New report says that a lack of awareness and knowledge of smart home products and their benefits is holding back market growth but still predicts healthy revenues.
High price tags continue to put smart homes beyond the reach of most home owners and many who can afford to pay are not been sold on the benefits, according to a report from Beecham Research released today. While new home comforts and easy living remain the main incentives for potential customers, it is practical applications such as home safety and money saving devices such as smart thermostats and energy meters that are currently driving the market, along with smart home entertainment systems. The report, ‘Smart Home Market – Current Status, Consumption Trends and Future Directions’, says that a lack of awareness and knowledge of smart home products and their benefits is a barrier to market growth, along with concerns about data privacy and lack of device interoperability.
While Beecham Research says that these smart home ‘speed-bumps’ make some of the more over-optimistic forecasts simply unrealistic, it still believes that new industry partnerships and innovative routes to market will help drive impressive market growth. It predicts that revenue from the sale of smart devices for the home will achieve at a compound annual rate growth of around 34% over the next five years, from $3.1bn in 2015 to $16.2bn in 2020.
Olena Kaplan, Senior Analyst at Beecham Research and author of the report, says:
“A basic light bulb is more than 20 times cheaper than its smarter counterpart. But evidence shows that consumers are willing to pay a premium price if they understand the value of the more expensive product. The crucial question is; does the smart bulb, or any smart home product, offer sufficient benefits for consumers to justify the price tag?”
The report points to the Amazon Echo smart home hub and Samsung Smart Things as a sign that major companies are trying to attract more customers and get a foothold in the home by offering entry products at affordable prices.
“In the energy market, the Smart thermostat was amongst the first smart devices to control home energy consumption but it has evolved to manage heating systems and energy used by individual appliances,” says Kaplan. “For example, Nest now also offers IP security cameras and CO2 smoke alarms, while Hive offers a smart power socket, motion sensor and windows/door sensors.”
New Partnerships and Players
Another key driver for the smart home will be new industry partnerships and routes to market, according to the Beecham Research report. For example, insurance companies will sell devices directly as part of their policies or offer discounts from retailers, while utilities companies, security providers and telecom operators also see the opportunities to partner with products companies to deliver new services and value add.
“As initiatives to encourage the adoption of smart devices proliferate, the partnerships offering specific financial advantages or benefits will show a stronger uptake,” says Kaplan. “These partnerships will also drive the shift from product to subscription or cloud-based service offerings.”
The Beecham Research report also takes a look at the global markets and levels of smart home adoption across different geographies. “For example, the US market is much more advanced than Europe and other parts of the world due to a more proactive attitude towards connected consumer devices and the popularity of safety systems,” says Kaplan. “Countries where vendors are investing in promoting smart products and raising awareness of their benefits are already seeing faster uptake.”
Beecham Research will also be publishing a second report later this month that takes a closer look at IoT security issues in smart home environment and development of smart home security market.