I often think about that Forbes piece “Why Best Buy is Going out of Business…Gradually” that was published nearly two years ago. You probably read it too; as of today it has around 3 million views. The emotion that author Larry Downes generated with that prescient article was overwhelming — like a collective “we can do better” echoing through the internet.
Two years later, and Downes is more right than ever. Through Grand St. I’ve had a front-row seat to the emerging hardware movement, and the big realization I’ve come to is that it’s not just Best Buy that’s going to fade away, it’s our entire notion of “Consumer Electronics”. It will be gradual, but there are already signals that indicate a shift is happening.
It’s a tailwind that’s supporting a growing long-tail of hardware and a new kind of creator.
As to what’s causing it, here are a few thoughts:
1. Hardware as an outlet for creativity
There have always been people that have used electronics as out outlet for creativity — people who made custom modifications and took devices apart just for fun. With the rise of open-source hardware, channeling that creativity has become easier and much more structured. Not limited to the devices already available, now you can invent new devices from scratch depending on your whims. It’s also significantly cheaper as well.
2. The notion of “core devices” is disappearing
For the foreseeable future everyone will likely have a smartphone and a laptop, but the number of miscellaneous ancillary products that people are buying is growing like crazy. There’s a flood of these creative devices that are invading our lives and our homes and even the most traditional products are becoming pieces of technology.
3. People starting hardware companies
My friend Adam is making an awesome new bluetooth speaker called the “Bongo”. It looks amazing and I can’t wait to get mine. He is an example of the new kind of hardware creator – someone with a great idea but not necessarily decades of experience.
4. Rush of money
In the past two years, money going to crowdfunded hardware projects has spiked 10x **per year**. Investors are starting to get in the game in a very real way, but the real money is coming from consumers hungry to buy.
5. The role of the smartphone
The ubiquity of smartphones is contributing in a big way to long-tail hardware. By leveraging thriving platforms (Android, iOS), hardware producers don’t have to start from scratch when building software for their devices.
What this means for the future of CE as we know it now is pretty interesting…it’s simply no longer a commodity game that revolves around price, further complicating Best Buy’s future. As costs come down further, and more creators enter the market, we should see a whole range of hyper-customized devices that address all kinds of niche and mainstream markets.
At Grand St. we see awesome new devices every single day, and they are only getting better.
Today we announced the Grand St. seedround. We are incredibly excited to be working with some of the smartest investors in hardware, commerce and digital communities around and are delighted to have the opportunity to grow the company and build more dope internets for our community. Much love to our earliest users, customers (!!) and friends for all the support so far.
In a way this moment in our (admittedly short) history has made all of us painfully aware of how much we want to accomplish. The hardware revolution is truly just beginning, and there is much to be done. This financing will help us grow our team (now at 7!) and continue to make the experience better.
There’s so much amazing innovation happening around new hardware, and our sole goal at Grand St. is to build a store that is just as innovative and delightful as the products we sell.
We launched Grand St. v0.1 on December 14 to the few thousand people who were on our email list. One of the best moments in the life of any small company is the moment when someone who is not your mom or your friend or your cousin buys something. Here is a random stranger who decided that you built something legit enough to hand over their credit card information (which btw is VERY SAFE TO DO thx stripe) … little do they know that four people are crouched around a computer screen cheering and mostly doing this. That day, we sold many thousands of dollars of creative technology to people across the U.S. and realized that maybe we weren’t the only ones who wanted a site like Grand St. to exist.
Creative Technology is Real
The democratization of hardware/consumer electronics is very real and should not be underestimated. Think about the number of really fantastic products that have launched in the last 12 months. Over time, that number will grow aggressively and the number of new products available not the market will become more and more impressive.
We feel privileged to work with so many independent (and even a couple of established) inventors. Putting together our April Fools roundup, I realized that 10 years ago it was an unthinkable fever-dream to try and launch a new electronics product. In the same way that the music industry has transitioned from top-down to bottom-up, the same thing is happening with consumer electronics.
Though by now we have had many customers who aren’t our friends or family, each and every new product sold is still exciting for us.
The future of Grand St., though, and the most profound thing for me (and Joe and Aaron too) is our fast-growing team. We are excited to show up every day mostly because everyone is effing genius-level talented and inspires all of us to work harder and better.
Like Phin said, we hope “…technology makers can focus on crafting experiences and utilize platforms to dramatically reduce the friction in their businesses. This means more craft and less commodity activity for the maker and it means more choice and creativity reaches the consumer.”
