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TECHNOLOGY

Home TECHNOLOGY Page 7

by EOS Intelligence EOS Intelligence No Comments

MedTech in APAC – Harmonizing Hazards and Rewards for Rapid Expansion

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Being the third largest medtech market in the world, Asia-Pacific (APAC) is becoming an investment hub for medical technology companies globally. Owing to the economic growth of the region and increasing income of the local population, healthcare affordability and quality are on the rise. These are the ground reasons that drive medtech companies to focus on APAC for growth and business expansion. But having access to many local markets in this vast and diverse region seems a hard nut to crack for the medical device businesses. Singapore, with its favorable business environment, which vigorously defends intellectual property rights, currently seems to be the geography being eyed by major medtech companies. Though Singapore is well-positioned as a gateway to region’s medtech sector, entering other markets in the region is still challenging. With differences in the regulatory frameworks bundled with lack of clear reimbursement strategies, medtech companies find it strenuous to meet the requirements of the regional markets. In order to witness growth, it is imperative for medtech companies to focus on the growing opportunities for industry-wide collaboration, intending to create strong platforms for growth in APAC.

In 2015, APAC was the third largest medtech market in the world, after the USA and EU, accounting for over 22% of the global revenue which stood at US$398 billion. The region’s medtech industry is expected to be one of the fastest growing globally and is forecast to surpass EU by 2020 to become the second largest market behind the USA.

The high potential of APAC is fueled by the highly populated south-east Asian countries (China and India, the world’s two most populous countries, have a combined population of 2.8 billion), aging population (by 2050, Asia population will constitute 25% of the world’s elderly aged 60+), strong economic growth, increased spending power of the middle class, and reduced costs by manufacturing medical devices in the region rather than importing. The medtech revenue generated in the region was US$88 billion in 2015, expected to reach US$133 billion by 2020, achieving a compound annual growth rate (CAGR) of 8.6% over the period of five years.

Companies want to seize APAC’s potential for rapid development of medical devices by investing in the right geography that would support their expansion plans. One such location that offers the right environment for medical device players to grow is Singapore. In Asia, Singapore is the innovation center for medtech players due to its business-friendly regulations.

Companies want to seize APAC’s potential for rapid development of medical devices by investing in the right geography that would support their expansion plans.

The country brags of presence of leading medtech companies such as Medtronic, Baxter International, AB Sciex, Becton Dickinson, Biotronik, Hoya Surgical Optics, and Life Technologies that set up their manufacturing plants and R&D units here due to strong patent laws and easy policies to set up and manage a business. For instance, in 2011, Medtronic, one of the world’s largest medical devices manufacturers, opened its first pacemaker and leads manufacturing facility in Singapore, which was the company’s first Asian site manufacturing cardiac devices. As the number of heart patients in APAC rapidly increases, Singapore is a perfect base to offer modern medical facilities to patients across emerging Asian markets.

Medtech in APAC

The medtech sector in Singapore is growing mainly due to government schemes that focus on investing in the sector. With initiatives such as Sector Specific Accelerator (SSA) Program that identifies and invests in high-potential medical technology start-ups (an amount of US$70 million has been committed for the formation and growth of such businesses) and EDBI, the corporate investment arm of the Singapore Economic Development Board that invests in innovative healthcare IT, services, devices, and therapeutics companies, the Singapore government supports the growth of medtech innovation in the country.

The medtech sector in Singapore is growing mainly due to government schemes that focus on investing in the sector.

Apart from setting up committed bodies, the Singapore government in 2015 announced that it would invest US$4 billion in biomedical sciences research for the period between 2015 and 2020 to strengthen the county’s position as Asia’s innovation center.

While Singapore is a favorable location for medtech manufacturing and R&D, it is still a young market that is witnessing problems similar to the ones seen in other APAC countries. Many countries in the region are also capable of contributing to the technological health innovation but face challenges in broadening their reach and lack assertiveness to develop innovative ways to reach a broader range of patients.

Medical device regulations are the key challenge faced by device manufacturers in the Asian region. Med tech industry is regulated by strict guidelines through each phase of product or service development. In several Asian markets, there are no clear guidelines for device manufacturers that classify medical devices as simple or complex, or even mention how to handle them. Irregularities in clearly laid guidelines for introducing and using such products often create problems for companies to come up with advanced solutions in new geographies of the APAC region. Each country has different regulations for quality control, product registration, and pricing, and these are frequently unclear and inconsistent. This is a considerable concern for medtech players planning to set up a shop in the APAC region.

Medical device regulations are the key challenge faced by device manufacturers in the Asian region.

