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The battle over driver experience is increasing and will be won in software

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The battle over driver experience is increasing and will be won in software

Sirius XM‘s current all-stock $3.5-billion buy of this music-streaming support Pandora increased a great deal of eyebrows. A major issue was why Sirius paid much. Is Pandora’s music library and client base actually worth that sum? The solution is that this is a tactical move by Sirius at a battle that’s much larger than radio. The actual battle, which is becoming a lot more visible in the next several years, is more than the driving experience.

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People today spend a good deal of time commuting in their automobiles. This time is fixed and will not likely change. But what’s changing is how we drive. We are already seeing several new cars with motorist support characteristics, and automakers (and technology firms ) are working hard to attract completely autonomous automobiles into the industry as swiftly as possible. New cars now already contain a mean of 100 million lines of code which may be upgraded to boost motorist assist choices, and a few automakers such as Tesla offer an”autonomous” style on highways.

As stated by the Brookings Institute, one-quarter of cars will be autonomous from 2040 and IHS forecasts all automobiles will soon be autonomous after 2050. These are conservative estimates, as we’re very likely to see big changes in another 10 decades.

These changes will affect the driving experience. As automobiles become more autonomous, we could do more than just listen to podcasts or music. We might have the ability to watch movies, browse the internet and much more. The worth of automobile property is already precious, but it is likely to skyrocket because we alter how people consume media while driving.

The Pandora acquisition was a strategic move by Sirius to achieve the crucial assets so it will not fall behind in this area — and also to enter the fast-paced music streaming company, where consumers have music in the home, work and in play. Even though Pandora’s music library is possibly next grade, in addition, it is good enough it may provide pretty much every celebrity many men and women want. This can be how expensive mergers occur — a single party is worried about falling and pays a premium to buy the other firm’s assets. Additionally, it is a wager by Sirius concerning the driving experience of their future.

As the conflict over the driving experience heats up, we’ll initially see businesses such as Google, Amazon and Apple start dipping their toes on the marketplace. They might do this via investments in startups, rolling their own solutions, or buying competitions. A few of those massive tech firms already have jobs around autonomous automobiles. Uber might even be interested in the marketplace.

For the time being, Sirius likely does not need to be worried about competition from startups. They will not have the ability to grow large enough quickly enough to receive a large share of this marketplace. A more probable situation is that startups will operate on applications that delivers an exceptional performance, which makes it an attractive acquisition target by a bigger firm.

This will be an interesting battle to watch in the next few years, as automobiles basically become applications using four wheels attached. Firms like Sirius know that this is a significant space and the battle within the driving experience is going to be won in applications. The purchase of Pandora is just the start.

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Why fashion should still care about wearables

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In the three months ending 30 June, sales of Michael Kors watches were down, but not smartwatches. Device sales – produced by watchmaker Fossil via licensing arrangement – increased 13 per cent, partially offsetting the category’s overall decline. On an earnings call with analysts, Michael Kors CEO John Idol said smartwatches now represent about 25-30 per cent of its watch business — a figure he could see climbing to 50 per cent.

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Those numbers are surprising in the context of fashion’s waning enthusiasm for the category. When Apple unveiled its first smartwatch in 2015, fashion brands were quick to jump on the wearables bandwagon, releasing a series of lo-fi ‘smart accessories’, including $495 notification bracelets and fitness trackers disguised as jewellery. But underwhelming sales and less than favourable media coverage quickly refocussed the industry’s efforts elsewhere.

Not Fossil. The company invested early and aggressively in the smartwatch category, acquiring Misfit in 2015 and securing partnerships with well-known fashion brands including Michael Kors. That bet is paying off as smartwatch penetration continues to climb. Apple alone sold 8 million smartwatches in the final quarter of 2017, its highest number ever – and more than Rolex, Omega and Swatch combined. Fossil’s own smartwatch sales are up 91 per cent year-over-year, and now represent approximately a quarter of its total watch sales.

