Freaked out by in-home delivery? Blame August CEO Jason Johnson

In-home package delivery could grow to rival voice assistants as a driver of smart home product sales. At least that's what  August Home CEO Jason Johnson tells us. 

It's also apparently the belief of Sweden's Assa Abloy, the world's largest lock maker and the parent to Yale Locks. Assa Abloy just acquired August Home, in part because of August's in-home delivery technology, August Access.

August Access was Amazon Key before Amazon Key existed. Amazon rolled out Key in October 2017 as an in-home delivery service that lets you authorize a delivery person to enter your home with a temporary digital key. The key works with an Amazon-certified smart lock, and Amazon's Cloud Cam captures footage of the drop-off for you to watch remotely. Johnson has been testing the same concept for packages, but also for dog walkers, dry cleaning pick-up and others, with August Access since October 2015. 

Here at CES 2018, August announced a new partner for August Access, the last-mile delivery logistics firm, Deliv. Deliv will essentially help August create a platform for in-home delivery that August can then turn into partnerships with brick-and-mortar retailers.

I met with Johnson at August's suite in the Venetian Hotel here in Las Vegas to discuss in-home delivery, his company's acquisition and whether you might one day let someone deliver food directly to your refrigerator.

Johnson: We had the vision for in-home delivery from the beginning, five years ago. We were telling Amazon about it, probably four years ago.

What did they think when you first told them?

Johnson: I told [Amazon CEO, Jeff] Bezos and Jeff Wilke [Amazon's chief executive of world wide consumer], and they got it. They're like, that's really interesting. That would be really interesting to try to do something. We spent a lot of time working together. They've launched Amazon Key. We haven't announced with them what our relationship is, and where August fits into Amazon Key. But we have an active relationship with Amazon.

That relationship will be developing?

Johnson: The relationship is developing. And in the meantime, we've got a whole bunch of other relationships that we've been developing. The announcement [Tuesday] is a way for us to lay out the universal home delivery platform for August Access, before our various retail partners make their announcements in the coming months and quarters. There's a whole bunch of them that we've been working with to develop programs.

Now you haven't described the retail partners yet.

Johnson: We're not announcing the retail partners today. Today, if you order on Walgreens or from Kroger or others, Deliv will do the last mile logistics. They go to the store, pick up the item, they bring it to your house. Today, it's dropped at the door. What we've been working on with Deliv is to enter the front door, just a couple feet and drop it inside.

Best Buy, who's an existing Deliv partner, won't necessarily be delivering inside your house yet? That part still needs to be worked out with each individual retail partner?

Johnson: The way it works, Amazon Key is a good example. Amazon's a retailer, and they launched their service, it's their announcement. Who provides the locks on the back end is secondary. The same thing will happen with each of these August Access partners. Each retailer will make their announcement, and it's their program. It's already public we're working with Walmart . Walmart will make an announcement of their in-home delivery program, and it's their announcement, not our announcement. Today's announcement is our way to introduce our platform before we get blurred into being a background provider to these different partners.

You expect that you will be in the background then? But if I'm a customer, I have to have the right lock. There has to be some hardware awareness.

Johnson: Each retailer that will offer in-home delivery will have an in-home delivery kit. For the ones that are using August Access, we're supplying the hardware, but it's their kit. They will only be marketed as their kit. Just like Amazon has their kit for Amazon Key. Each of them has their own marketing, promotional plan. Yes it will have an August Lock, and yes you'll be using August software, but it's their customer they're marketing to. We like that. We get new customers, but from their marketing.

Something goes wrong with the delivery, for any reason. They brought the package to the wrong address, the package was damaged, or the lock doesn't work, who takes responsibility?

Johnson: It works just like it does today. Today, when you order from a retailer and there's a delivery company involved, you may reach out to the delivery company, you may reach out to the retailer. That won't change. The only different part is if it's a lock problem, then the delivery company is going to let us know, "Hey, we had a problem unlocking this door, or we had a problem locking this door," and then we'll work with the delivery company and with that particular consumer to resolve that.

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A consumer wouldn't get with you guys directly, the delivery company would be the intermediary?

Johnson: We have a very large installed base of August Smart Locks. We're the largest smart lock provider. I know because the FTC told me so. Everybody who has an August Lock is going to be able to use those existing locks with those companies. People who have an August Lock are going to go to the August app, and the August Access section, just like you can for AirBnB Home Away, you click and you put in your username and password for that retailer. We have a relationship with that consumer, because they have the app.