In some ways, we all know we have always been living in the future, and now we can get paid to do just that.
I spent about a month last spring working on a hardware concept with a fewfriends. There was this energy around hardware that was becoming so palpable – pg called it “The Hardware Renaissance” in a recent essay.
After talking to many friends going through the same process we realized that for all the opportunity and excitement around hardware, there’s a lot of pain too. But when you work in startups, you begin to see pain as real opportunity.
For all the excitement around new connected devices that remind us all that we live in the future, why are we still buying this stuff at Best Buy (slowly imploding), and Amazon (the best, but too much of a general store)?
Surely our generation, filled with tinkerers and device-makers and digital natives, could do better.
And so we changed things up. Got back to work. This time on a store, built from scratch, that would sell these devices in a way that was just as awesome as the devices themselves. Something that was constructed to be digital first, screen-agnostic, and mobile, that would tell the stories of these devices in a way that the existing retailers aren’t doing.
What we realized as we started talking to hardware producers is that the incentive structure around retail agreements isn’t great — it’s a brick wall on both sides. Customers get almost no information about how, where and who made this product they are buying and why it’s great. And producers get hardly any data on who is buying their products, where they live, who they are, etc. Coming from the data-obsessed world of software, this made very little sense.
In an attempt to crowdsource some feedback: I’d like to know, internet peeps, what you would like to see in a new kind of electronics store? Is it really still about price and specs? I feel like we’ve moved on from that.
We are doing a pretty small closed beta and we’d love some rando testers who aren’t our moms (who we <3) to tell us what they love and hate. Be way harsh, we can handle it. Sign up at GrandSt Dot Com, please enjoy our snake game, and we’ll email you.
If there really is a hardware/connected devices/electronics renaissance that’s coming, there has to be a place to tell its story and, you know, sell THE THINGS. Excited.
And although there was a lot of commentary around the event itself, I kept waiting for a discussion to pick up around what the union symbolizes for the future of gadgetry in general. It’s certainly not the first time that the fashion and tech paths have intersected, but the significance here, regardless of your feelings on Glass, is potentially larger than simply an entertaining pairing. Instead, I see it as the beginning of a merging of paths – gadgets are becoming stronger identity markers like clothing, and as such the two industries will begin to overlap in new and interesting ways.
It reminded me of that part in “The Devil Wears Prada” (2006) where Meryl Streep chronicles in ice-cold terms the path that Anne Hathaway’s bargin-basement marm sweater took from runway to mass market. For someone who knows next to nothing about fashion, this point actually made sense. It was the technology adoption curve, just for clothing. And it’s also the best scene in the movie:
Actual lifecycle of fashion trends and cerulean history aside (another topic for probably a different blog than this one), the point of the rant is clear: “you think this has nothing to do with you”. Many of us who stand firmly on the technology side of this worlds-colliding trend believe a pairing like this is perhaps comical but otherwise insignificant to us. That this move from DVF doesn’t imply more fashion/tech pairings in the future or a general uptick in technology as differentiating accessory.
And after giving it some real consideration I think that’s wrong.
There has been some overlap in the past but the lines were always clear – fashion on one side, technology on the other. Get together when it’s lucrative to do so, otherwise keep to yourself.
Never before though, has there been as strong an impulse around gadget as identity piece — from your headphones to your smartphone case to your laptop stickers, electronics personalization is becoming more and more mainstream. Look at the indicators in the market. Personal electronics are cheaper and easier to make, and cheaper and easier to personalize. Urban Outfitters has transitioned most of their front section away from random liquor-related knick knacks to electronics. Beats by Dre is a $500m business and they are *everywhere*. Case and accessories companies are growing like weeds. The Internet of Things meme means we’ll have more connected devices than people as soon as 2020 (7.6 billion vs. 50 billion), and that study didn’t come from crazies but from Cisco and Ericsson. And on and on.
The proliferation of devices means more opportunity to differentiate and be creative in all sorts of ways that don’t involve specs and pricing — things like customization, storytelling, software, etc. Couple that with the fact that barriers to entry in consumer electronics are coming way down as the market becomes more democratized. This is going to create an explosion of new creativity in consumer electronics.
So the lines will continue to blur. There will be more collabs and more overlaps in either direction, and either personal technology will become more fashionable or fashion will become a little geekier, though I wonder if we look back at this particular collaboration in a few years and look at it as an indicator of change to come. Regardless of your feelings on whether that’s a good thing for either industry, change like this always has interesting and unpredictable results.
