Content amp Services

bull Safety amp Driving Assistance

bull Navigation Services

bull Diagnostics amp Maintenance

bull Connectivity

These technologies are forecast to more than double revenue in the connected car

market from more than $10 billion USD in 2017 to more than $21 billion USD by 2021

Revenue in the connected car marketin millions US dollar

21217

17026

13556

10376

80116109

4622

25000

20000

15000

10000

5000

0

Content amp Services

Safety amp Driving Assistance

Navigation ServicesDiagnostics amp Maintenance

Connectivity

2020201920182017201620152014

SOURCE STATISTA

CONSUMER ELECTRONICS

32

While the definition of a connected car is likely to evolve in the years to come today there

are six categories of connectivity that are defining and driving this trend

SOURCE STRATEGYamp

Mobility Management Functions that allow the driver to reach a destination quickly safely and in a

cost-efficient manner

Examplesbull Current traffic informationbull Parking lot or garage assistance

bull Optimized fuel consumption

SafetyFunctions that warn the driver of external hazards and internal responses of the

vehicle to hazards

Examplesbull Collision protectionbull Hazard warnings

bull Emergency functions

Driver AssistanceFunctions invovling partially or fully

automatic driving

Examplesbull Operational assistance or autopilot in

heavy traffic in parking or on highways

Well-beingFunctions involving the driverrsquos comfort

and ability and fitness to drive

Examplesbull Fatigue detectionbull Automatic environment adjustments

to keep drivers alert

bull Medical assistance

Vehicle ManagementFunctions that aid in the driver in reducing

operating costs and improving ease of use

Examplesbull Vehicle condition and service remindersbull Remote operation

bull Transfer of usage data

EntertainmentFunctions involving the entertainment

of the driver and passengers

Examplesbull Smartphone interfacebull WLAN hot spotbull Music video internet social media

bull Mobile office

CONSUMER ELECTRONICS

33

Just 93 of vehicles manufactured in 2016 are considered connected cars However

demand is expected to increase in part when lower vehicle price points are implemented

as market research indicates that many of todayrsquos connected cars tend to be relatively

luxurious models with average selling prices of $55000 Consistent with that the

connected car penetration rate is projected to be 277 by 2020

34

61

93

131

176

225

277

Penetration rate in the connected car marketin percent (US)

0

5

10

15

20

25

30

2020201920182017201620152014

SOURCE STATISTA

CONSUMER ELECTRONICS

34

However as the market becomes more saturated with connected cars average revenue

per connected car is projected to decline to $66685 USD by 2020

115029

84312

72679

6742065447 6668566075

Revenue per connected carin US dollars

1200

1100

1000

900

800

700

6002014 2015 2016 2017 2018 2019 2020

SOURCE STATISTA

CONSUMER ELECTRONICS

35

In addition to realigning automaker IT departments and creating user-friendly interfaces

that are IoT compatible and potentially even device agnostic analysts suggest connected

car manufacturers will have to overcome this challenge

Faster Product CyclesldquoThe typical product cycle in the passenger car

industry is about eight years in the consumer

electronics industry itrsquos less than a year To

successfully sell electronics products for connected

cars automakers will need to mimic the rapid

development cycles of the consumer electronics

companies The key for the automakers is to learn

to build perfectly functioning modular systems

into which updates and product developments can

be integrated quickly and with little effort Such a

modular infotainment building set would allow for

individual components to be updated through plug-

and-play technologies several times during a carrsquos

life cyclerdquo

CONSUMER ELECTRONICS

36

If yoursquore wondering why connected cars were included under consumer electronics

consider how the world will change when self-driving vehicles are status quo Google has

already logged more than 1 million autonomous vehicle miles and has been involved in

just 12 minor crashes in six years none of which were the fault of the driverless car

Once autonomous vehicles become part of our driving fabric expect next generation

connected cars to offer driverspassengers additional options in terms of the devices that

can interact with the vehicle

Smartphone temperature control amp bed-like seat adjustment applications and voice control of windows car hoods amp trunks and streaming music

Remote control or voice activated aftermarket add-ons that allow a passenger to plug in an electric car or pump gas remotely

Innovative cameras and real time editing software that allow for video conferencing that appears as if itrsquos being conducted in an office rather than a car

CONSUMER ELECTRONICS

37

TREND 05

Commercial Drones Take (Test) FlightWhile civilian use of drones may be what many first picture when they think of drones

itrsquos the military use of drones that has been driving demand Specifically military use of

drones has far outpaced civilian use of drones when measured by revenue Defense

spending on drones is projected to be robust through 2024

Global aerial drone marketin billions $14

$12

$10

$8

$6

$4

$2

$0

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

DefenseCivilian

SOURCE BI INTELLIGENCE

CONSUMER ELECTRONICS

38

However research also suggests the civilian and commercial markets are expected to

grow significantly as drones are used in new and innovative ways Analysts at Grand View