In some cases they will contact us and say "Hey, today Deliv tried to make a delivery, but my lock jammed, I need support to find out why my lock jammed." Our customer support team does that today, helping people troubleshoot the problems with the actual hardware. But if the delivery person never showed up, or they never even attempted to unlock the door, then that's clearly an issue for the retail provider or the delivery company.

Are you giving sales numbers, if you're the largest installed smart lock in the country?

Johnson: Our latest number is we have done 350 million lock-unlock operations.

That's barely in the ballpark as an answer, but all right. So obviously there was a ton of, I don't know if I'd say backlash, but there was a lot of skepticism when Amazon Key was announced. That's the service that's gotten the most mainstream attention. But August had the advantage of doing this before, without as much fanfare. What did you learn along the way as far as user comfort and addressing any hesitation. What have you learned during the first stage of August Access?

Johnson: We've been doing this for a few years now. We've unlocked a lot of doors. We have a lot of experience in how to lock a door and how to unlock a door. Now we're the only company that tells you if your door is actually open or closed, and how long it's been open for.

That's with the new sensor kit.

Johnson: Right, DoorSense. But, what we've discovered through a whole bunch of pilots with retail partners and delivery partners, is there are some nuances to in-home delivery. Some of them are new to us, but not new to the delivery company. For instance, traditional delivery, UPS, USPS, FedEx, they've been dealing with dogs for decades. They deal with dogs every day. We've never dealt with dogs before. 

Now you have a door open up and there's a dog on the other side, and you want to do two things. One, you want to keep the delivery person safe, two, you want to keep the dog safe, you don't want to let the dog out. So that requires some training of delivery personnel.  

What about for initial adoption, that I'm going to give a stranger permission to come into my house? Have you done anything with August Access to convince people that this is OK, or have you learned anything that can make that core concept more comfortable?

Johnson: We're still learning how to make it comfortable. We have work to do there. Basically, what we discovered is that a third of people that we've surveyed in different markets are uncomfortable. Like, very. To quote them, "there's nothing you can do to make me comfortable." That third, we probably shouldn't spend too much effort on. They're going to be hard to sway.

Then, fortunately there's a third that love it. They're like "Absolutely, I've had packages stolen." A thing we've learned from a lot of them is they love not having packaging material. They come through the front door and there's the stuff they ordered.

The way it works is the delivery agent goes to the store with a canvas bag, puts the stuff in the bag, takes it out of the bag when they deliver it. So your GoPro is sitting there in its crystal display case from the retail store. There's no box with packing stuff. People love that, there's an environmental consciousness that a lot of people have and appreciate about that.

Then there's the third in-between. They're not promoters or detractors. They're right in the middle, and they're not sure that they'll do it, but they're not saying they wouldn't do it. I think that those people are the ones that, when Uber got started or Lyft, they weren't the first to do it in their friends, and they waited until somebody else did it. Or same thing with AirBnB, they weren't the first to go stay at an AirBnB, they waited until their friend stayed at an AirBnB.

I've often thought that once you see people talking about it up on Nextdoor, then you'll start to see more people using it.

Johnson: In our surveys of people that have done August Access deliveries, the Net Promoter Score is extremely high, through the roof. It's a measurement tool that we use to try to understand whether people will be a promoter or a detractor. The short data analysis of it is that people that have had a delivery or two, they break quickly, they love it. It's like, once you've ridden in an Uber or a Lyft and you've enjoyed the frictionlessness of not having to pullout a credit card, have cash or whatever, you never want to ride in a taxi again.

You get comfortable, too, [with in-home delivery]. You realize, "my iPad didn't get stolen off the coffee table." You realize the chances of something bad happening are really low.

The policy is "Don't be beyond the entryway. This is your area, don't go beyond that. You will lose your job if you go beyond that."

And you'll know know because of the camera.

Johnson: Because of the camera.

You're relying on the customer to let you know, though, and to provide evidence?

Johnson: Let's just say, well, you're aware of vision processing and cameras and what you can do with virtual fencing and how you can understand when a human moves in a direction.

Meaning that you guys are pulling in information from the camera that the customer isn't sending, but that you guys have access to. Is that explained anywhere, or spelled out explicitly?

Johnson: No, because we haven't officially announced our camera yet, and how it works and what it does, so when we launch the camera, we'll talk more in detail about that.

If you had a camera, how would you address privacy questions?