Another hiccup that the manufacturers face is the lack of definitive reimbursement structure. With new innovations in the healthcare domain, expenditure on medical technology is expected to grow but lack of transparent compensation schemes is a major hindrance. Medical device firms, across APAC region, face the challenge of limited clarity on payment structure of technological products and services. For instance, for medical products such as pacemakers and heart valves that are readily available, the reimbursement cost is generally available, but for progressing techniques or products like LVAD (left ventricular assist device), no coverage guidelines have been established. With this lack of clarity on the structure and level of reimbursement on such advanced products, medtech companies find it difficult to place their products in the market at a competitive price.

With unclear regulations and reimbursement policy structure, the medtech companies face a hard time in the APAC region. Competition from local players also add concerns for these players to survive in these markets. Partnerships of local medtech companies with funding firms and other players are on the rise. Domestic companies often partner with private equity firms that invest in and support the local players to innovate and expand. For instance, Huami Corporation, a manufacturer of wearable fitness monitoring devices, attracted investment from American venture capital firm Sequoia Capital and Xiaomi, a Chinese smartphone player, to develop a device that monitors health (tracking the number of steps walked, number of sleep hours, calories consumed, etc.) selling at a sober price of US$15 as compared to the average price of more than US$150 of its competitive brands including Apple and Samsung.

With unclear regulations and reimbursement policy structure, the medtech companies face a hard time in the APAC region. Competition from local players also add concerns for these players to survive in these markets.

Challenges for entering such a diverse market will take time to overcome, but companies are on the lookout for growth platforms and seem to be willing to leave no stone unturned to capture new opportunities. One such opportunity that multinationals can use to their advantage is partnering with regional stakeholders to access the APAC market. These collaborations are not limited to medtech companies or players in the healthcare domain, but are extended to a broader range of players including regional governments, regulatory bodies, educational institutions, insurance companies, and other technology companies.

Med tech companies are partnering with pharmaceutical players to access local market and widen their network. For instance, in India, Roche, a Swiss healthcare company dealing with diagnostic devices, got into a marketing partnership with Indian drug manufacturer Mankind Pharma, to extend the availability and market penetration of its blood glucose monitors, Accu-Check Go, in tier 2 and tier 3 towns making use of Mankind’s extensive local distribution network. Partnerships are critical for multinational players to rapidly and efficiently increase their geographic presence in the APAC region.

Another opportunity that medtech companies can seize to grow is the appointment of local staff in the regional management. Local people have a better market understanding and know how the system works. The decision making capabilities, if lie in the hand of local leaders, can work in favor of the companies as these leaders better understand the way the market functions. Balancing the availability of local talent and brand’s global assets, medtech players can be successful in developing products as per market needs. A mix of local resources and international talent in crucial to oversee operations in unstructured and fragmented markets such as APAC.

EOS Perspective

Correct assessment of the market needs is critical for any business to be successful. For medtech companies, APAC has been a challenging landscape due to fragmented market, as well as unstructured and complex regulatory environments. But with the focus being shifted to the dynamic and fast growing economies of APAC, the medtech market is positive to grow as the region offers scope of development and growth mainly due to aging population and growing income of middle class.

With challenges unique to each geography in APAC, medtech companies are focusing on partnering and collaborating with local medtech players and other stakeholders in the region. With strategic partnerships, global medtech players can reduce the intensity of competition faced from local companies. Collaborating with the right partner in different aspects of product development ensures growth, right product placement, and speedy market expansion. Association with regional entities are expected to increase, witnessing strong growth of the players in the medtech space.

The regulatory landscape in the region is highly fragmented and needs restructuring. Independent organization such as Asia Pacific Medical Technology Association (APACMed), formed in 2014, assigns itself to strike a balance between medtech companies wishing to enter the APAC market and other regional agencies aiming to improve the standard of healthcare offered to patients. Efforts such as these may bring coordination in the regulatory landscape, but it will take long to come to general consensus on similar laws of conducting business in this field.

by EOS Intelligence EOS Intelligence No Comments

Blockchain Technology – Next Frontier in Healthcare?

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Blockchain, an innovation underlying the Bitcoin cryptocurrency, is a distributed ledger technology enabling transparent and secure data sharing in real time. The buzz around blockchain technology has spread far beyond finance sector, the technology’s original application area. In fact, think tanks globally are exploring and testing the potential use of blockchain technology to ease current pain points in healthcare and pharmaceutical industries.

Blockchain Technology – Next Frontier in Healthcare? by EOS Intelligence

EOS Perspective

Blockchain-managed information exchange ensures data security, transparency, integrity, and reliability. These attributes have the potential to address several healthcare industry challenges associated with interoperability, data security and privacy, insurance claims processing, clinical trials credibility, and drugs counterfeiting, among others. As a result, blockchain technology is quickly gaining ground among industry stakeholders.