Research describe future applications such as

ldquoAgriculture is expected to emerge as the dominant

application sector over the forecast period on

account of several benefits attained such as yield

increase due to crop monitoring Tech giants such

as Facebook Inc and Google Inc are planning

to use solar powered UAVs that hover around the

atmosphere of the earth providing internet access

to the remotest of places acting as flying internet

access points or hotspots In addition Amazon has

been working on Prime Air a drone delivery system

that promises goods delivered within 30 minutes

after order placementrdquo

CONSUMER ELECTRONICS

39

The list of potential drone applications includes

bull Agriculture

bull Law Enforcement

bull Ecommerce Delivery

bull Mapping amp Imagery

bull Wildlife Patrolling

bull Forest Fire Management

12000

10000

8000

6000

4000

2000

00

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Agriculture

Energy

GovernmentMedia amp Entertainment

Others

US commercial drone market by application 2012-2022USD million

SOURCE GRAND VIEW RESEARCH

bull Vehicle Traffic Control

bull Marketing amp Entertainment

bull Energy amp Mining

bull Real Estate

bull News Gathering

bull Infrastructure Monitoring

CONSUMER ELECTRONICS

40

Research indicates sales of commercial and civilian drones will grow at a compound

annual rate of 19 between 2015 and 2020 The economic impact of the commercial

drone segment is forecast to grow to $51 billion by 2025

While some analysts argue package delivery will not be an early priority the impact

drones have on the delivery of consumer electronics may be relatively muted as only

a third of the people surveyed recently trust a drone to deliver consumer electronics

The economic impact of the commercial drone sectordirect economic impact from the UAV industry in the United States (billion US dollars)

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

$12

$23

$35 $36$38 $40

$42 $44 $4649

$51

SOURCE STATISTA

CONSUMER ELECTRONICS

41

74

54

45

44

44

32

15

73

For which of the following products would you be open to trusting drone deliveryUS consumersrsquo opinion on items qualified for drone delivery 2015 (share of respondents)

Books

Clothes and Apparel

Pet Items

Tools

Sporting Goods

Household Goods

Consumer Electronics

Luxury Goods SOURCE STATISTA

CONSUMER ELECTRONICS

42

As is often the case technology is well ahead of regulation While a record 185

commercial drone waivers were issued in April 2015 expect a relatively slow regulatory

process in regard to green lighting expanded use of commercial drones As BI Intelligence

puts it

ldquoProposed US regulation would effectively end the

ban on commercial drone flights and would allow

low-altitude flights of small drones within view of

a ground-based pilot The rules are unlikely to be

finalized before early 2017 Some believe it will

happen earlier But we believe it most likely that

widespread but heavily restricted commercial UAV

flights will become routine sometime that yearrdquo

CONSUMER ELECTRONICS

43

TREND 06

3D Printing Evolves Beyond Just PrototypingThe 3D Printing market value is expected to grow from approximately $7 billion in 2016 to

nearly $21 billion by 2020

2013 2014 2016 2018 2020

$4

$6 $7

$13

$21

Value of the additive manufacturing (3D printing) market worldwide from 2011 to 2021in billions US dollars

SOURCE STATISTA

CONSUMER ELECTRONICS

44

Thus far 3D Printing has been used mainly as a tool for rapid prototyping However

analysts suggest that will change toward the second half of the decade as the global

market for 3D Printing and services is projected to grow at a compound annual rate

of 457 through 2018 As printing printing methods and software evolve expect the

growth in 3D printing to be driven by new uses

Possibly the biggest advance in 3D Printing is the emergence of a new class of printers

that provides both high capability and lower price points In fact affordable specialty

3D printers that create high-quality products have recently become cornerstones for

ecommerce businesses

For instance consumers who are unwilling or unable to spend thousands of dollars on a

piece of fine jewelry now have the option of paying several hundred for a nearly identical

piece created by a 3D jewelry printer Iconery combines ecommerce with fashion and

3D Printing to offer women access to beautiful designs for a fraction of what they might

otherwise pay Obviously compromises are made in terms of the raw materials used to

create 3D printed pieces but the target market here isnrsquot likely the ultra-wealthy

