Budget cuts in the government sector due to the sluggish economy and more accessibility to network technology across sectors has made the commercial sector much more important to the security industry.
The government sector is the primary and largest market sector in the security industry. The main products and solutions of major security manufacturers are usually invented as per the government's request, as government projects still take up the most revenue in the global security market. However, the economic slowdown has been affecting global government budgets. Meanwhile, network technologies have become more affordable to all market sectors. Commercial and residential sectors, then, have gained a lot of traction in recent years. As a result, major security manufacturers are now starting to tailor their products and solutions to the commercial and residential market sectors.
The blurry line between commercial and residential market sector
The commercial market usually includes a wide range of applications, from small- and medium-sized businesses (SMB) to global corporations and enterprises, and in many cases, the residential sector too. With diverse interpretations of what the commercial and residential markets consist of in the security industry, most manufacturers are convinced that there are no absolute differences between them. For example, small-sized, standalone stores are very similar to the residential sector. Some companies believe that the commercial security market includes offices, factories, chain stores, parks, community areas, logistics centers, and buildings. Nevertheless, some might include the aforementioned places in the residential market, since, in many cases, the residential sector has adopted certain commercial applications; there are also some companies that include the residential sector in the commercial market.
In contrast to professional security products and solutions that are mainly applied to safe city and government projects, the commercial security market targets residences, chain supermarkets, small-scale stores, and small- to medium-sized corporations. While it is widely believed that chain stores, shopping malls, and small-sized stores are under the commercial security market, not all agree. Some companies might argue that chain stores or multinational wholesale stores such as Walt-Mart, which tends to engage in centralized procurement from the same supplier for packaged-service offerings, are quite different from others. As a result, some companies consider chain stores as one particular market sector.
Commercial customers prefer value-added solutions
The difference between the commercial and residential markets is not very clear. Even, in several cases, a SMB project can develop into a large-scaled one so it might not be easy and reasonable to simply define the market by its verticals. However, according to different levels of the end users' requirements toward security, we can try to picture what the commercial sector is like by comparing supplier's product offerings.
The professional products (solutions) -- mostly adopted by government-related and high-security sectors -- and commercial ones are distinctively different in terms of end users' primary requirements. Reliability is the primary requirement for the professional products; whereas end users who are opting for the commercial products look for higher cost-performance and multiple managerial functionalities to achieve higher working efficiency and return on investment (ROI).
Take video surveillance devices, for example. End users for the professional products prefer to deploy devices with high image resolution, extreme lighting, and frame rate performance. Conversely, end users for the commercial products prefer value-added devices that provide additional marketing information and managerial functionalities, like customer flow and other intelligent analysis on customers. Shopping malls usually require the installation of hundreds of cameras that can instantly provide customer flow data, which analyzes customer capacity in terms of time and space to help the company make the right business strategy. Furthermore, devices used in commercial applications usually utilize mature technologies that need little maintenance, since these companies usually do not have sufficient or professional personnel to regularly maintain or operate the equipment.
End users for commercial products tend to buy security products that are convenient to operate but also have innovative technology at an affordable price. Additionally, some chain stores and shopping malls are also concerned with whether or not a surveillance device is good looking, can be installed in a hidden location to make customers feel more comfortable while wandering around, and have low power consumption. Most small-scale shops, chain stores, and restaurants still use outdated local surveillance systems that are unreliable. This provides security equipment and service suppliers with an excellent opportunity in the commercial market.
Direct sales business model
Centralized procurement has become a trend in the commercial market. While some stores and corporations are rapidly expanding their business, it is more cost-effective for them to purchase all security devices from the same supplier, like manufacturers. Some hotels are also starting to require central management functionality to better manage their branch hotels and the extra service of solution design, which presents challenges to distributors. Hence, end users have started asking manufacturers for help directly, instead of distributors, for large orders of cost-effective products, packaged-service solutions, or specifically designed solutions according to each company's requirements.
Innovative applications spur market demand
One time attendance system manufacturer has developed a solution that allows end users to review their own attendance and purchase records, and even remotely control physical access, so it saves extra time of their HR department. Furthermore, this solution can automatically provide parents with their child's school attendance records. Some solution has even been designed with near field communication (NFC), allowing users to make deposits and transactions with their personal smart device. Another well-known company has produced a time attendance system that works with Android 4.0 system. The system offers functions such as weather forecasts, a hygrometer, etc. If an IP-based webcam is installed on the system, it becomes a surveillance device as well. Additionally, there are many manufacturers producing intelligent management solutions for chain stores. These solutions allow chains to unify the management systems of up to 500 stores, with integration for 1,000 stores not too far off.
Although the most updated intelligent store management systems already offer end users other management functions than customer flow, many end users still regard it merely as a customer counting system, suggesting that the other functions of a store management system have yet to be broadly promoted. Many store owners have noticed the importance of investing in security equipment and are willing to invest in them; however, only a handful of them can fully recognize the benefits of network technology, intelligent systems, and the importance of central management of their branch stores, especially for the chain stores. There is still room for suppliers to better educate their customers. One thing for sure is that this market is still underdeveloped and it will require more innovative solutions to spur market demand.