An IBM study (released in 2016) based on survey of 200 healthcare executives – both providers and payers in 16 countries – indicated that 72% of the respondents were planning to deploy blockchain technology-based solutions by 2020. The survey emphasized that the industry pioneers have great confidence in application of blockchain technology with about 16% of the respondents planning to have commercial blockchain solution operational in 2017. Another survey commissioned by Deloitte in 2016 involving 308 executives at the US companies (from various industry segments) with US$500 million or more in annual revenue indicated that 35% of the respondents from healthcare and life sciences industry plan to deploy blockchain solutions in 2017. These surveys suggest that healthcare industry have set high expectations from and is ready to embrace blockchain technology.

 

Blockchain Technology – Next Frontier in Healthcare? by EOS Intelligence

Though blockchain promises to offer several unique solutions, industry players need to be cautious about some obstacles associated with adoption of this technology.

Blockchain technology is a relatively new concept for healthcare domain. There are high risks of dealing with immature and untested technology. A report released by Tierion (a US-based blockchain start-up) in 2016 indicated that healthcare data is prime target of cybercriminals as patient health records sell at US$20 compared with US$1 per credit card number.

Moreover, healthcare organizations need to comply with stringent rules and regulations pertaining to patient data privacy and security to avoid steep penalties. Even though the blockchain technology is expected to provide better security against data breach, the adopters need to be cautious until the capabilities of blockchain technology are proven in real-time environment.

Even though the blockchain technology is expected to provide better security against data breach, the adopters need to be cautious until the capabilities of blockchain technology are proven in real-time environment.

Since blockchain technology is still in the stage of development, the costs and risks associated with its implementation in practicality are largely unknown. Moreover, in absence of real-world business cases, it is difficult to forecast the operating costs as well as potential technology post-implementation roadblocks. This might create some hesitation among the industry players to adopt this new technology as there is little clarity on return on investments.

Full digitization of healthcare data is imperative for successful deployment of blockchain technology. However, it is observed that even some of the developed nations have not been able to achieve 100% digitization till date. For instance, 2015 Commonwealth Fund’s International Survey of Primary Care Physicians indicated that about 84% of physicians in the USA use some form of electronic health record system, while in other countries, such as Germany, France, Canada, and Switzerland, these figures are even lower – 84%, 75%, 73%, and 54%, respectively. These shares can surely be expected to be incomparably lower in less developed and developing countries.

Explore our other Perspectives on blockchain

Furthermore, the implementation of blockchain solutions would require significant changes to, or complete transformation of, existing systems. In order to integrate blockchain software in legacy systems, all forms of data would need to be standardized to ensure compatibility. Considering large volumes of healthcare data, which is now being produced in the range of petabytes, the transition would be a major challenge.

Implementation of blockchain solutions would require significant changes to, or complete transformation of, existing systems. In order to integrate blockchain software in legacy systems, all forms of data would need to be standardized to ensure compatibility

In view of these risks and challenges, we believe that the time is not ripe for the healthcare industry to readily adopt blockchain solutions at a large scale. Rather than rushing to adopt blockchain solutions, the technology should be thoroughly tested before deployment. There is no doubt that the application of blockchain technology has the potential to impact healthcare industry in several positive ways, however, in absence of real-world business cases, it seems too early to estimate the scale of impact and risk.

by EOS Intelligence EOS Intelligence No Comments

Refurbished Smartphones – the Future of High-end Devices in Emerging Markets

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An anticipated slowdown in the global smartphone sales forecast for 2016 due to lack of new first-time buyers in large markets such as the USA, China, and Europe, has been alarming for large players who have turned their focus to other emerging markets. To fit the expectations and financial capabilities of price-sensitive consumers in these markets, companies are lining up to sell refurbished smartphones as a strategic move to increase sales volume. However, competition – primarily from new smartphones – in these markets is still fierce, due to some smartphone makers (such as Chinese mobile phone manufacturer Tecno Mobile) reaching consumers with more economic devices. Are second-hand smartphones capable of outshining new devices in emerging markets?

The global smartphone market has been witnessing a slowdown in sales during 2016 in comparison to previous years, partially because some markets, such as the USA, China, and Europe have become saturated (in large part with mid-range and high-end models, such as Apple’s iPhone and Samsung’s Galaxy). Therefore, to avoid a decrease in sales and a subsequent loss in profits, smartphone makers are readjusting their strategies to focus on marketing economic second-hand sets in developing countries.

Refurbished Smartphones - Market Growth

 

 

According to a 2016 Deloitte report, refurbished smartphones global sales volume is expected to increase from 56 million units sold in 2014 to 120 million in 2017, growing at a CAGR of 29%. Large part of this growth is likely to occur in emerging markets, such as India, South Africa, or Nigeria, which is a sound reason for large players to venture into these geographies.

Most smartphone buyers in these markets are highly price-sensitive and frequently precede their phone purchasing decisions with intensive online research to get a good understanding of options that are available to them based on their financial capabilities. These consumers are likely to prioritize price over features and appearance of a smartphone. Therefore, refurbished devices from well-known brands, such as Samsung or Apple, need to offer satisfying functionalities yet be available at affordable price in order to be attractive for buyers in these emerging economies.

