Why IoT start-ups have yet to win the hypermarket battle
The Digital Secretary of State rightly congratulated herself on Twitter on the signature with large retailers in favor of French connected objects. The brands have undertaken to sell on their stalls the connected objects produced by the companies of the French Tech. In the press, there was no lack of flattering headlines: “Connected objects force the door of adults stores“ “When large retailers support French Tech“, “Eight distributors sign a charter to distribute French Tech connected objects“
Should we be delighted with this “Charter of commitment for retail chains”? Obviously, this is good news and a step forward for FrenchTech. This does not preclude reading the charter – once one has succeeded in find her– to see what it is exactly.
Start-up side, a market of 10 million consumers
Having your product on the shelves of supermarkets can seem like the holy grail for many start-ups. They are also “more than 40” to be part of this new charter. Unfortunately, if they are all gathered within another “charter of commitment for the producers of connected objects”, we were quite unable to find a precise list of the companies concerned. Should we assume that the only condition is to be a French company that produces connected objects? First point of confusion.
But which start-ups?
Very smart whoever can say that they are the start-ups concerned by this device or even how to join it. We will undoubtedly find the giants of the connected object, Withings, Netatmo, Parrot, Holî, Giroptic, but what about the others? The charter requires distributors to select 5 start-ups per year, potentially leaving “more than 35” left behind. Because distribution does not like risk, it is not part of its job to take it. And to be allocated 1 square meter of sales area, you had better have serious arguments and a convincing sales experience (understand profitable for the distributor).
All this still does not answer the question, who will be selected and by whom? We can simply take note that the governance committee for this operation is only made up of distributors who will meet at best four times a year. Nothing obliges them to select new start-ups each year. As FrenchTech is a label managed by the government, there is ultimately very little room for start-ups.
Let’s be optimistic, this operation has only one week and the conditions of access will probably be clarified in the coming months. Will the “FrenchtTech” spirit include companies that do not have the strike force of a Parrot? The future will tell.
For the lucky lucky ones
Start-ups that have succeeded in integrating their products into this annual operation will benefit from many advantages. First in terms of sales. On the Internet, the FrenchTech operation will be highlighted, for at least one week, on the home page of distributors. They represent an unconsolidated audience of 30 million unique visitors per month, which is not negligible. Although the charter only requires the selection of 5 products, it is hoped that the catalogs online are better supplied. Add 5 or 50 products online does not change much in terms of cost, this is where smaller start-ups have a card to play.
Start-ups must however keep in mind that the conversion rates on e-commerce sites of mass distribution (Carrefour, Auchan and E. Leclerc in the lead) are relatively far from those of pure players. It is one thing to be seen, quite another to be bought. Start-ups will therefore have every interest in closely supervising this promotion. online on the whole operation. Once again, a pity that they are not in the governance.
For sales in brick’n’mortar, it gets complicated. For once, presenting 5 or 50 products entails a much higher expense. Whether in an Orange store of 100 square meters or in a hypermarket a hundred times the size, profitability per square meter is carefully measured and the requirements are drastic. For example, a hypermarket expects a turnover of around 15,000 euros per year per square meter. A little less in the provinces and more in the Paris region, the choice of the five stores will therefore be crucial. It is still to be hoped that start-ups will have their say on this choice.
Whatever the case, no connected object start-up should count on this charter to explode its turnover. Those who are already selling a lot will sell more and for those who are entering the market, the obstacle course should remain more or less the same.
A formative experience
The most interesting thing for start-ups in this charter is ultimately the support. The distribution undertakes, for the five selected companies, to help them prepare for this marketing during the year.
The connected objects market remains quite young, Parrot dates back to 1994 when Carrefour was created in 1960. It is therefore years of large-scale sales experience that is opening up to various start-ups. Manufacturing, logistics, pricing… there are many sectors where start-ups will be able to benefit from solid experience. There is also one, rarely mentioned, it is the internationalization of sales. This should take a few years, but let’s not forget that some distributors (Auchan, Carrefour, Orange) have points of sale in all corners of the globe. If the experience proves successful in France (profitable), distributors will be able to open their stores in other countries and will probably be willing to test the market. We are far from it, but it is an additional reason to welcome this charter.
Finally, even if the charter only requires a presence in 5 points of sale (for nearly 8000 all distributors combined), the number of visitors to each of these points of sale is colossal. This will allow start-ups to have unparalleled customer feedback from a large panel, which is not one of their preferred targets. These same start-ups which will have to train the salesmen of the department in the use of their products. Finally, fortunately there are only 5 points of sale because the training is expensive in time and money.
Trainer but hard
The start-ups that will have the chance to be distributed by these large groups will learn a lot. It remains to be seen how. Obviously, this charter is signed in a spirit of mutual aid and support. But start-ups must not forget that large-scale distribution does not tolerate roughly.
In our experience, it takes an average of 6 months to sign a contract – getting the check is another story – with mass distribution. First because you are rarely a priority subject for them, second because you have to show that you are the best at what you do. If you have to redo the packaging fifteen times before having the distribution slip, you will have to redo the packaging fifteen times. And it doesn’t matter if it costs you 15,000 euros, it’s your problem, not the distributor’s. And obviously do not expect to pass these costs on to the purchase prices. For a simple reason, it is that the person who validates the packaging is not at all the person who sets the purchase prices. There’s even a good chance they won’t talk to each other. Welcome to mass distribution.
When talking to a group with an organization chart the size of a directory, assume that the person you’re talking to doesn’t care about your business. What interests him is to put himself forward with his hierarchy. Your only objective is to help him in this task and therefore to chew up his work so that he can present a project that gives him value without taking his time. The task is arduous, privileges exceedingly rare.
The objective of this charter is precisely to simplify these processes in order to facilitate integration into catalogs for start-ups. Are the signatories of this charter the signatories of the distribution contracts? Response within 6 months minimum.
Pierre Aurèle Martin has been working for almost 10 years in e-commerce where he supports large accounts in the development of their sales. Specialized in recent years in behavioral analysis for mass distribution, he recently founded ZOKS Media which supports these same companies in their digital communication.