Weston Henderek, lead wearable tech analyst at NPD, says Fossil’s success with Michael Kors-branded smartwatches can also be credited to:

  • ‘Hybrid’ watches. Alongside true smartwatches – which have a digital screen and run a high-level operating system that can download apps – these hybrid styles sport traditional watch faces but include some light tech features such as notifications or fitness tracking.
  • Marketing tech-centric watches in the same retail channels as traditional watches. “If you had $200 to spend on a fashion-oriented watch and narrowed it down to two similar choices, would you pick the brand that had some integrated tech capabilities or the brand that didn’t?” he asks. 
  • Training sales reps on the watches’ tech features.

LVMH-owned TAG Heuer has done well with smartwatches in the $1,500+ range, Henderek adds. Perhaps it’s time for fashion to reconsider the category. Clock’s ticking.

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Loomia’s electronic jacket heats up the e-textile market

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In the Wild West of e-textiles, there are few established materials, manufacturers or standards. Creating a product that looks and wears like a jacket with the guts of a keyboard is an uphill battle, especially because of all the testing required.

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As founder and chief innovation officer of New York-based Loomia, Madison Maxey is hoping to change that. Today, the former Parsons student and first fashion-world recipient of the Thiel Fellowship is launching the Loomia H1, a heated wool jacket powered by a two-hour battery and washable by hand.

Her goal isn’t to make a living from $550 outerwear. Instead, she’s building a scalable proof of concept to kick-start the e-textiles market.

At the jacket’s heart is a thin, flexible, wire-free circuit board called the Loomia Electronic Layer (LEL). The LEL works as a plug-and-play component à la Gore-Tex or the YKK zipper, which clothing makers can integrate into their garments instead of having to build and test their own circuit board from scratch.

The LEL is the brains that brings heating, lighting, touch-sensing and data-transmitting capabilities to clothes. With relatively small investment, a brand could use the LEL to create, for example, a vest that alerts factory workers if they are lifting improperly or running pants that light up.

The Loomia H1 is powered by a two-hour battery and washable by hand.

© Marta Molina Gomez

Setting standards

Underlining the industry’s infancy, the word “e-textile” lacks a precise definition. One interpretation of an electronically-integrated textile, says Diana Wyman, technical director of the American Association of Textile Chemists and Colorists, is any fabric or textile product with permanently integrated electrical circuits or parts of electrical circuits.

The big challenge for e-textiles is establishing standards and expectations. Washing, for example, introduces variables like vigour, frequency and water temperature that manufacturers need to account for. Safety is also a concern: consumers expect garments to degrade over time, but it’s different when clothing short-circuits or just stops working.

Maxey, who spent three years and about $750,000 developing the LEL, is an early innovator at the crest of a new wave. By 2028, the market for e-textiles is forecast to generate more than $2 billion in sales annually, according to IDTechEx. (Today, the e-textiles market is valued at about $100 million, but that’s largely from consultancy and research, rather than product revenue.)

“Manufacturers want a fair and technically correct way to show that their products meet expectations,” Wyman says. “Brands and retailers want to compare technologies and provide a safe, reliable product to customers.”

Progress is happening. A European arm of the e-textiles committee of the Association Connecting Electronics Industries recently proposed three standards for introducing e-textiles to sporting equipment, medical products and personal protective items.

Loomia spent three years and $750,000 developing the LEL.

Heating up

Still the question remains: will e-textiles ever go mass? Why would someone want a smart shirt when a smartwatch might serve similar functions?

Customers have shown interest in clothes with heating. Milwaukee Tool has made heated gear for nine years. Ministry of Supply launched its $495 heated Mercury jacket on Kickstarter one year ago, raising $643,000.

Big brands are biting. Ralph Lauren says that a heated jacket made for the 2018 US Winter Olympics team inspired its $1,098 Polo 11 jacket, which is “mostly sold out”. In September 2017, Levi’s tested the wearable waters with Google, creating a $350 denim jacket woven with conductive threads.

Hanging over all this is Apple, which recently filed a number of e-textile patents. Just like it kicked off smartwatches and tablets, the California company might have the weight to nudge the needle.

“They have skills of design, storytelling and product love,” says Stephanie Rodgers, director of product research and development at Apex Mills. “But for an electronics company to take on textile formation is very scary… if the people who don’t know about textiles are the ones reinventing them.”