Refurbished Smartphones - India, South Africa, Nigeria

Refurbished smartphones hit obstacles across the markets

Emerging markets, despite their favorable dynamics that should at least in theory offer a great environment for refurbished phones sales to skyrocket, are not easy to navigate through, especially for high-end devices makers.

Some markets are becoming protective of their local manufacturing sectors, and introduce regulations that make it difficult to import smartphones, especially refurbished ones. India is one such case. In 2014, the Indian government rolled out the Make in India program, with the idea to promote local manufacturing in 25 sectors of various industries, one of them being electronic devices (including smartphones).

Coincidentally, two years later, when Apple initiated efforts to start importing and selling its refurbished smartphones as a way to increase the iPhone’s market share in the country, these efforts were unsuccessful. The Indian government rejected Apple’s plan, justifying its decision with a concern about the electronic waste increase caused by a deluge of refurbished smartphones entering the country. As a result, the refurbished version of Apple’s iPhone is currently sold only by online commercial platforms (e.g. Amazon, Snapdeal) from vendors that are not always official company retail stores. This could fuel sales in a parallel market, not necessarily benefiting either India’s local manufacturing or Apple.

In case of South Africa and Nigeria, both markets share similarities in terms of advantages as well as potential barriers for refurbished smartphone sales volume to grow. Nigeria’s GDP contracted by 2.06% in the second quarter of 2016, causing wary consumers to maintain their old phones or purchase very economic options due to decreasing disposable income. In South Africa, consumers are also highly price-sensitive with a very limited brand consciousness.

The rapid level of smartphone adoption registered in both markets is seen mainly in handsets with retail price of US$150 or less in South Africa and US$100 or less in Nigeria. Therefore, refurbished high-end models may dazzle local consumers, but low-cost devices can be expected to represent an obstacle for brands such as Samsung or Apple, as these smartphone makers are likely to sell their refurbished devices for half the original price which is still above the consumer-accepted purchase price in these two markets.

EOS Perspective

In case of India, the recent rejection of Apple’s plan to import and sell refurbished smartphones is an indicator that similar issues might be faced by other large players willing to do the same in the future. However, as one of the world’s largest smartphone markets, India is likely to continue building a strong sense of brand loyalty among consumers, especially towards Samsung’s and Apple’s brands in general (smartphones and beyond), and consumers will demand access to these brands (Samsung and Apple already held a 44% and a 27.3% market shares, respectively, in 2016).

The risk of India’s market being flooded with refurbished smartphones sold in a parallel market or online commercial platforms without proper regulation by authorities could result in lost control over excessive e-waste in the country, without necessarily driving local production of competitive products. Consequently, India’s government might have to consider the possibility of allowing large manufacturers to import factory-certified second-hand smartphones into the country, perhaps under the condition of refurbishing the devices in India.

In Nigeria and South Africa, the consumer price sensitivity and limited brand loyalty seem to be the most pressing issues for large players such as Apple or Samsung intending to sell their refurbished phones. In both markets, the rivalry is rather fierce, mainly due to a relatively strong presence of smaller regional manufacturers and large Chinese companies (e.g. Xiaomi) that offer affordable smart devices. While consumers in these markets are willing to spend up to US$100-150 for a device, in most cases they lack brand loyalty.

Apple or Samsung are likely to be negatively affected by this when launching their refurbished high-end handsets at half of the device’s original retail price, which in most likelihood would still be above the price consumers in these markets can and are willing to spend. As a result, large players may have to set their eyes on a long-term horizon, and slowly build the brand loyalty sense in local consumers and temporarily relinquish on large profits in order to enter these markets and settle among their potential customers.

by EOS Intelligence EOS Intelligence No Comments

A Doctor under Your Skin: Wearable Medical Devices in India, Brazil, and China

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From smart glasses that allow a surgeon to operate having his patient’s medical records at sight to an intelligent contact lens that measures glucose levels of its wearer, technological innovations are changing the world as we know it. Wearable medical device market growth has been promising and the industry is expected to reach a value of US$7.8 billion by 2020, growing at a CAGR of 19% from 2015 to 2020. Since 2015, the USA and Europe have been two key markets hosting majority of users of these new technologies. However China, India, and Brazil are expected to increase its demand for wearable devices driven mainly by rapid expansion of smartphone users and an increasingly aging population. Is these emerging economies’ current set-up favorable for medical wearable to maintain a steep growth?

 

The use of wearable medical devices is skyrocketing due to aging populations, fast adoption of new trends, and greater incidence of chronic conditions around the world. An increase in health awareness across the globe and a simultaneous increase in worldwide wearable medical device shipments estimated to reach 97.6 million units by 2021, growing at a staggering CARG 108% between 2016 and 2021, might indicate the industry’s large growth potential.