And the video that they made with Glass was undeniably pretty awesome:
In a fit of early-morning delirium I approached the head of the line at the Soho Apple Store just before 8am on Friday. They gave me a card and asked if I had any questions. So I asked about cases, because no one drops phones like this girl.
The guy in the blue shirt said no cases. I replied that I guess I would have to be extra careful.
And then, in a moment of unscripted wonderful, the Apple employee stared back at me and said:
“…you should treat it like the supercomputer it is.”
Although my first reaction was to roll my eyes and dismiss his comment as fanboyishness at its best, it got to me.
Two days go by and people ask what I like about the new phone, wondering if they should upgrade. And I can’t quite come up with an answer. Sure, I am happy to pass on kind words about the speed and cameras and features and LTE and weight and what-have-you, but that’s just not really it.
Fast forward to Saturday, when I am at the Bruckner Blvd Home Depot in the Bronx (the largest HD in the five boroughs, nbd). I am sitting at the picnic tables outside, drinking cherry coke and trying to not blatantly eavsdrop on the people next to me. It was a 15 year-old explaining to his older uncle/brother/dad/cousin about a new app for odd jobs. The younger one pulls up the website on his brand new iPhone and walks through the app – explaning that you can segment jobs by type and location and walking through how you can place bids on the jobs you want. They found one that looked good, and placed a bid right then. It was really great to see TaskRabbit in the wild, but even more awesome to see this entire series of events happen at a picnic table outside Home Depot in about 3 minutes.
Mostly when people have their phones out in public they are looking at photos or playing games or listening to music or reading. There’s just not a lot of transactional behavior happening, so it was really neat to see.
While all of us tech-lovers have been celebrating smartphones for years and years, I think it’s worth the reminder that the mobile economy is so incredibly nascent and only going to become more interesting. After a brief brainstorm the other day, the only mobile-only billion dollar companies I could name were Instagram, Square and Rovio (add more in the comments if you have any). Surely there will be more epicness to follow.
Perhaps it’s that most futurist types live so far in the future that they miss out on the moment when the *real* shift happens for the rest of the world.
And so I keep thinking about the supercomputer comment. The idea of a powerful machine in my pocket sounds trite at this point, but still really isn’t. Smartphone penetration passed 50% just this year (2012). What will the world look like when it’s at 70%? 90%? Perhaps that’s what I like best about the iPhone 5 – that it, even more than any other iPhone launch IMO, sits so perfectly at the intersection of the future and the present.
Perhaps you too remember that crayon-factory segment from Sesame Street. The one where they show dramatic shots of hot orange wax getting poured into vats and molds and eventually labeled and boxed up into neat packages of the rainbow, while Skrillex-junior music played in the background. This was my favorite segment on Sesame Street, evidenced mostly by the fact that it’s really the only one I remember. Not to worry if you have no recollection, I found it for you on YouTube.
Some people freak out when they see movie sets, or space stations, or fire trucks, but for me it has always been factories. I spent some time 2005-2008 wandering in and out of factories in Shenzhen, Dongguan and Chaozhou and what was most surprising was how much is still made by hand. It is not all robots, even remotely.
And modern supply chains were built around that very premise – that hands were needed, and the best way to compete and scale was to find the cheaper hands. But some very interesting rumblings on the periphery of mainstream production (specifically in electronics) indicates not that the need for hands is going away, but that the entire system is evolving in a much more fundamental way.
The latest buzz-phrase-of-late seems to be “hardware is the new software” – and from what I can tell, the significance rests in the idea that the formerly painful process of making software has become a mostly democratized affair that has created many billion dollar companies along the way. The same will soon happen in hardware. And “soon” is used very loosely here. Could be 2, 12, 20, years down the road (ok probably not 2), but it seems near-inevitable that the shift will create many new and interesting companies along the way.
I titled this post “APIs for Manufaucturing” because that’s what I hope will happen; in many ways the changes are already underway. The dream is that manufacturing will eventually be democratized through a series of APIs. They will make it easy for aspirational producers to access expensive production devices that they would not be able to get access to on their own. Because sadly manufacturing is still extremely difficult and out of reach for all but the most tenacious producers. Open-source hardware and consumer-friendly 3D printing is slowly changing that, but getting any sort of scale remains quite difficult.
