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Why Nest's new security products may face stiff competition

Why Nest's new security products may face stiff competition
Nest has recently launched a series of products that marked its entry into the home security arena. While this may be welcoming news for Nest users, the company may face stiff competition due less expensive alternatives for consumers, according to a recent report by IHS Markit.
Nest Labs recently launched a series of products that marked its entry into the home security arena. While this may be welcoming news for those already adopting the Nest ecosystem, the company may face stiff competition as these products charge a premium in a very competitive market that offers less expensive alternatives for consumers, according to IHS Markit.

According to the Nest website, the newly launched products include the Nest Secure alarm system. The starter pack includes these products:
  • Nest Guard: A security base that provides the alarm, keypad and a motion sensor.
  • Nest Detect: A sensor that detects both motion and open or close movement in one compact, battery-powered product.
  • Nest Tag: A fob that can attach to a keychain, allowing the user to easily arm and disarm Nest Secure without a passcode. Nest Tags are easy to share with family members and trusted people who regularly enter the home.
Other products in the launch include Nest Hello video doorbell and Nest Cam IQ outdoor security camera.

According to Blake Kozak, Principal Analyst for Security Technology at IHS Markit, these product announcements from Nest follow the current industry trend of specialists moving into the wider market. “What this means is that companies which entered the market with a primary specialty – in Nest’s case, thermostats – are starting to build complete portfolios,” he said. “With motion sensors and door/window sensors, the Nest thermostat could be alerted to an open door or open window in order to turn off the HVAC system, which can save on energy costs. Until the announcement of these products, Nest relied heavily on ‘Works with Nest’ in order to have their devices as part of a smart home. Now, Nest will be able to exercise greater control over their own destiny. So although Nest Secure is a security system today, these sensors will have a dual purpose for Nest in the coming years as they build out the ecosystem.”

However the new security system does not come cheap. According to the Nest site, the Nest Secure starter pack, which includes Nest Guard, two Nest Detects and two Nest Tags, has a suggested retail price of US$499. According to Kozak, this can present a challenge especially when Nest is trying to woo consumers that are new to the brand. “Consumers that already have several Nest Protects, several cameras and a thermostat, will likely be excited about these new products and will be the first to adopt. However, consumers that are still deciding which ecosystem to adopt may find it hard to spend $500 on something they could essentially get for less than $200 with almost every other brand on the market,” he said. “The primary difference though and why consumers may opt for the Nest over the competition is that all the devices are under the same brand and there is no question it will work together.”

But Kozak further reminded that there are fees attached to the new products’ advanced features. “For example, Nest Aware comes at a cost of $10 a month for the first a camera and $5 additional for each additional camera. Cellular back up for the Nest Guard comes at $5 month and the cost of MONI professional monitoring has not been released yet. So for cellular-back up, a Nest Hello, Nest indoor camera and two Nest outdoor cameras will cost $30 a month, excluding any fees for professional monitoring. As a result, the end cost for a complete Nest system with professional monitoring will likely cost at least $45 a month, right in line with what ADT, Vivint and the other professionally monitored systems cost,” he said. “Although other DIY systems do not have cellular-back up or the advanced features that come with Nest Aware, many of the competitors in this DIY market for smart home cost $0 each month. This means that Nest can certainly take market share away from the existing players with security systems, but with the high upfront cost, the consumer base is limited and the attach rate will be much slower compared with other players already in this segment.”


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