Johnson: What we care about is monitoring the delivery person. We have no interest in seeing who's coming and going. We have doorbell cameras today, right? We don't study the footage of people's doorbells. We do have human detection. We do have the ability to determine a human from a dog or from a car or from a branch blowing in the wind. We have that onboard vision processing to eliminate false positives, to create a better experience.

In the case of the entry camera, the goal there is to record the delivery. We know when it's a delivery person because we make the lock. And as the door is unlocked, the video recording begins until the door is closed and the door is locked again. All we're capturing is information from that period of time and doing vision processing on it.

When a delivery person comes in and the resident might be home and comes to greet them, that might make it look like someone went further in. Would you have the ability to review and see what really happened?

Johnson: All things we learned during testing. That exact scenario happens.

Walmart is trying delivery straight to your refrigerator.

Johnson: We've announced pilots of both package delivery in the entryway, as well as in-fridge delivery.

The kitchen side of this seems like a separate can of worms. There's the idea of getting things into the refrigerator.

Johnson: Or pantry.

Could that person delivering things to my refrigerator do a little more? Like tell you you're out of something and add it to a list. Or take it even further, maybe see that you have the ingredients for an awesome risotto and then tell you how to make it? When I think about smart kitchen, and when you start talking about things like grocery purchasing, inventory tracking when you get the stuff home, then using that inventory for recipe recommendations, and then sending that information to your appliances to help you prepare it, it really needs to be wrapped around one platform. If a delivery person coming in is in part of that platform, is there a possibility that person might have another role in the kitchen?

Johnson: We're working with several delivery companies, both giant established ones that everyone knows about as well as newer ones like Deliv. I can safely tell you that none of them have any intention of doing that.

When you get someone in the house, though.

Johnson: I agree. Like, "Take care of my cat litter box." But they're not. Once you get into the last mile logistics business, that itself is so complicated to do well and to do efficiently that they don't want to make it more complicated. Now, I will say that the retailers have a strong interest in helping you with your everyday needs, and getting you your everyday essentials. I won't disclose what some of them are working on, but let's say they very much want to be able to make sure that you never run out of the things you need.

So if I never go to a store because I'm having things delivered to my house, as a customer, I'm probably not going to make as many impulse buys. I'm probably not going to be exposed to a variety of brands if I'm ordering things from an automated list. So the ability for brands to conquest is much harder.

Johnson: Let me challenge that for you. If you reduce some of the friction for both procuring items, as well as returning things you don't want, if on a regular basis you have these delivery agents entering your home and you have a designated area where you place things to be returned, and there's no friction to returning them.

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I want that. I never return packages.

Johnson: Right? It's a pain. From a retailer perspective, I want to get you to try things. I want you to try this new cereal, this new soap, whatever, right? And the cereal and soap companies want you to try it too. If I make soap, and Acme retail wants to make this available to try, and the customer doesn't like it and returns the bottle three quarters empty, I'll make the retailer whole. My customer acquisition cost to have you potentially like that soap. I don't know how much the cost of good a three-quarter bottle of soap is, but it's a fraction of the cost to acquire new customers, that I know.

If you reduce that friction to returns, and you have the supply chain that embraces this idea of exposing people to try different things, then you have the opportunity to make it real easy for people to do impulse experiencing things. You don't require them to reach their arm out and place it in a shopping cart, you take care of that part for them.

When I've returned a bottle of soap I don't like, when does the alternative brand enter the scenario? Is it when I'm building the list and an app is pushing another brand of soap?

Johnson: I'm fully confident that the retailers know exactly how do that. They're really good at it. And I'll also add that other, newer participants [gesturing towards an end table with an Amazon Echo and a stand up display that's obscured by a water bottle] in the value chain for procuring goods, they're also really good at it.

I used Amazon Prime Now earlier this week to deliver a mouse to my hotel, and guess what, it was an Amazon white label mouse. If I'm a brand, but Amazon is just pushing its own stuff through these replenishment services, why would I be happy about that?

Johnson: I'm not talking about Amazon. There are others that aren't pushing their own brand of products, they're not interested in trying to push as much stuff, but maybe they get into the business of making their own goods, too. They could. They could.

I'm trying to see who you were gesturing to over there.

Johnson: Oh I see, my water bottle. [removes water bottle blocking the sign, a Google Home promo] And they do that every day, right? They're in the business of making suggestions.

When do you think we'll see retailers announcing Deliv kits? This year?

Johnson: It's not just Deliv, there's also other delivery providers as well. There's a whole bunch of announcements slated. Everybody has their own time frame, and we'll be supporting them as they make their announcements. And there's some in Q1, some in Q2, and so no.

