Tiny Sensors Drive Massive Walmart-Amazon War

So far, the Internet of Things has been a challenge for investors. That is about to change.

Last week, the Electronic Engineering Times ran a story featuring Chris Enslin, a vice president at Wal-Mart (WMT). His team of 500 is actively exploring ways to bring IoT, robotics and artificial intelligence to its global network.

Pay attention.

The idea that billions of connected sensors are going to change the face of commerce is not especially novel. Analysts and consultants have been predicting the emergence of the IoT for several years.

In 2015, McKinsey, a global consulting firm, estimated the global impact of smart systems could reach $11 trillion by 2025. The firm predicted enormous cost savings for health care, preventative maintenance for general interoperability. There was a lot to like, with very little downside. Or so it seemed.

The holdup is sensors. They are still too expensive for wide adoption. Enslin admits IoT strategies remain immature at Wal-Mart. Engineers have trials up and running at only a handful of its 12,000 stores. Even then, the applications are rudimentary.

It uses heat and vibration sensors in refrigerators to increase food safety and preventative maintenance. Scanners and computer vision systems now read codes for packaged products, replacing legacy log management systems.

It’s a start. And it’s a baby step toward the next generation end-to-end systems. But at the right price, sensors could be attached to every product Wal-Mart sells. “Intelligent packaging someday could help re-order products from home when they get low,” Enslin says.

Now that would be a game-changer. And it is going to happen.

The company is locked in a fierce battle with Amazon.com (AMZN) for retail superiority. Although the online giant has only a fraction of Wal-Mart’s annual sales, it has leapfrogged the Arkansas company in market capitalization. Investors are intrigued by its operational excellence. Through technological innovation, Amazon.com changed the landscape.

We take distribution and ecommerce for granted, but the beauty of the model is loss elimination. Items are rigorously tracked throughout the supply chain, resulting in better inventory management. There is no need for seasonal sales. There is no shoplifting.

However, Wal-Mart can level the playing field. The technology exists today.

The sad story of General Electric (GE) is a prime example of what happens when you’re too early.

The company spent the last five years remaking itself into a software company for the Industrial Internet of Things. As the world’s largest maker of jet engines, diesel trains and other large industrial wares, finding ways to make things cheaper is in its DNA.

Sensors and big data analytic software seemed like the logical next step. So in 2013 it unveiled a productivity software platform called Predix. The goal was to bring penny-pinching predictive data analytics to the industrial sector at scale.

Although Predix saved GE $500 million in 2013, and is projecting to slash $1 billion by 2020, it has been a tough sell outside the company. See GE’s stock price, down 43% this year alone.

The opportunity for investors is elsewhere, and it is big.

I have been pointing my members to a much smaller company. It is considered the market leader in low cost sensors that could fill all of Wal-Mart’s needs. The company has an extensive patent portfolio, and working relationships with the likes of Intel (INTC), Alphabet (GOOGL) and Amazon. And the technology can easily be adapted to run cutting-edge data analytics.

Like all IoT stocks, its share price is depressed given the slower than expected adoption. But that won’t last long. The Internet of Things is real, and when it arrives in size, it will hit investors with sudden impact. Make your bets early, and be patient.

Best wishes,

Jon Markman


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