Expect the trend to evolve in ways that position 3D printers on store shelves and allow

consumers to customize products on demand

SOURCE PWC

4545

PAGE 46 INTRODUCTION

PAGE 47 DRIVER 01

Virtual Reality Business Solutions Powered by Artificial Intelligence

PAGE 48 DRIVER 02

Ultra-Personal Customer Experiences Powered by Next Generation Beacons

PAGE 51 DRIVER 03

Next Generation Wearables That ldquoFeelrdquo amp Generate Recurring Revenue

PAGE 54 DRIVER 04

Context-Aware Devices That Predict Needs amp Improve Health

Tomorrow amp Beyond

CONSUMER ELECTRONICS

CONSUMER ELECTRONICS

46

The future will likely belong to consumer electronics manufactures that not only create the next must-have item but those that also ensure their new products seamlessly integrate within a userrsquos broader IoT ecosystem the home the car and in virtual reality and beyond Igniting future growth in the sector will also require consumer electronics manufacturers to build products designed for the IoT with security in mind In a password-free mobile payment voice activated future that frequently jumps back and forth between reality VR and AR (augmented reality) protecting customers from IoT threats will become essential in earning trust Consumer electronics that solve big problems easily integrate into a consumerrsquos IoT and

create highly valuable user experiences will position themselves to drive future growth in

the following four ways

CONSUMER ELECTRONICS

47

DRIVER 01

Virtual Reality Business Solutions Powered By Artificial IntelligenceStreamlining solving or otherwise combining consumer electronics with evolving or yet

to be invented technologies in ways that solve difficult business problems better than

employees can in some situations will provide the industry opportunities to further serve

the enterprise market

An AI powered personal customer service representative a consumer

can access in virtual reality that already knows the customerrsquos purchase

history preferences and behavior and can help the customer with

billing questions returns or exchanges that are subsequently

automated in the physical world and require no human interaction

unless the customer desires

Virtual customer service representatives equipped with emotion

detecting AI like that created by a startup recently acquired by Apple

that can automatically sense and interpret whether the customer is

satisfied or unsatisfied with the experience and make real time data

driven adjustments

Consumer electronics powered by AI and for use in VR may also help enterprise companies more

efficiently and effectively achieve human resources or employee training objectives

Scientists working at VR labs argue that VR will become more effective than video in the

corporate workplace Electronics that supplement complement or otherwise add value to

VR experiences will likely drive demand in the enterprise market

A device that offers diversity training that transforms a white male

in virtual reality into a black female and allows him to virtually feel

prejudice by experiencing the harsh discriminatory behavior of

avatars

CONSUMER ELECTRONICS

46

The future will likely belong to consumer electronics manufactures that not only create the next must-have item but those that also ensure their new products seamlessly integrate within a userrsquos broader IoT ecosystem the home the car and in virtual reality and beyond Igniting future growth in the sector will also require consumer electronics manufacturers to build products designed for the IoT with security in mind In a password-free mobile payment voice activated future that frequently jumps back and forth between reality VR and AR (augmented reality) protecting customers from IoT threats will become essential in earning trust Consumer electronics that solve big problems easily integrate into a consumerrsquos IoT and

create highly valuable user experiences will position themselves to drive future growth in

the following four ways

CONSUMER ELECTRONICS

47

DRIVER 01

Virtual Reality Business Solutions Powered By Artificial IntelligenceStreamlining solving or otherwise combining consumer electronics with evolving or yet

to be invented technologies in ways that solve difficult business problems better than

employees can in some situations will provide the industry opportunities to further serve

the enterprise market

An AI powered personal customer service representative a consumer

can access in virtual reality that already knows the customerrsquos purchase

history preferences and behavior and can help the customer with

billing questions returns or exchanges that are subsequently

automated in the physical world and require no human interaction

unless the customer desires

Virtual customer service representatives equipped with emotion

detecting AI like that created by a startup recently acquired by Apple

that can automatically sense and interpret whether the customer is

satisfied or unsatisfied with the experience and make real time data

driven adjustments

Consumer electronics powered by AI and for use in VR may also help enterprise companies more

efficiently and effectively achieve human resources or employee training objectives

Scientists working at VR labs argue that VR will become more effective than video in the

corporate workplace Electronics that supplement complement or otherwise add value to

VR experiences will likely drive demand in the enterprise market

A device that offers diversity training that transforms a white male

in virtual reality into a black female and allows him to virtually feel

prejudice by experiencing the harsh discriminatory behavior of

avatars

CONSUMER ELECTRONICS

47

DRIVER 01

Virtual Reality Business Solutions Powered By Artificial IntelligenceStreamlining solving or otherwise combining consumer electronics with evolving or yet

to be invented technologies in ways that solve difficult business problems better than

employees can in some situations will provide the industry opportunities to further serve

the enterprise market

An AI powered personal customer service representative a consumer

can access in virtual reality that already knows the customerrsquos purchase

history preferences and behavior and can help the customer with

billing questions returns or exchanges that are subsequently

automated in the physical world and require no human interaction

unless the customer desires

Virtual customer service representatives equipped with emotion

detecting AI like that created by a startup recently acquired by Apple

that can automatically sense and interpret whether the customer is

satisfied or unsatisfied with the experience and make real time data

driven adjustments

Consumer electronics powered by AI and for use in VR may also help enterprise companies more

efficiently and effectively achieve human resources or employee training objectives