So August will be working with other last mile providers?

Johnson: Yes.

Have you announced any?

Johnson: No. A lot of that is driven by the retailers. It's the retailers that have their different partners that they prefer and use. As we're working with each of the different ones, they're like we need you to work with this delivery company and this delivery company, so we had to make our APIs available to them and show them how use our APIs to make temporary access provisioning.

Are there regions around the country where August Access has had more pick up than others?

Johnson: Technically, the only live August Access companies that we serve are AirBnB and HomeAway. Those are the only companies we use. We allow them as an Access partner to provide access provisioning on your behalf.

What about the dog walker, and the whole list of services that August had up before?

Johnson: We've done a bunch of trials, but none of them are commercially launched yet. We just stripped all of them out of the app and the Web site, the trials are all completed. We'll be adding them back in as they launch.

The relationship between Yale and August in the greater corporate structure of Assa Abloy, what is that like?

Johnson: Yale makes great locks. They make full replacement locks, and we're very excited to be working with Yale to August Access-enable their locks. Most Yale residential and commercial locks will become August Access-enabled. This is important because as much as we make a device that works with deadbolt locks, there are homes that don't have deadbolts. They have mortise locks or they have some other type of lock, and Yale, and even other Assa Abloy brands make every kind of lock that you can imagine. Our job, as we seek to enable in-home delivery and in-home services is that whatever device that the home or the business or the hotel uses, that whatever electromechanical lock you have from Assa Abloy, that we make is August Access capable.

Do think that August will be a software and services company from now on?

Johnson: We make very popular retrofit door locks. It's great for somebody that doesn't want to replace an entire lock. A lot of people aren't capable, or at least aren't comfortable making that whole effort. It also lets us make them cheaper. This lock right now [gestures to display with August's new lower cost smart lock] is available for $135 on Amazon.

What about for apartment buildings? Jet.com has run a trial there.

Johnson: Jet.com has a small trial with a lock start-up [named Latch] that makes mortise style locks, and they're in some New York high rises. Yale makes all those products, too.

So that's how you imagine August Access spreading around in apartment buildings and commercial spaces, not through August hardware?

Johnson: That's right, it will not be August hardware. It's actually a whole Yale system. It's got a name [nexTouch], it's got a Web site. It actually has a Web-based management portal, so that if you're a property manager or an apartment management company, you can manage all the locks through the Web-based portal. It also uses key cards, and key fobs, as well as locks with PIN codes.

Do a lot of older apartment buildings retrofit locks like that? My building when I lived in New York was built in the 50's and a lot of the lock hardware was original. And it was a co-op. That board is never going to approve a big lock upgrade.

Johnson: Where we see it is, a lot of the larger real estate investment trusts, big REITS, are trying to lower their costs on turnover. Every time a resident leaves, by law you have to change out the key cylinder. And there's labor, and there's actual mechanical costs in that. When you go to a purely electronic system, you eliminate that. What you have is some of the more progressive management companies upgrading to electronic access as an investment in long-term cost savings.

30-percent of the country lives in multi-family. We have to solve multi-family. This is why the Assa Abloy acquisition made sense for us. They have that whole multi-family solution that we didn't have. Now we have a multi-family product.

Camden Properties is one of the big REITs, they own hundreds of apartment buildings. They actually banned package delivery. You can no longer have UPS or FedEx deliver packages to the front office, because they are tired of being in the business of storing packages. They had to take one or two apartments offline, just to store packages. They can't monetize that. People living in an apartment complex paying $1500 a month in rent won't pay for package service. So Camden said they're no longer accepting packages. They reject them.

We believe that some of those property managers are going to embrace August Access, so the package will go right into the apartments so they don't have to deal with them.

Is it possible to have August Access, Amazon Key, and multiple services on top of one set of lock and camera hardware?

Johnson: We are certainly open to having Amazon Key participate in August Access. So all of our locks can be used by any retailer. We believe that consumers want choice. They might want to shop at one retailer this week, another one next week, and not be locked into one retailer. So, we're universal, we're open.

Has Amazon shown any interest in being open?

Johnson: You should ask them. It's going to be a fun 2018. Obviously, Alexa and Google Assistant are really giving smart home a boost. We actually think that with all these retailers launching home delivery programs, and at least one giant delivery company is also launching, we think it's going to usher a lot of smart lock installations in a lot of home. It will be interesting to see what drives more, the voice assistants or package delivery. 

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