A market connected – the IoT in context

The Internet of Things was once a niche area for geeks and the ultra-rich but now thanks to products like Amazon Echo it has become a huge corner of tech retail. Jonathan Easton examines the market and asks the Channel about the state of play

Connected devices that were barely even imaginable a few short years ago are now commonplace, if not in homes then at least in stores. Connected products are certainly very visible in the retail space, but is that visibility converting into a profitable market?

According to the figures, that definitely is the case. “The market for smart home technology saw another bumper Q4-Q1 across Western Europe,” says Context UK and Ireland country manager Jonathan Wagstaff. And the UK is leading the way, according to Wagstaff. “In Q1 2017, the distribution channel in the UK grew 79 per cent year-on-year in terms of revenue, ahead of both Germany and France,” he added.

This confidence in the connected devices market isn’t just financial though, with customer demand reflecting the figures, according to Dixons Carphone director of connected home Steve Moore: “We’re seeing strong demand for connected devices across the board. Customers are getting used to the flexibility of connected solutions.”

While it’s all well and good to say that the connected devices market is doing well, the IoT is such a catch-all term that it doesn’t entirely tell the whole story of what types of products are selling. 

“Streaming products from Sonos to Chromecast are selling well. We’ve done well with connected cameras like Canary and Ring. We’ve also launched Google Home, and we’ve been selling the Amazon Echo and Dot for a while and these voice-enabled home products are really fun and easy to use, they are catalysing the smart home category in general,” adds Moore.

This is a sentiment which is seemingly shared not just by retailers but also by analysts. “The consumer market for this technology is slowly but surely gaining traction,” notes Gekko business development director Rupert Cook. “This has been led principally by wearables, home automation/security brands and more recently the intelligent personal assistant devices such as Amazon’s Echo.”

Wagstaff agrees, asserting that Amazon’s Echo is ‘by far the most important product the IoT has seen over the past two quarters’.

“Voice-enabled products are fun and easy to use. They’re catalysing the category in general.” 
Steve Moore, Dixons Carphone

Positive sales figures would suggest that consumers are very much aware of the IoT and connected devices, but Cook says that might not necessarily be the case, with brand awareness superseding technological nous. “Consumers may not be particularly aware of the IoT and connected technology specifically, but they are becoming increasingly aware of the certain brands and products that are based on such technology.”

So, as ever the tech industry is boiled down to marketing. It’s not all about having the best or most sophisticated product, but conveying what your product does to customers in a palatable way that makes it seem vital and allaying any skepticism about entry that consumers may have.

Solving the problem of perceived product complexity, and – as a result – inaccessibility is a hurdle that needs to be leapt over in order for mainstream viability. “Some customers still have worries about the complexity of setting these products up,” says Moore, with Wagstaff agreeing that ‘for many consumers, setting up the devices is still a big barrier’. Making the tech seem essential is also a key factor for the market to succeed. While tech enthusiasts may be determined to connect everything under the sun, the majority of average punters are likely to ask ‘what is the point of connecting this?’

“Shoppers are likely to be wary of products where connected capability is seen as perhaps unnecessary,” states Cook. “If a consumer has happily used a non-smart product for years then the challenge is for brands and retailers to convince them that they really need to upgrade to a smart version.

“A good example is white goods. It’s very clever that your fridge can monitor what products you’re running low on and re-order automatically but is this something that the average consumer will use on a day-to-day basis?”

With this healthy dose of caution in check, it begs the question of how close we are to the fabled ‘smart home’? That really depends on who you ask. At one extreme you’ve got Dynamode’s Nick Beer who thinks that ‘we are at least 20 years away’, while on the other side is BullGuard CEO Paul Lipman who states that ‘it’s already here’. 

“The challenge is for brands and retailers to convince consumers that they really need to upgrade.” 
Rupert Cook, Gekko 

Realistically, we are somewhere right in between. While sales of smart home products from companies such as Hive and Nest have been positive – “In the past three years we’ve seen well over 50 per cent year on year growth every year,” notes Nest EMEA general manager Lionel Palliet. “There are not many product categories that do that” – it’s safe to say that the majority of adopters are keen enthusiasts, and they are just now entering into the wider public discussion.

But while smart home products are just now becoming a major factor in the technology market in 2017, wearables, for example, have been around for years and are a well-established force. And that’s the problem of trying to talk about the Internet of Things market. We’re seeing so many different categories and products popping up that are blurring the lines. Everything from wearables and smart speakers to fridges and coffee machines all come under the umbrella of the IoT. As the functionality and purpose of different products merge, it is becoming harder to classify different categories of products. And it’s not just within traditional tech, the ‘white goods’ that would never have previously been mentioned in PCR are now potential areas of investment for the Channel. 

One thing for certain is that – for better or worse – there won’t be a shortage of connected products in the future. But for the market to flourish, products need to be presented as essential to consumers and not be overcomplicated.