Scientists working at VR labs argue that VR will become more effective than video in the

corporate workplace Electronics that supplement complement or otherwise add value to

VR experiences will likely drive demand in the enterprise market

A device that offers diversity training that transforms a white male

in virtual reality into a black female and allows him to virtually feel

prejudice by experiencing the harsh discriminatory behavior of

avatars

CONSUMER ELECTRONICS

48

Mass merchant stores (Target

Walmart)

Electronicsstores

Home improvement

stores

Oice supply stores

Other Donrsquot know

6865

55

48

13 13

What type of store would beacons be most useful in

DRIVER 02

Ultra-Personal Customer Experiences Powered By Next Generation BeaconsAs the digital and physical worlds merge via pop-up stores and omni-channel marketing

and sales strategies consumer electronics manufacturers will have myriad opportunities

to assist pop-ups and established physical stores capitalize on the 78 of consumers who

spend $1500 additional dollars per month at brick amp mortar stores versus ecommerce

stores

Store beacons powered by Bluetooth that recognize you by device location and digital

behavior can send alerts offers or text messages Creatively improving upon existing

beacon capabilities may help increase overall industry sales as two-thirds of recent survey

respondents say theyrsquod welcome beacons in brick and mortar electronics stores

SOURCE CTA

CONSUMER ELECTRONICS

49

You are comfortable using beacons while shopping

Donrsquot know4

Neutral9

Strongly Disagree

30

Strongly Agree16

SomewhatDisagree

13

SomewhatAgree28

However formidable barriers exist regarding the comfort level people have when

considering whether theyrsquod like to shop with beacons In fact 53 are uncomfortable with

the idea of using beacons to shop

SOURCE CTA

CONSUMER ELECTRONICS

50

It means next generation beacons must not be designed solely to increase sales Next

gen beacons must leverage customer data and online behavior to intimately understand

individual users and offer not only an enjoyable shopping experience but also help

consumers make better choices save money and offer IoT security protection

Beacons that are connected to appliances medicine cabinets and

food pantries and attached or embedded in VR headsets that not

only allow for a personalized virtual shopping experience but also

offer suggested purchases based on replenishment cycles items of

which the shopper is running low or food items that are about to

expire and are on a userrsquos meal schedule for that evening

Beacon-like devices attached to personalized shopping hubs or

designated store areas that recognize a customer the moment

they walk into a store automatically rotate shelf space so only

merchandise the customer is most likely to buy is on display and

incorporate facial recognition scanning or eye tracking technology

to interpret amp better learn the customerrsquos preferences and make

improved data driven purchase suggestions

Beacons that attach or embed in mobile devices that may be

accessed with permission by companies that then have access to

a userrsquos personal calendar event schedule and social networks or

contacts and can offer targeted promotions based on situational data

like weather geography upcoming activities and social interaction

Beacons that connect the device home and car in ways that inform

shoppers when they donrsquot need an item they are about to purchase

whether an item theyrsquore about to be purchased can be purchased

cheaper elsewhere or whether the shopper has selected the correct

maintenance item such as filters that fit the furnace properly or the

proper tap water filter replacement

CONSUMER ELECTRONICS

51

DRIVER 03

Next Generation Wearables That ldquoFeelrdquo amp Generate Recurring RevenueNext generation wearables will likely combine with VR in ways that better protect us from

human error while also providing consumer electronics manufacturers with much needed

recurring revenue The cosmetics industry is leading the way in this regard by creating

Wearables that feel like human skin described by some as a robotic

band-aids or wearable tattoos and can connect with devices to

reveal personal health data like temperature stiffness hydration

heart rate UV exposure LrsquoOreal is co-creating a flexible electronics

patch designed to measure exposure to UV radiation and create a

custom skin protection solution based on an individualrsquos skin type

Researchers are attempting to build avatars that can replicate the

feel of an actual handshake in VR as well as other tactile events that

are often experienced in reality which could overcome the limitations

of video conferencing and possibly reduce business travel costs

by simulating the face-to-face feeling business professionals often

desire to make better decisions

Wearable gloves or faux medical instruments or devices that help

surgeons feel exactly what itrsquos like to successfully perform a specific

high-risk action during a virtual surgery

Likewise VR research labs are already working on technology to allow people to ldquofeelrdquo

what theyrsquore seeing in virtual reality

The ldquofeelrdquo technology that may one day complement VR may also integrate with consumer

electronics that help skilled professionals perform at even higher levels

CONSUMER ELECTRONICS

51

DRIVER 03

Next Generation Wearables That ldquoFeelrdquo amp Generate Recurring RevenueNext generation wearables will likely combine with VR in ways that better protect us from

human error while also providing consumer electronics manufacturers with much needed

recurring revenue The cosmetics industry is leading the way in this regard by creating