A great read from yesterday is Ben Kaufman’s blog post on Quirky’s recent $68m fundraise. Perhaps the most insightful observation for me was from this reaction piece: “After several trips to China, Kaufman realized that he actually needed to master a list of “50 or 60″ disciplines to make his product a reality”. It is these 50 or 60 disciplines that will one by one become companies in the still-nascent MaaS market (manufacturing-as-a-service, a term not-yet widespread but still used). Perhaps that’s why this is such an exciting time in hardware – the changes are materializing but are nowhere close to realized.
But when you start to poke around, it becomes clear that the changes happening in the market are actually much more profound, and are mirroring a lot of what has happened with software startups since the late 1990s. Changes in creation, prototyping, production and distribution is making it more and more possible to thrive as a 4-person hardware startup and new ones seem to be launching every day.
I can’t overstate how exciting this is – consumers will get access to devices that more exactly fit their needs and producers will no longer need million-dollar retail distribution deals to survive.
Here’s an overview of some of these changes:
Our relationship with our devices has evolved.
More and more, our devices are becoming extensions of ourselves. They are the first thing we see in the morning and the last thing we see at night. In the same way that clothing can be a tool of self-expression, so can your speakers or your headphones or your docking station or your watch. Specialization and niche products are becoming the norm.
Buying decisions are less influenced by specs and features and more driven by design and experience.
Apple up, Dell down. Need I say more?
Financing is shifting.
Pre-sales happening through Kickstarter/Indiegogo and new development models from companies like Quirky are making it easier for hardware companies to get started. Costs are coming way down and transparency around production is growing as knowledge-sharing becomes even more ubiquitious. Producers can connect directly with their users right away, making the getting-started costs much less prohibitive.
Consumerization of 3D printing.
The growth of consumer and prosumer 3D printing will help to cut costs even further and will contribute to a more iterative prototype process, increasing the overall quality of these new electronics.
Growth of the maker community.
The communites that have grown around Makerbot, Shapeways, Tindie, Kickstarter, and other hardware niches is exceptional. While the indie hardware community is not new, there has been a spike in sites and tools that make hardware hacking easier than ever.
The gaping hole, at least for me, is at the very last part of the process: retail. The biggest players are the same – Best Buy, Wal-Mart, Amazon. Given all the above changes, surely this segment would have to shift – the experience of finding and buying new personal technology needs to adapt as well. Joe, Aaron and I couldn’t stop talking about this – we’re all gadget-obsessed web nerds, so we decided to just start building instead. Excited to share it soon, but for now, hope you enjoy our snake-tastic landing page and launch contest.
Just because we have all spent years buying electronics based on specs we didn’t care about, features we never used, and Black Friday blowouts doesn’t mean it is going to be that way forever.
Ironically enough, some of the growth in hardware has been facilitated by advances in web and social software. Putting aside the heartbreak of 2001, the late 1990s were (from what I hear) some of the most exciting years in web software development. Endless possibilities and intoxicating optimism, and the best is still yet to come.
I’ve been thinking about hopeful Craigslist-crushing startups this weekend as a result of all the Padmapperdrama over the past few days. Padmapper is my #1 site for apartment hunting and I really sincerely hope that Craig and Jim will at least consider coming to some sort of agreement that is beneficial to both. Even if they don’t come to an agreement, I am optimistic about Padmapper’s future because Eric is super talented and will figure it out.
This post isn’t about Padmapper though, it’s about all the startups you don’t read about that have struggled over the past however-many years because of this Craigslist-can-be-killed attitude that is pervasive in startupland. While I don’t doubt that perhaps the right person will come along someday, I also think that the formula for killing Craigslist will require so much beyond software alone (sorry nerdos) and will be a piecemeal game.
While a handful of companies like AirBNB and TaskRabbit have made some progress in their particular areas of focus, Craigslist is still incredibly dominant in the following 4 areas: selling used items, apartment search, roommate search, and jobs (other than the IRL task-focused jobs that TaskRabbit has cornered). Coincidentally these are also all the areas where craigslist makes their money.
Why do so many startups focused in the above four areas generally flounder? Here is my hypothesis: startups are failing most on the seller-side because of their inability to provide qualified buyers. Everyone has their own theory on 2-sided marketplaces and mine is as follows: if you provide a seller with a pool of qualified buyers, and a transaction happens, they will continue to sell through you. Otherwise, they will go elsewhere.
Over the past few years, I have done every one of those 4 things listed above as a seller. I have listed apartments, a roommate ad (that led me to one of the most awesome roommates ever), found several interns, and sold countless items – electronics, furniture, etc.
