Why is retail hesitant over smart home products? - PC Retail

Why is retail hesitant over smart home products?

Analyst Context believes home automation is growing
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Home automation is a growing market everyone can tap into, says Context's Adam Simon in this opinion piece…

It is estimated that there are 240 million homes in Europe and of those around one million are equipped today with smart home solutions, mainly single-point i.e individual solutions such as smart thermostats or IP camera systems. A small percentage of those homes have multi-function solutions, which is a technology allowing multiple systems to be linked in.

The potential for growth is enormous and according to research carried out by Berg Insight, the market will be worth €2.6 billion in 2017 and will cover 30 million homes. There is plenty of opportunity for all retailers – the immediate questions are:

1. How quickly will consumer demand build up for the products which make up a smart home?
2. Which channels are going to succeed in selling smart home products and installation?
3. What are today’s winning categories?

Consumers are still ignorant about smart home products, and remain to be convinced about the extra benefits they can bring. There have been some advertising initiatives notably the Nest campaign, which was launched in October 2014, starting in the USA.

Direct contact with the consumer has been a big driver with British Gas using their other interventions in the home to push successfully for their Hive solution. But according to a recent study only five per cent of consumers who have heard about smart products would know where to buy them. Work needs to be done to persuade a consumer that they will get value from a £100 smart smoke detector as compared to a standard unit that costs £20.

The normal ICT channels are facing new competition in the distribution of smart home and other connected products. DIY retailers are playing an important role in this space, and are leading in the USA with smart hub solutions in retailers such as Lowe’s and Home Depot.

Utilities are very engaged, as mentioned above with British Gas selling the Hive and Npower selling the Nest. Mobile phone operators are showing a lot of interest and in the USA, Verizon has recently started the rollout of a new store format, which includes fitness, wearables and home products.

Insurance companies and gyms will play a role in the health arena as they start offering products at a subsidised cost in order to encourage their clients to track their health and physical activity. And lastly, the OEM manufacturers themselves are competitors as they link up to the end customer and can propose upgrades and new products directly to them.

The categories to watch include thermostats, smoke detectors, IP cameras, alarm systems, and smart lighting. As an illustration of growth potential, the unit sales in Context’s tracking of IP cameras through distribution in the UK went up by 80 per cent in Q4 2014 compared to the prior year and 59 per cent in Q3 2014 compared to the prior year – a nice growth category.

There are two vital questions for the successful retailer in the smart homes market – which retailer will decide to invest in their own smart hub like the US retailers mentioned above and Staples with Staples Connect? At the moment there is hesitancy because of fears of adopting a technology that could become obsolete.

The other question is which retailer is going to invest in the capability to install not just a single point solution like a thermostat, but a multi-function smart home solution? This is by definition not plug and play and requires knowledge of the different protocols and how to link them up in one system.

This is a market that is ripe for small independent retailers and artisans to operate in, where so much of the value is the installation itself. In summary, there is room for everyone.

About the author

Adam Simon is Context’s global managing director for retail business and development.

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