Wearables that feel like human skin described by some as a robotic

band-aids or wearable tattoos and can connect with devices to

reveal personal health data like temperature stiffness hydration

heart rate UV exposure LrsquoOreal is co-creating a flexible electronics

patch designed to measure exposure to UV radiation and create a

custom skin protection solution based on an individualrsquos skin type

Researchers are attempting to build avatars that can replicate the

feel of an actual handshake in VR as well as other tactile events that

are often experienced in reality which could overcome the limitations

of video conferencing and possibly reduce business travel costs

by simulating the face-to-face feeling business professionals often

desire to make better decisions

Wearable gloves or faux medical instruments or devices that help

surgeons feel exactly what itrsquos like to successfully perform a specific

high-risk action during a virtual surgery

Likewise VR research labs are already working on technology to allow people to ldquofeelrdquo

what theyrsquore seeing in virtual reality

The ldquofeelrdquo technology that may one day complement VR may also integrate with consumer

electronics that help skilled professionals perform at even higher levels

CONSUMER ELECTRONICS

52

Finger wearables that help automotive repair technicians listen to

touch and feel what a successful part extraction feels like amid

difficult or impossible to see vehicle repair scenarios that often

result in costly botched repairs due to inexperience

Products that allow a defense attorney who is interested in striking

the right tone while cross-examining a crime victim to virtually morph

into the actual crime victim and actually feel thanks to wearable

sensors how their breathing heart rate and other bodily functions

change while being questioned

Feel technology that integrates with virtual safety training for miners

construction workers and oil amp gas driller that enable them to

actually feel what a particular part procedure or system feels like

when installed incorrectly or in the lead up to a collapse disaster

or explosion

Next gen wearables that complement VR with ldquofeelrdquo experiences may also help consumer

electronics manufacturers develop new sources of recurring revenue for professions that

are highly dangerous have high turnover or must regularly educate employees about

new industry rules and regulations

The idea that consumer electronics devices can generate recurring revenue is something

thatrsquos already happening at Livestream a platform that enables consumers and businesses

to broadcast and watch live events The company recently launched its category creating

Mevo a pocket-sized live event camera device that can be mounted anywhere and lets

people edit while they film

CONSUMER ELECTRONICS

53

Mevo allows practically anyone to create and direct the equivalent of a multi-camera shoot

from an application on their iPhone

Herersquos how it works bull Mount the camera anywhere yoursquod like

bull Use the iPhone app to pan zoom cut and live switch between Mevorsquos

nine virtual cameras

bull Share the event with your social network later or live stream the event

yoursquore directing almost anywhere in the world

SOURCE LIVESTREAM

CONSUMER ELECTRONICS

54

ldquoPeople have never been able to do anything like

this beforerdquo Jeremiah Linder Mevorsquos marketing

manager says ldquoWe set out to allow anyone to

be a video director and give them the power of

a professional television crew in the palm of

their handrdquo

ldquoA system is context-aware if it uses context to

provide relevant information andor services to the

user where relevancy depends on the userrsquos taskrdquo

Even better customers who purchase the $399 Mevo can edit save and share their

events later without additional charge However customers who prefer to stream events

live pay a monthly subscription

DRIVER 04

Context-Aware Devices That Predict Needs amp Improve HealthNext generation devices will interact with us in ways todayrsquos smart devices simply canrsquot

Advances in machine learning natural language processing and technology that can

detect our emotions as well as interpret personal health data in real time will likely

combine in ways that make it possible for next gen consumer electronics devices to be

context-aware on a much deeper level

While context-aware has been defined differently since 1994 herersquos how Anind K Dey

and Gregory D Abowd at the Graphics Visualization and Usability Center and College of

Computing at the Georgia Institute of Technology define it

CONSUMER ELECTRONICS

55

In its earliest forms context-aware applications included autocorrect computer

screensavers and motion-detecting lights The concept morphed into location based

navigation devices and has evolved today into anticipatory context-awareness such as

predictive typing software for smartphones

Tomorrowrsquos context-aware advances will likely come in the form of better functioning

virtual assistants Rick Kowalski of the Consumer Technology Association summarizes the

future like this

ldquoThe predictive power of context-aware computing

is one of the features that make it useful The idea

is that devices can accurately act on our behalf

in a way that saves time and effort Software

developers are beginning to build predictive

features into personal digital assistants on our

mobile devicesrdquo

CONSUMER ELECTRONICS

56

78

39

38

28

22

21

17

5

21

2

Top desired tasks for virtual personal assistants

Any (Net)