Wearable Medical Devices in India, Brazil, and China-Global Outlook

Brazil, India, and China (BIC), in particular, have been registering increasing rates of chronic diseases such as heart failure, diabetes, and obesity for the past several years. Therefore, these countries have started to be considered as the next destinations to focus on in search for high growth-potential wearable medical devices markets.

Wearable Medical Devices in India, Brazil, and China - BIC Markets Are Attractive

Regardless of the fact that wearable medical devices are thriving in the USA and Europe, in countries such as Brazil, India, and China, these devices are bound to face challenges that could translate into major roadblocks for the market to grow. For instance, although wearable medical devices have proved to be a significant aid when monitoring and preventing illnesses, these are not yet considered an essential product for healthcare consumers. Consequently, BIC buyers, who tend to also be highly price sensitive, may refrain from purchasing such solutions if the retail price is high in comparison to their purchasing capabilities. As a result, this behavior may lead to a stalling sales volume in these markets and, subsequently, a slowdown in the wearable medical market growth.

Wearable Medical Devices in India, Brazil, and China - Successful in BIC

In addition, the growth of wearable medical technologies in BIC is challenged by deficient regulatory frameworks with regards to categorizing and supervising such devices for their import and commercialization in each market. Currently, regulatory frameworks are mostly outdated and do not include specific category for wearable devices with proper security measures. Moreover, as these wearables are battery-operated, improper testing due to lack of regulation can affect their safety as well as may reduce the trust consumers need to develop in order to accept and use the device. Further, this inadequate regulatory scenario may drive away potential market players (including key providers).

Wearable Medical Devices in India, Brazil, and China - Regulatory Frameworks

 

Wearable Medical Devices in India, Brazil, and China - Challenges

EOS Perspective

Global wearable medical device market is witnessing a steep growth driven mainly by changes in demographic profiles of many populations and a growing incidence of chronic conditions. In developed economies, wearable medical technology is experiencing high adoption rates and its role in the healthcare sectors is strengthening, mainly because physicians already use such solutions during consultations, whether to monitor, diagnose, or treat a patient. In emerging economies such as Brazil, India, and China, wearable medical technology has even more room to continue expanding, however, current scenarios in these countries may partially impede this growth.

Some of the key issues in these markets include the problem of import regulations unfitted for wearable medical devices, and this seems to be an important issue which needs to be sorted out in the short term to avoid driving potential players and manufacturers away from BIC markets. At the same time, the high retail price makes the wearable devices unaffordable for a large percentage of the population causing low rate of adoption among patients, and hindering medical wearables’ market growth.

Further, the fact that healthcare providers are not planning to include such devices in public health insurance schemes and reimburse the cost of wearable devices as part of their health plans, lowers the chance of this technology reaching higher number of consumers. This limited accessibility to wearable medical devices in BIC markets may result in low consumer’s awareness about their benefits, or even their existence.

Local governments should reform and adapt their import regulations to fit the wearable medical devices characteristics, allowing a better flow of these products to enter the countries without risking human health. At the same time, for wearable medical devices to healthily grow in these promising and widely populated markets, manufacturers and retailers should aim to lower a wearable device retail price. A way to achieve this could be by adding wearable devices to private health care plans (and encouraging public health insurers to do the same) – especially for chro
nic diseases patients and people over 60 years old. This will most likely allow consumers to purchase such a device at a lower retail price or rely on their healthcare reimbursement policies.

by EOS Intelligence EOS Intelligence No Comments

China’s Digital Single Market – Internet of Things

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Underpinned by immense government support, private investments, as well as the highest number of machine-to-machine (M2M) mobile connections globally, China has potential to get to the forefront of IoT (Internet of Things) development. While most countries are still beginning to understand the benefits of IoT, China already embraced the technology as early as 2010, when it built a national IoT center and aimed to create a market worth US$160 billion by 2020. IoT, with its promise of delivering continuous connectivity, is likely to usher an industrial revolution in China resulting in improved productivity, global competitiveness across industries, and higher economic growth.

IoT is helping China to build momentum and succeed in the digital age, fostering development across various industries by revitalizing manufacturing, boosting connectivity through smart cars and buildings, crafting a new consumer market for wearable devices, enhancing healthcare services, and stimulating energy efficiency.

China seeks to integrate various industries with IoT technology for economic gains and efficient management. Industries such as logistics, manufacturing, transportation, and utilities and resources, in particular, are likely to witness improved efficiency, lower costs, and better-managed infrastructure through real-time information provided by IoT technology.

China’s Digital Single Market – IoT - Revitalizing Growth

 

Chinese consumers are very open to adopting IoT technology, which results in growing penetration of smart devices. Smart home appliances, cars, meters, and retail devices are likely to witness tremendous success in China.

China’s Digital Single Market – IoT - Adoption

 

Industry dynamics are improving driven by launches of new smart devices by private companies, pivotal government support, and several digital drivers (including growing M2M connections as well as smart phone and Internet users). However, there a few factors such as security and infrastructure issues, fragmentation in the market, and lack of standardization that are slowing down IoT development.