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There are no digitally native luxury brands. Kering wants to retrofit one

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Key takeaways:

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  • To compete with the new generation of digitally native brands, Kering is making broad investments in proprietary technology, including an in-house e-commerce platform and an AI-powered sales forecasting tool.
  • In stores, the company is using RFID tags to improve inventory allocation and iterating on a proprietary app for sales associates, which has increased average ticket value up to 20 per cent.
  • It is also surveying new retail models, including luxury rental and resale.

Despite the proliferation of digitally native, direct-to-consumer brands — some with valuations north of $1 billion — none has poised any serious competition to luxury fashion.

But Grégory Boutté, Kering’s chief client and digital officer, isn’t waiting around for that to happen. He’s on a campaign to make the company’s existing family of brands, which includes Gucci, Saint Laurent and Bottega Veneta, start behaving like digital natives.

Speaking to a small group of journalists on 6 June in Paris, Boutté outlined an ambitious strategy that would give Kering’s brands the same control over their online presence as they have over their physical stores. This includes powering its monobrand websites (such as alexandermcqueen.com) through a proprietary platform instead of Yoox Net-a-Porter’s, and using artificial intelligence to improve internal productivity and customer experience.

Boutté believes the strategy plays to Kering’s strengths in storytelling and direct sales. “[The digital shift] is a big change for industries that are primarily wholesale. That means incumbents need to build a new muscle of selling directly to their customers,” he said. “The good news is that most of our brands have a big retail business [already], meaning they have their own stores and they know how to sell directly.”

He sees an especially significant opportunity in the APAC region, which is responsible for one-third of the group’s revenue but only 15 per cent of online sales.

Data and AI

In addition to allowing for greater ownership of customer experience, Boutté says that selling via its own websites and virtual concessions (i.e. websites such as Farfetch that, like some department stores, allow brands a degree of control over their retail environment) will both boost margins and expand omnichannel capabilities. For example, the average order value for a BOPUS (buy online, pick up in store) order is more than 1.7 times the average online order — something Kering can’t take advantage of when it doesn’t own the end-to-end shopping journey.

Having ownership of the online retail experience means also having ownership of the data trail customers leave. “We want to make sure we understand all the products you looked at, and you’re interested in,” he says. “That’s very valuable information for us to better know you and offer you personalised communication when you call client service.”

Boutté, who spent time at Ebay and other Silicon Valley companies before joining Kering in 2017, oversees an 80-person “AI factory”, whose data scientists work from the same database on the same platform without sharing data across brands. Although creating an independent e-commerce infrastructure is a massive undertaking, Boutté is confident that the data they collect will lead to a better product, and thus more users and more revenue.

He points to the democratisation of machine learning as a crucial lever. “The computing power, which was reserved in the past to only tech giants like Ebay, Google or Amazon, is now made readily available for companies like us. AI will change the way we do business in every industry.”

Bringing technology in-store

Kering is also looking at ways to bring technology into stores, which are still responsible for 90 per cent of sales. The company has begun integrating AI into sales forecasting, which in pilot tests were 20 per cent more accurate than traditional forecasts. It will roll out the new programme officially beginning with Gucci’s handbag division next month.

The conglomerate is also continuing to develop its proprietary Luce app, created with Apple last year to give sales associates the ability to access real-time stock information, purchase products in other stores, source product recommendations and prepare for customer appointments. Luce is used in Gucci, Saint Laurent, Bottega Venta, Balenciaga, Alexander McQueen and Brioni stores, where it has boosted average ticket value for Luce-assisted transactions by 15 to 20 per cent.

Kering is upping its digital investment in other ways. It has increased the online proportion of its media spend from 20 per cent to 50 per cent. It is also experimenting with RFID tags to improve inventory allocation. Boutté says he would even partner with rival LVMH on a blockchain platform such as Aura — if it was hosted on a decentralised server. The rise of luxury rental and resale is also something he is closely following.

“We see the model clearly just like everybody,” he says. “We see it’s a new behaviour and then we see the market broken in some big markets, especially for millennials and Gen Z. We’re at the stage of, ‘How is that experience compatible with our business and the way we run our business?’ And we haven’t resolved that question yet.”

“We’re not transforming the company because we’re putting posters in the hallway and declaring, ‘We need to be digital friendly.’ We’re doing it because we’re running projects in ways that digital native companies are actually doing.”

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