Reporting the news or weather

Performing calling or texting functions by voice command

Providing dining and entertainment recommendations based on location

Scheduling and time management

Answering questions about music movies or TV shows

Providing shopping recommendations and deals pertaining to the

recommended retailers

Summarizing trends and conversations on your social media accounts

None of these

Donrsquot knowrefusedSOURCE CTA

CONSUMER ELECTRONICS

57

3D printed wearables like football helmets or cosmetic stickers

known as Dermocosmetics that process contextual data such as the

number of times a quarterback has been hit during a game versus

the average how his cognition compares to other situations or the

average as well as personal health data like hydration and sugar

levels to suggest specific courses of action or in-game treatment or

benching to prevent injury amp illness

Evaluation devices that mount on school bus driver seats taxicab

rear view mirrors or inside plane cockpits that combine real time

traffic and passenger pattern data with key health metrics so school

bus drivers pilots and or designated drivers responsible for the

safety of others can be be monitored remotely in real time provided

with pre-emptive corrective behavioral action or removed from their

positions of responsibility

Context combined with structured knowledge housed on the web promises one day

to provide virtual assistants that can stay one step ahead by predicting what we want

or need in advance Imagine how consumer electronics manufactures might one day

integrate these advances with wearables

One company of the forefront of all this is InteraXon a Canadian startup that created

Muse a personal meditation assistant in the form of a headband that measures your

brain activity interprets your level of anxiety and helps you learn to calm yourself

ldquoYour brain is similar to a musclerdquo InteraXonrsquos

Martin Cieszewski says ldquoWhen you train your

biceps you see results the same is possible with

your mindrdquo

CONSUMER ELECTRONICS

58

The headband also provides real time feedback you can use to track progress over time

better recognize when yoursquore starting to stress and rewards you for calming yourself and

achieving a healthier state of mind

Herersquos how it worksbull The headband fits across your forehead and tucks behind your ears

bull It connects via Bluetooth to a smartphone application called Calm that assists

in meditation

bull The headband uses EEG sensors the same technology doctors use to check for epilepsy

or Alzheimerrsquos to measure and interpret your brainwaves

bull Once you begin meditating the app provides real-time brain feedback by providing

audio that indicates whether your brain is ldquoactiverdquo or ldquocalmrdquo

bull If yoursquore calm yoursquoll hear pleasant sounds like birds chirping

bull If your mind is active yoursquoll hear harsher weather-related sounds like strong wind

and waves

SOURCE INTERAXON

CONSUMER ELECTRONICS

59

The app monitors a userrsquos progress over time and can help users pinpoint specific

situations or environments in which the user might be more prone to experience stress

or anxiety The idea is to use the Muse to train yourself to become more self-aware and

quickly recognize in the real world when your mind wanders or you become stressed

If you can do this the company suggests you can with practice quickly begin to calm

your brain

Muse is now expanding to help others

Doctors psychologists and therapists are prescribing

Muse as a supplement or alternative to traditional

prescription medications and for addiction recovery

patients

Professional athletes especially golfers are using

Muse to gain a competitive advantage and improve

performance

606060

Technology Friend or Foe

The big thing is we needed to be sure we could handle more volume which is why Shopify just made sense

Right now we only have a few SKUs but Shopify allows us to add SKUs easily and in a

really intuitive way

ldquo

ldquoJEREMIAH LINDER

Marketing Manager at Livestream

606060

Technology Friend or Foe

The big thing is we needed to be sure we could handle more volume which is why Shopify just made sense

Right now we only have a few SKUs but Shopify allows us to add SKUs easily and in a

really intuitive way

ldquo

ldquoJEREMIAH LINDER

Marketing Manager at Livestream

The big thing is we needed to be sure we could handle more volume which is why Shopify just made sense

Right now we only have a few SKUs but Shopify allows us to add SKUs easily and in a

really intuitive way

ldquo

ldquoJEREMIAH LINDER

Marketing Manager at Livestream

TECHNOLOGY FRIEND OR FOE

62

Whatrsquos Your Digital Business Advantage

A customized checkout that increases conversion rates and average ticket size

Creating interactive and highly personal customer experiences

A POS application you can use to make sales in both the digital and physical worlds but still provide centralized one-stop-shop reporting

Split testing cart upsell and cross sell tactics designed to increase top line growth

A customizable flexible and easy to use ecommerce platform that allows you to focus on the customer experience

Innovatively marketing in ways that increase conversions andcustomer lifetime value

Unless you have a digital advantage research suggests yoursquoll likely end up like the