China’s Digital Single Market – IoT - Promotors and Inhibitors

 

Despite IoT’s immense potential, several driving factors, and promises of economic gains across industries, a 2015 study conducted by Accenture revealed some deterring factors such as lack of specialized skills, low R&D investments, and substandard infrastructure, which may hold back IoT development in China.

China’s Digital Single Market – IoT - Readiness for Adoption

EOS Perspective

Undoubtedly, China is likely to witness unrivalled opportunities in terms of productivity improvements and economic development as IoT technology spreads across the country. Efforts made by the Chinese government are stimulating the IoT growth – ‘Made in China 2025’ initiative launched in 2015 aims to integrate production with Internet to deliver smart manufacturing and higher manufacturing value. Further, with the ‘Internet Plus’ strategy, China plans to integrate mobile Internet, cloud computing, big data, and IoT with manufacturing.

However, Chinese business leaders and policymakers cannot expect to reap benefits of IoT technology without the right enabling conditions. In order to ensure development, it is imperative for China to overcome the gap in technical skill set, infrastructure, as well as focus on promoting IoT investments. To address the shortage of critical skills, China needs to improve the number and quality of tertiary graduates in science and engineering fields. Beyond that, building a cross-industry ecosystem is also essential for IoT-led growth, which requires development of an integrated communication system along with cluster of secured networks for data transmission.

China’s IoT industry, still at a developing stage, has promising growth potential that could materialize only if the country takes all necessary measures to improve its infrastructure and technological platform, which will allow IoT to diffuse through its industries and completely transform them.

by EOS Intelligence EOS Intelligence No Comments

Sharing Economy Needs Regulator Support

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Sharing economy works on a business model where individuals have the ability to borrow or rent goods or services owned by someone else. The concept has been widely accepted in a short span of time and companies such as Uber and Airbnb have become well known among consumers. The sharing economy sector has witnessed tremendous growth with aggregate valuation of the companies operating in this market reaching US$ 140 billion in 2015. The industry has already started causing a shift in the employment sector and is said to have far-reaching implications which are likely to disrupt the traditional rental business model, particularly for companies in hotel and transportation sectors. The growth potential of sharing economy has become of considerable interest to policy makers around the globe as well, and the industry has recently come under scrutiny of various governments and regulators, and is likely to face regulatory barriers affecting its potential to scale up.

The concept of sharing economy, also known as peer-to-peer economy, facilitates a direct contact between consumers and service providers and is centered around the use of privately owned, unused inventory. Technology is key to the growth of this type of economy, which has already witnessed the emergence of several sharing platforms enabling consumers to share products and services such as cars and houses.

Sharing EconomySharing EconomySharing EconomySharing EconomyEOS Perspective

Companies such as Uber and Airbnb have become the talk of the town, due to their tremendous growth achieved thanks to a simple business model: providing consumers the ability to monetize idle inventory and rent an asset, instead of purchasing it. Sharing economy also meets consumers’ desire for social interaction, lower costs, and technology-based access to goods and services. However, the sudden and overwhelming rise in its popularity has shaken the governments’ ability to appropriately and sufficiently regulate this economy. Weak legal frameworks hampering consumer’s safety and tax collection have led to debates around the benefits of sharing economy.

Implementation of the traditional regulatory frameworks in the sharing economy sector is likely to upend the peer-to-peer business model. Inclusion and implementation of monetary employee benefits, tax obligations, and safety regulations in the sharing economy can be expected to lead to an increase in the cost of services offered by these companies, thereby defeating the purpose of the existence of sharing economy. Thus, instead of imposing regulations originally developed and meant for traditional rental sector, there arises a vital need to develop a new policy framework best suited to the peer-to-peer business model.

Instead of completely imposing bans on these services and eliminating the opportunity to make use of idle inventory, governments should work alongside these companies and create regulations tailored to their regions to encourage safe business conduct. For instance, Airbnb signed an agreement with the City of Amsterdam to promote responsible home sharing in 2015. The agreement includes a set of rules for the hosts to be followed before activating their listing, and also stipulates the collection and remittance of tourist tax by Airbnb on behalf of the hosts. In addition, the agreement also includes a partnership with Airbnb to collect content from the company’s database to shutdown illegal hotels. These efforts are expected to ensure the hosts receive clear information on renting their homes and promote consumer safety.

Sharing economy has the potential to make a tremendous impact on the traditional rental sector and is likely to create opportunities across various different economic activities. However, from a legal perspective, it cannot be ignored that the model lacks a strong regulatory support, which over time will continue to put pressure on this newly emerged sector. The peer-to-peer model will be required to address these imperatives in the near future in order to scale to new heights.

by EOS Intelligence EOS Intelligence No Comments

Generic Medical Devices: Can They Breach the Branded Wall?

