BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

Mobile Solutions For Retailers: Off The Shelf Or Private Label?

Forbes Technology Council
POST WRITTEN BY
Robert Morcos

Getty

As businesses grow, so do the demands of consumers. Today’s consumers are more demanding than ever, and they have come to expect speed and ease in all facets of life. The surging popularity of on-demand services, such as Netflix and Uber, has led to a change in consumer behavior and has conditioned them to expect instant gratification on demand, with a shrinking desire for human interaction. Customer service is a critical factor in determining where consumers decide to allocate their disposable income.

To enable the highest level of customer satisfaction and retention, organizations are turning toward mobile devices to help their associates provide immediate solutions for their customers. The food service industry has made great strides in that direction, allowing servers to process payments at the table using tablets, ensuring a fast checkout and reducing the odds of a lost credit card situation.

The cost of most high-end customer-focused mobile devices ranges from $500 to $1,000, and in many cases, that cost makes the adoption of new technologies a nonstarter. As the founder of a firm that now caters to that exact solution, my business has evolved over time to meet these market demands, and I often find myself guiding clients in their decision between a private-label and off-the-shelf product.

Cost

I emphasize cost because it plays such a huge role in our clients’ hardware decisions. When trying to decide which route to take regarding private label or off the shelf, there are many costs that need to be considered.

Since businesses need to ensure these devices can perform the functions required, they tend to avoid purchasing entry-level devices and stick to high-end product lines. The price tags of these off-the-shelf solutions can be high. For example, the newest iPhone (iPhone 11 Max Pro) has a price tag of $1,099, while the latest Samsung Galaxy (Galaxy S10+) ranges in price from $499 to $1,499.

These costs do not include the price for third-party staging and kitting of the devices, which is the process devices undergo prior to being deployed (usually costing upward of $50 per device).

An alternative option is to design a bespoke, private-label device for a company’s specific use case. Of course, private-label devices come with their own set of challenges, including upfront costs and lead times.

If the choice is to design a custom device, the business will first need to pay for nonrecurring engineering (NRE) and tooling costs, which can range from $100,000 to $2 million, depending on the complexity of the project and the required specifications. A customization project truly begins here, and this initial phase can last anywhere from six to 10 months.

Though many balk at such a substantial upfront expenditure, significant savings are realized through the back-end cost of each individual device. Since the device is built from scratch, it can incorporate or remove any functionality or features, creating a uniquely tailored product. The removal of unnecessary components helps keep the cost down, bringing the per-device pricing to well below that of an off-the-shelf consumer-focused product.

Timeline/Lifespan

Deployment timelines and product lifespans are also important factors for consideration, and companies would do well to think through this aspect of the process as part of their strategic decision making.

For off-the-shelf devices, you can walk into a store (or make a phone call) and receive the devices right away (inventory permitting). Once the necessary volume is secured, the devices will be sent to a third party to be staged and kitted prior to deployment. This process involves having custom software/apps flashed onto the devices, as well as provisioning the devices with a management profile through an enterprise mobility management (EMM) solution. For a deployment of 5,000 devices, the entire staging process can take upward of 30 days, including the logistics to and from the third party.

Another key factor to consider with off-the-shelf devices is their lifespan. Typically, these devices are refreshed annually, so you may run into difficulty trying to source the exact iteration of that product down the line.

With private-label devices, the initial lead time may be six to 10 months, but there is no refresh cycle, which provides clients with a future-proof solution. This lead time may be initially daunting, but once the design process is complete, the supply chain is turnkey. When clients private label their own devices, the final product is built to include the client’s exact software, packaging and hardware requirements right out of the box, removing the time associated with third-party staging and kitting.

As on-demand, efficiency-focused services continue to increase in popularity, businesses are going to make expenditures to keep up with customers’ expectations. The obvious answer to this challenge is through increased adoption of mobile technology, which will help employees provide immediate answers and solutions. This improved customer experience typically leads to increases in customer satisfaction, customer retention and sales growth.

Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?