20-percent of todayrsquos market leaders thatrsquoll lose their top spot to younger more agile

companies Unfortunately many of the ecommerce companies we talk with arenrsquot

singularly focused on the things thatrsquoll help them succeed and grow

TECHNOLOGY FRIEND OR FOE

63

Itrsquos not that these objectives arenrsquot top of mind or that yoursquore not working toward

them The problem is often the technology that underpins your ecommerce business

which often unnecessarily distracts your attention from key business goals and robs

you of the money and time needed to accomplish whatrsquos really important

Herersquos how Shopifyrsquos Andrea Wahbe sums it up in a blog post entitled

Why Are You Still Paying $1 Million For An Ecommerce Site

ldquoFor years high volume merchants have willingly

budgeted between $500000 to $1 Million for

the design development project management

supporting applications and content for their

ecommerce website builds

Add to that your needs for ongoing site maintenance

and new features and yoursquore looking at spending

upwards of an additional $1M a year to have an

enterprise ecommerce service provider support

your annual online business growthrdquo

TECHNOLOGY FRIEND OR FOE

64

So ask yourself this is technology a friend or foe

ldquoIn all of those conversations I said please

explain why I need to spend $100000 on

a custom checkout cart the vendor has

probably already built for another client

versus one thatrsquos already on the market

and working well for thousands of other

ecommerce companies like ours If I go

down the custom route it could be a black

hole and wind up costing hundreds of

thousands of dollars more for development

and integrationrdquo

NATE CHECKETTS

CEO

Rhone Apparel

TECHNOLOGY FRIEND OR FOE

65

The Replatforming Myth

ldquoWersquore ecstatic about all of the possibilities

Not only did we not take a huge hit when we

changed platforms but our organic traffic

began growing Our conversion rate has

increased 25-30 and our average order

value is up 15-20 Wersquore super optimistic

about the futurerdquo

Yoursquoll lose traffic customers and it might not workhellip

Those are just a handful of the reasons ecommerce companies give for not replatforming

or initially trusting an easy to use out-of-the-box solution like Shopify Plus an enterprise

ecommerce platform for high volume merchants

The reality is replatforming with Shopify Plus is easy even for big

ecommerce companies that require customization integration and

applications that tightly manage inventory and fulfillment In fact

many of the negatives you hear about replatforming are part of

The Dirty Little Secret Traditional Enterprise Software Companies

Donrsquot Want You To Know

JOHN HART

Ecommerce Manager

Peepers

TECHNOLOGY FRIEND OR FOE

66

The Shopify Plus team has helped thousands of merchants replatform quickly and in ways that answer two burning questions many of you and your peers have

QUESTION 1

Is Shopify Plus easy to use

ANSWER

Itrsquos extremely easy to use right out of the box Even better itrsquos flexible which means you

can easily integrate your current systems and quickly customize your store

ldquoItrsquos Shopifyrsquos inexpensive technology that

allows us to stitch all of the pieces together

If you have no technical experience Shopify

allows you to pop a few buttons and have

a store up in no time But if you have a bit

of technical know-how itrsquos also a platform

thatrsquos extremely flexible in terms of

customizationrdquo

MADISON WICKHAM

Co-founder

Man Outfitters

TECHNOLOGY FRIEND OR FOE

67

QUESTION 2

How will Shopify Plus impact my business financially

ANSWER

Yoursquoll pay a fraction of the cost of a traditional enterprise software solution know exactly

what yoursquoll pay each month and can invest the money you save into growing your

business Going with Shopify gives merchants two key advantages

ldquoWersquove saved so much money since moving

to Shopify Plus Irsquom no longer calling a

developer at 3 AM and begging people

to help Our hosting development and

software costs have been cut in half

since switching Shopify Plus is worth

every pennyrdquo

ldquoThe push notifications on my Shopify

smartphone app were going crazy It was

incredible an extreme high to see two or

three sales notifications every minute In just

a week we were doing in revenue what some

of the biggest artists do in an entire month

We wound up doing $2 million in 30-daysrdquo

FARAH BARGHI

Brand Manager

All Pro Science

CHARLIE JABALEY

Co-Founder

Street Execs

01 Cost Savings

02 Increased Revenue Generation

TECHNOLOGY FRIEND OR FOE

68

Objections to ReplatformingItrsquos a big decisionhellip

One almost no one makes without at least a degree of unease In fact if yoursquore not at least

a little nervous about replatforming you probably donrsquot fully appreciate the perceived risks