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Multinational companies such as J&J, GE, and Siemens have dominated the medical devices industry thanks to product innovation and lack of competition from cheaper alternatives from generic manufacturers. Though local competition has emerged in some of the larger markets such China, most domestic companies remain small-sized, focusing on less complex Class I and Class II type medical devices, such as orthopedic accessories, catheters, wound solutions, and inhalers.

Most emerging countries rely heavily on imported devices such as stents, pace-makers, artificial joints, biologics, etc., as there are very limited alternatives available in their domestic markets. For instance, India imports about 80% of the required medical devices. This is where generic devices come into play.

Generic medical devices are copies of those branded devices that are not patent-protected. While the quality of such medical devices is at par with branded products, the price can be up to 50% lower. So far, only a few generic products, such as asthma inhaler (1995) and Pulse-Oximeter (2003), have caught market attention. The recent addition being a range of orthopedic products, including plates, rods, and screws by Emerge, a company started by former employees of Swiss-based Synthes (now acquired by J&J).

Currently, the market for generic devices is predominantly US-driven, where regulations do not differentiate between a branded device and its ‘substantially equivalent’ design. It is expected that more generic devices may enter the market as branded devices go off-patent. Other branded devices, which are similar in function and not manufactured through proprietary process, may also face generic competition.

Generic Medical Devices

Generic devices may be the answer to various governments’ aim of minimizing healthcare cost without compromising on quality. However, the market for generic devices is still fragmented and geographically constrained vis-à-vis branded ones. Much would depend upon the ability of generic manufacturers in containing costs (to remain competitive) and in breaking the hold of established players over sales and distribution channels.

by EOS Intelligence EOS Intelligence No Comments

Yet Another Word on Showrooming. Should Brick-and-Mortar Retailers Start Packing Their Bags?

We all seem to have heard the intriguing word of ‘showrooming’ some time recently, term that stands for consumers going to a physical store to see, touch, and test a product before buying it somewhere else, in most likelihood from an online store of a competitor retailer. Showrooming has been a buzzword for some time now and it is making some retailers very nervous. News article titles, ‘The Next Victims of Showrooming’ or ‘Retailers Stand to Suffer from ‘Showrooming,’ paint a rather grim picture for retailers. Is it really the case?

According to the 2013 TNS Mobile Life Study, some 30% of shoppers globally admit to showrooming, with an estimated 20% of them using mobile phones while doing it, in search of price comparisons, product specifications, consumer reviews, expert opinions, checking product availability in different stores, etc. Although showrooming is increasingly a worry for retailers, they might take relief from the fact that, at least for now, consumers still prefer to get product details from a store assistant, than to look up the information online. European consumers are particularly attached to shop assistants – over 50% of consumers prefer interacting with store staff over getting the information on their phone, with the ratio being as high as over 65% in some European countries, e.g. Poland. What retailers are unhappy to hear, is that this ratio is expected to continue to decline, as the penetration of smartphones increases, shopping and comparison applications proliferate, and consumers get familiar and comfortable with using them on a daily basis.

Online stores don’t mind at all

Obviously, online retailers are very eager to take advantage of this new trend, and encourage consumers to use their sites to compare prices and make final purchases. Some online stores, e.g. Amazon, offer free apps to check prices in their store and offer special discounts if the user purchases from them after using their price-check application.

Some online retailers go even beyond that. Bonobos, men clothing online retailer, made the headlines recently by opening “stores that don’t sell anything”, as quoted by USA Today. These ‘Guideshops’, which are regular brick-and-mortar locations, are used just to showcase the online offer, allow customers to feel the fabric, check the sizes, and try on the clothes, before purchasing them online. It seems silly and contradictive to the essence of online shopping, but Bonobos appears to have gotten on the path to strategically benefit from the showrooming trend.

Traditional retailers still slow to react

There is no way the showrooming (and e-tailing) will come to a halt and magically disappear to the satisfaction of traditional retailers. Thus, it is clear the retailers cannot just sit and wait for the trouble clouds to go away, as they risk becoming a showroom with high foot traffic with no sales to justify their operations. Physical, traditional retailing will inevitably decline to some extent, so the retailers must devise strategies to tackle the issue head on – fight it or embrace it.

We have already seen retailers’ attempts to counteract the showrooming. Some of them started charging an entry fee – for just looking through the products in the shop, a fee later deducted from the final bill if any purchase is made.

Overall, it’s neither good nor bad, depending on whether you view it as the death of physical retail or a kick to traditional retailers to innovate their cross-channel experience. Those who are tackling it head-on may actually consider showrooming the future of retail.” – Brian Gillespie, Continuum, Global Innovation and Design Consultancy, for Mashable.com, May 2013

Needless to say, such approach is likely to be very successful in limiting showrooming – and probably overall sales as well. There will be a group of consumers, who will never come in the shop that carries notification of entry fee on its door. People who will enter, but won’t find anything worth buying, will be left unsatisfied with spending money on… nothing in return. It can be fairly assumed that this group of consumers will not be converted into customers later on.