As a lover of startups, I will often list items on multiple platforms just to see if anyone is making a dent. C-list *ALWAYS* wins on pretty much all criteria: volume of responses, best price, best candidates, people who mostly reliably show up and always pay cash. Now look, I am not saying that Craigslist is free of sketchballs and criminals. That would be naive. What I am saying is that, from a seller’s perspective, I will take spammers, flakes, and weirdos any day of the week so long as you are bringing me legitimate buyers/options.
Nothing is worse than crickets. NOTHING.
If you are trying to compete with Craigslist in any of the above listed categories, you have to make life amazing for the seller. If that means driving a truck around “buying” couches and bookshelves and iphones for a year, consider it the cost of user acquisition.
I think we need to collectively get over the knee-jerk “problems” with craigslist:
1. that a new UI is the answer (it’s not…though maps on apartment listings would be <3 <3 <3)
2. that making the listing process “seamless” will make users switch (it won’t…the listing process is already seamless)
3. that sellers want better tools (this is party true. but what sellers really want is buyers, and they are not willing to sacrifice buyers for better tools)
4. that you can be competitive through software alone – you need SERIOUS community-building skills, potentially paid acquisition ($$$) and maybe even a logistics mastermind
I love startups and genuinely would love (and use!) a better solution.
But to be honest I kinda just want to sell my stuff and be done with it.
There’s an incredibly large and tragically unsexy opportunity hidden in all the excitement around consumer-facing “collaborative consumption”: the massive opportunity it presents for enterprise-scale logistics-driven industries like shipping, big box retail, energy and agriculture.
The same principles that apply to “Hey I have a snowblower, extra bedroom, car, desk in my office, or Chanel bag that I don’t use all the time and can rent in off-hours” apply equally well to the four industries listed above. Technology will allow farmers to connect directly with consumers to sell food and allow anyone with a car to become a one-person Fedex in the same way that AirBNB has made everyone a hotelier.
I like to think about it as distributed economies of scale. Previously, achieving economies of scale meant crippling up-front investment: warehouses, hubs, trucks, storefronts, employees, etc. Selling one frying pan costs a lot, but every additional pan sold costs you less.
We all took economics.
Yet the rise of web and mobile technologies has created an opportunity to eliminate so many of the costly steps before the actual sale happens. Up-front investment required is smaller and the economic benefits received from achieving scale come much more quickly because the risk/costs are shared amongst the entire network instead of taking on the entire burden yourself.
At some point someone made the assumption that consumers shouldn’t have to share the burden and are willing to pay more for that. I am not so sure that is true anymore.
While naysayers will point out that the theory won’t hold up for physical goods in the same way it has digitally, I am optimistic. Yes, the belief in such a system requires a rosy outlook on human nature – that the members of any given network won’t ruin the system for everyone. But just as Fedex trains its drivers not to steal packages, I think these emerging P2P systems will first learn some hard lessons and then construct incentive systems that punish bad behavior to the point where it just isn’t worth it. There will always be outliers, just like there are within the existing system.
In some ways the early successes of model suggest that we are at the very, very beginning of an emerging peer-to-peer world. Music to files to bedrooms to, soon, ALL THE THINGS. With properly constructed software, a suburban block can be Target, Costco, UPS, Exxon, and Whole Foods. Whether this will actually lead to more jobs or more efficient consumption or a better world is TBD.
I have been thinking about a succinct way to express this thought for a few weeks — that time and attention are valuable in a way that is just as measurable as real estate or oil or currency.
Saw Jonathan Harris talk at the Eyeo Festival this afternoon and he said it perhaps most eloquently: “human attention is a finite resource.” While it’s fairly obvious, I wonder why so many people have trouble applying this supposed truism.
For example, the fact that Facebook’s stock is imploding indicates to me that we dont value attention in the same way that we value commodities, when in fact they are quite similar – both are very limited and in extremely high demand.
The real problem here is pricing. The inability to determine the value of something does not mean the thing itself has no value. That is a dangerous fallacy. It simply means that there is no comprehensive system in place. Too many people understand that oil is valuable, and as a result a system developed to track the value.
How long will it be before such a system is developed around human attention? Will it be something in the future that we can buy, sell, trade and collect?
Slash Blog is a collection of thoughts about creative technology, mobile product design, new hardware and the future written by me, Amanda Peyton. I am a technology entrepreneur living in New York City working on a new company called Grand St.