Similarly though you may not be genuinely appreciating the risk of opting to stay with your

traditional ecommerce enterprise solution

The replatforming objections you may have are likely similar to those Shopify Plus

merchants had prior to switching

ldquoI wish you had come to me six months ago Irsquove put

too much money and time into our current platform

to switch at this pointrdquo

ldquoWersquove put a lot of money into development in fact

our business is structured around employing a lot of

developers to make this work I canrsquot go back to my

boss now and tell him or her that we donrsquot need all

this after wersquove already spent the moneyrdquo

ldquoIrsquom in too deep now to switchrdquo

TECHNOLOGY FRIEND OR FOE

69

These are extremely difficult positions to find oneself in Even if you realize albeit

belatedly that a relatively inexpensive out-of-the-box enterprise ecommerce solution

offering the functionality an enterprise level organization requires exists it just doesnrsquot

seem like an option if yoursquove sunk large quantities of time and money into your existing

platform

Remember this though

ldquoA rational decision maker is interested only

in the future consequences of current

investments Justifying earlier mistakes is

not among [a rational thinkerrsquos] concerns

The decision to invest additional resources

in a losing account when better investments

are available is known as the sunk-cost

fallacy a costly mistake that is observed in

decisions large and smallrdquo

DANIEL KAHNEMAN

Nobel Laureate and Author

Thinking Fast And Slow

TECHNOLOGY FRIEND OR FOE

69

These are extremely difficult positions to find oneself in Even if you realize albeit

belatedly that a relatively inexpensive out-of-the-box enterprise ecommerce solution

offering the functionality an enterprise level organization requires exists it just doesnrsquot

seem like an option if yoursquove sunk large quantities of time and money into your existing

platform

Remember this though

ldquoA rational decision maker is interested only

in the future consequences of current

investments Justifying earlier mistakes is

not among [a rational thinkerrsquos] concerns

The decision to invest additional resources

in a losing account when better investments

are available is known as the sunk-cost

fallacy a costly mistake that is observed in

decisions large and smallrdquo

DANIEL KAHNEMAN

Nobel Laureate and Author

Thinking Fast And Slow

TECHNOLOGY FRIEND OR FOE

70

When Technology Fades AwayItrsquos not sustainable continuing to pour resources into something your competitors take

for granted and to which they pay little attention Traditional ecommerce enterprise

software is a recurring expense that can gnaw away at margins distract you from growing

your business and prevent you from realizing your full potential as a company

Itrsquos never too late to right a wrong

Identifying a solution that could save your organization millions of dollars year after year

even if yoursquove already sunk significant time money and face into your current platform is

undoubtedly one of the most courageous and valuable contributions yoursquoll ever make

ldquoWe were never really a sunglasses company

Wersquore more of a marketing agency with a

great product that we know how to brand

and sell Shopify Plus helped us to focus on

that rather than the technologyrdquo ANDREAS KLEIN

Chief Operations

Officer

Hawkers

TECHNOLOGY FRIEND OR FOE

71

What if technology got out of your wayWhat would you spend the hundreds of thousands of dollars in savings on innovative

research and development improving the customer experience or marketing like you

know you can if only you had the time

Your future will likely be determined by the experiences you create for customers

Virtual reality ecommerce recommended by AI-powered personal assistants and amplified via social shares and next generation segmentation

On demand one-click ecommerce motivated by artificial intelligence and delivered in the same day to a location of your choice

Wearables and digital mapping technology that can detect emotion and combine it withpersonal health data to boost conversions and sales

TECHNOLOGY FRIEND OR FOE

72

If yoursquore worried about outdated technology you wonrsquot be focused on creating points of differentiation like your competitors

ldquoThere really are no technical limitations

now If we want to do something all we

have to do is plug it in and gordquo

ldquoShopify is just the best It is by far the best

ecommerce platform out there and has truly

allowed us to sync our operations with

vendors apps and tech partners as well

as provide amazing reportingrdquo

RON DIORIO

Digital Engagement Director

The Economist

GRIFFIN THALL

Co-Founder

Pure Vida Bracelets

TECHNOLOGY FRIEND OR FOE

72

If yoursquore worried about outdated technology you wonrsquot be focused on creating points of differentiation like your competitors

ldquoThere really are no technical limitations

now If we want to do something all we

have to do is plug it in and gordquo

ldquoShopify is just the best It is by far the best

ecommerce platform out there and has truly

allowed us to sync our operations with

vendors apps and tech partners as well

as provide amazing reportingrdquo

RON DIORIO

Digital Engagement Director

The Economist

GRIFFIN THALL

Co-Founder

Pure Vida Bracelets

TECHNOLOGY FRIEND OR FOE

73

ldquoShopify allows us to focus on product

development Having a plug-and-play option

that is still flexible enough to meet our

business needs and maintain the aesthetics

we want is great Itrsquos just so easy with

Shopify It really allowed us to get up and

running and gain a lot of momentum right

out of the gaterdquo

ldquoShopify is absolutely awesome We swear

by Shopify now and wouldnrsquot be where we

are today without itrdquo

JEREMIAH LINDER

Marketer

Livestream

MIKE BROWN

Founder

Death Wish Coffee

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