Customer experience is the key

The smarter option (though not necessarily an easier or cheaper one) is to deal with reality by embracing the new trend. With good strategic thinking, investment and willingness to change the way customer is handled day-to-day, showrooming can probably be flipped to an advantage, or at least considerably neutralized. Let’s look at some ideas of what retailers can and should do in this uneven battle with showrooming.

The key weapon, currently underutilized by many retailers, which should be improved and used against showrooming, is customer experience. Some industry experts say that it is not the price, but the lack of great experience in physical shops that is the key driver pushing consumers to buy online.

E-commerce is not the reason people don’t shop in the store. Customers come to a retail environment for the recognition.” – Jean-Pierre Lacroix, president of Shikatani Lacroix Design, for Stores Magazine, March 2013

If they lack the right experience, they focus on other criteria for store choice, such as price or convenience, which allow online stores to win growing share of consumers’ wallets. Industry experts indicate that excellent in-store experience can become the key weapon in retailers’ hands:

  • Engage with ‘showroomers’, as since they are showrooming and browsing, it means they have been hooked to the idea of purchase and are actively considering buying a given product. More importantly, they are already in your shop. Look for ways to engage with the ‘showroomers’, and you might be able to convert them into your customer. Reward them for already being at your store – offer better discounts, deals on immediate purchases, etc. available to those who are already in.

  • Online-enable the store. Encouraging online presence in your store might sound crazy. However, your store might be a physical location, but it does not mean it is cut off from the outer world. Don’t expect the customers to go off-line when they are in your brick-and-mortar shop – they probably stay online all the time. Entwine online experience with your in-store experience. Introduce store mode of your website, ability to connect via WIFI when on the premises, reward with deals accessible via this mode for purchases from the physical shop

  • Make it speak. Instead of placing product info in print on the shelf, allow customers to browse product information via their smartphone (or self-operated information kiosks on the store floor), searching via QR and barcodes, linking to interactive content available on the in-store mode website, including product specifications, reviews, additional content, e.g. virtual fitting rooms for clothes or visualization for furniture purchases, interactive maps guiding the customer through the store to specific products

  • Revamp the role of your floor staff. They are not there just to show the customer down the aisle, answer basic questions about the product, and ring the register bell. The staff is the element that can really make the difference, engage and capture the customer. The key here is to wow the customer with helpful and knowledgeable assistants, who offer depth of information that goes beyond what a typical consumer can anyway find online. Invest in turning your assistants into ‘mobile points of service’, that is create tablets and smartphones-equipped staff with access to CRM and product data, and provide them with certain level of autonomy to offer special discounts and other deals right on the spot when interacting with individual customer

  • In large stores, where self-service naturally dominates (e.g. groceries), invest in precision retailing. Your customers are probably enjoying the level of personalization when shopping on Amazon and the likes, so it is time to start using your big data effectively. Some developers already offer cloud-based enterprise solutions allowing for one-to-one, real-time retailing personalization, which includes personalized content allowing for virtual shopping lists, special offers presented at the point of decision in the shop, deals tailored depending on the past purchase history, shopping frequency, etc.

Retailers can also opt for other weapons, not necessarily linked directly to the customer in-store experience, but rather ways to attract them to come through the door:

  • Use technology to draw customers – adopt geo-location solutions and use GPS or NFC technologies to make yourself visible to the consumers remaining near your store

  • If you can afford it – try price matching. While customer experience might be the selling point of physical experience, a lot of customers are price-oriented after all. This might be dangerous to the margins, so not all retailers are able to afford this strategy

  • Emphasize the advantage of immediacy in two meanings. First, immediacy of information across all senses: the customer gets the information about the product (especially if in-store information incorporates elements of digital media and is as diverse and exhaustive as online) and can feel and try the product at the same time, something that online shopping will never be able to offer. Second, once the purchase decision is made, customers in general would prefer to get the product right away. This is a huge advantage for physical shops, where no shopping time has to be added (as still rather few online stores are able to execute ‘same-day-delivery’ on most of their products)

  • Make it exclusive by carrying unique products, limited editions, products with customized content, which will make it impossible to compare prices with other retailers and will attract the traffic towards your door. Unique products alone will not support all your sales, but will drive some level of unplanned purchases that are made ‘by-the-way’

There is no way to say which physical retailers will be able to withstand the pressures of the showrooming trend, and what mix of tactics will turn most successful. Showrooming potential to negatively impact retail industry indicates that it should be treated seriously, and dealt with by strategic solutions rather than immediate measures. The development of comprehensive solutions should therefore be a task for retailers’ strategy top executives, and must go far beyond attacking consumers for their willingness to participate in this trend.

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