What would it be like to be able to control the light in our homes from anywhere at any time and be able to turn on our ovens while we are pulling into our driveways? Being able to control the temperature in our houses or order detergent when it is running low by pressing a single button with devices that have AI technology installed would certainly make our lives easier.
These capabilities are becoming a reality right before our eyes and IoT (Internet of Things) technology is making it possible. Many IoT products are emerging on the market and competing with each other. IoT also received a lot of attention at CES (Consumer Electronics Show) and MWC (Mobile World Congress) this year.
However, even while IoT products are flooding the market, it is still not easy for the consumers, who are satisfied with their current devices, to buy high priced smart products. Today, we will discuss about IoT After Market products that we can use easily at low cost.
After Market refers to the secondary market of products that satisfy demands of a product that is already on sale in the market. As opposed to Before Market, aftermarket pertains to products and services for products on the market such as automobile maintenance. After Market devices that improve the value of products on the market have become very popular recently.
In the same way that the smartphone accessory market grew along with the popularization of smartphones, After Market devices have emerged that give IoT capabilities such as sensor and network functionality to non-IoT products as the interest of IoT increased tremendously. The development of this market is expected to expand the IoT service market.
① The Market Potential of Non-connected Devices
According to Cisco, the number of devices with network connectivity is expected to increase approximately 3.5 times from 1.44B in 2014 to 5.01B in 2020. However, compared to the total number of devices, the number of connected devices will still make up a mere 2.7% of the market. No matter how many IoT devices are released, the majority of devices will still not be connected to a network.
② The Product Replacement Cycle
The easiest way to upgrade the value of the non-connected products is to replace the existing products to new products, but the replacement cycle for products such as TVs, washing machines and cars is between 7 and 10 years, or an average of 7.6 years. Thus, the opportunity cost for consumers to replace products that are still within their lifespan is too high.
<Source: Electronic Engineering Bulletin, The Evolution of IoT Platforms and Methods for Vitalizing Aftermarket Business>
After Market products that integrate non-connected products into our lives and add value to the existing products have been receiving a lot of attention. These products are easier for manufacturers to produce than complete products and they are a more efficient and low-cost option for consumers.
The IoT After Market business model can be divided into 2 types. The first model is to add additional value to existing products and the second is to integrate or create a new service.
① After Market Devices
One of the best places for IoT After Market strategy is the LG telecom subsidiary, LG U+. LG U+’s IoT@home creates devices for the control of lighting, temperature, outlets and door locks via the Internet from anywhere, at anytime. Moreover, users are also able to verify energy consumption and detect the entry into the house with window sensors. Eventually, with these products, a new smart home can be created at an economical-friendly cost.
LG Electronics has announced the release of their Smart ThinkQ sensor that transforms household appliances without smart capabilities such as washing machines, refrigerators and air conditioners into smart products by attaching the Smart ThinkQ hub. The Smart ThinkQ hub does not only connect to the Smart ThinkQ sensor, but has a display that provides useful information such as the date and temperature as well as Blue tooth speaker functionality. For example, if a washing machine has a Smart ThinkQ sensor built in, an alert can be sent through the Smart ThinkQ hub display and speaker that alerts the user when a cycle is finished.
Korean boiler heater manufacturers such as Kyung Dong Navien and Kiturami are releasing various products with IoT functionality built in. By simply replacing with an IoT temperature control to a Kiturami gas boiler, the user can control the power, temperature, 24 hour scheduling and other functions with their smartphone at anytime from anywhere without spending too much money.
Also, Ambi Labs’ Ambi Climate and Tado’s Tado Cooling have converted air conditioners to smart products. Belkin’s Wemo allows users to power household appliances on and off by remote through an adapter attached to the power plug.
It’s unfortunate that many products still cannot be implemented with IoT due to a lack of standardization in the smart home market.
② Service Model
Amazon is releasing various test IoT products, such as Dash, Echo and Fire Phone, in order to improve their service process. These products offer special benefits to consumers by cost-effectively simplifying the ordering process.
The Dash Button is a combination of IoT and O2O (Online to Offline) services that creates a product ordering and deliver service that allows users to order products with a simple press of a button on a terminal. This service does not significantly innovate e-commerce in itself, but it provides an impressive business model that can increase Amazon’s customer base and allow them to collect a large amount of data and offer a better service to customers.
Verizon has announced a driver support automobile platform called Hum. Hum is installed with wireless CDMA, GPS and route recording equipment that tracks vehicles that have been stolen and sends notifications to authorities automatically when accidents occur. The platform also connects to smartphones to allow for basic automobile service support. As the vehicle is driven, the platform collects every data and can determine if there are problems which also lead to verifying the approximate cost to repairing.
Also, car insurance companies are releasing various UBI (Usage Based Insurance) with IoT capabilities. Diagnostic instruments (OBD – II) are installed in cars to collect data and driving patterns and habits that are analyzed to calculate insurance premium rate. Insurance companies can estimate the risk of drivers more efficiently and reduce fees so that drivers would be able to pay less according to their safety record.
The Italian insurance firm, Generali Seguros, and the Spanish telecom, Telefonica, have formed an alliance to create the insurance fee calculation service called Pago Como Conduzco that analyses the driving habits and patterns. The US insurance company, Progressive, is also implementing a service called Snapshop that calculates premiums based on driving habit analysis through equipment installed in cars. KT and Heungkuk Fire & Marine Insurance in Korea are preparing IoT products as well and SKT, Dongbu Insurance and T Map are expected to release similar products soon.
Many telecoms are offering various services for the automotive industry as discussed above. A particularly interesting point concerning these services is that they not only provide diagnostic information to drivers, but also offer a new service that collects data and shares this data with maintenance support and insurance companies. Of course, in order for these services to come into common use, it will require close cooperation between car manufacturers, ICT companies and insurance agencies.
Gartner cited digital business as one of their top technology trends of 2016 (http://blog.lgcns.com/1016). IoT is a major factor in removing barriers between the reality and virtual worlds of digital business.
These barriers will continue to vanish through the growth of IoT aftermarket business. Digital business is then expected to grow dramatically. The world will then become a much more convenient place with IoT development.
Written by Yunsun Lee, LG CNS
 Premium Rate shows the premium as rate of Standard Insured Amount and the contractor’s burden of expenses of the insurance benefit. [back to the article]