The U.S. leads the pack in the smart home market in terms of market maturity and penetration. According to Statista’s Digital Market Outlook, the United States is the world largest market for smart home technology in terms of revenue and household adoption.
The U.S. leads the pack in the smart home market in terms of market maturity and penetration. According to Statista’s Digital Market Outlook, the United States is the world largest market for smart home technology in terms of revenue and household adoption. There are currently 4.6 million smart homes in the United States, a number that is expected to increase fivefold by 2020. The other research firm Technavio forecasts the smart home market in the US to grow at a CAGR of 38.02 percent over the period 2015-2019.
In the United States, there are mature network facility, numerous innovative companies and products, strong ecosystem, and robust market demand. DIY systems are easily -accepted and fast-growing. The country has a long history of homeowners fixing their own household items. Also, with more and more new entrants into the field, the consumers have a better understanding and more choices of the smart home systems.
Home controller and platform providers like Control4, Crestron, Savant, ELAN, URC and RTI have led the home automation industry for decades. With regards to the smart home market, they dominate the luxury and mid-range segments by offering custom installation systems. With the evolvement of the Internet of Things and proliferation of smart mobile devices like smartphones, entry barriers are lowered. The existing companies thus face the threat from new entrants who target at the mass and entry-level market. The new entrants provide more affordable solutions with low-end disruption, satisfying mainstream customers who are price sensitive. The cost advantage makes the suppliers competitive since their entrance in this decade.
Paul Williams, VP of Lighting & Comfort Products at Control4 said, “Home automation at one point belonged exclusively to the upper market. We feel we have been successful over the last decade because we are driving home automation into the mid-level market.” Brett Stokke, Director of Communications at RTI said, “Satellite and cable companies are now moving into the home automation market along with big names like Google and Apple, which are generating a lot of buzz and helping the segment grow.”
Nolan Mondrow, President of LockState commented, “If you look at the CES four or five years ago, home automation was a very small portion. Now, the market is exploding. Everything now becomes mainstream and people are aware of that. It’s a long curve when we talk to the next five to ten years. If you manufacture anything without using IoT, you could risk failure.”
When talking about new entrants, there is a new group of installers in the United States called DIY installers. Mondrow of LockState said, “It’s almost like a handy man, but they are more trained. They tend to be small companies or individuals.”
Steve Ipson, VP of Commercial Care at White Rabbit indicated the driving force of growth will be cost and simplicity. He said, “The product needs to be affordable, not only providing security, but also the modern conveniences that home owners want at a price point that more people can afford. Many people don’t have a security or home automation system because it’s too expensive. So by bringing the cost down and making it effortless to use, we will see an increase in market penetration.”
Amy Jalili, Director of Marketing at On Controls said, “We definitely see a growing demand. The consumers in the middle-class market are budget-conscious, but still desire automated technology in their homes. With the increase in availability of such solutions we've seen the connected home trend become far more commonplace with today's homeowner.”
Lucas Funes, CEO and Founder of Webee thinks the consumers still need a lot of education for the mass adoption. He said, “The cost of a truly smart home is an important driver, but the main barrier to become mainstream is that consumers don't understand what type of system they need. System integrators, security and telecom companies play a key role in the education.” He added that the installer’s role is critical to let users understand what they need and where to start.
System installers solidifies foundations
The centralized system is a preferred solution because it’s more reliable. The system integrators and installers are a major group to drive the market, and have made the connected home come true. Distributors who sold products to them believe that the professional installation market is still larger than the DIY market in the United States. The distributors like Worthingtons and Border States Electric promote customized and semi-customized systems.
Darryl Minkin, DataComm Product Manager of Border States Electric said, “DIY products are certainly not as highly functioning as those professionally installed systems. The consumer could benefit from installation, configuration, functions, after services from professional installation.”
Funes of Webee said, “System integrators and installers that already are in the homes make the truly smart home become real and educate consumers. We think the smart home and IoT market will be mainstream, but it will take a couple of years since people need to understand even more the power and benefits of a truly smart home and how easy is to install and setup by itself.” Stokke of RTI said, “With the increased interest in home automation by consumers, it’s not surprising that they initially look to cheaper DIY products.
However, many times they become frustrated with the performance of these products and turn to our dealers for help. The majority of consumers simply don’t have the time to learn the software and setup procedures needed to successfully install and troubleshoot these systems. A professional integrator has the proper knowledge and experience to select and install the automation solution that will meet the user’s expectations.”
In the competitive market, it’s necessary to enhance the market penetration and presence as soon as possible. The companies make an all-out effort to support as many third-party devices as they can. For example, ELAN has released an open API to make it easy to create two-way drivers for third-party devices. “We have one of the best interfaces on the market. We develop most of our drivers in-house, so we can create better interfaces for third-party devices,” said Bundy. He continued “Because our controllers have no fans or moving parts, they never need to be reset. Once you plug them in, you never need to reboot. We try to make our system easy to use, while not compromising the experience.
ELAN also focuses on privacy as an important issue. “We have 256-bit encryption on every single log-in. It would take around ten years to brute force hack an ELAN system,” said Bundy.
The new entrant from Comcast, one of the U.S. largest service providers provides Xfinity Home system. It works with Nest, Chamberlain, August lock, Lutron Caseta and other popular residential DIY solutions. The users can use their cable box to connect to those smart home devices they already have at home without purchasing a specific home hub or gateway.
Furthermore, the integrators are looking for consistent method for creating service contracts and want to make sure which clients are covered for various levels of service. From Ihiji’s research, they had no centralized place for all customer and site data and an effective method for sending monthly bills.
Ihiji launched a new SaaS solution ServiceManager for integrators, security monitoring firms, and other companies that offer technical support or services to improve and profitably expand their businesses. It gives professionals the tools they need to set up and maintain bottom-line-boosting recurring monthly revenue service plans.
Steve Muccini, Director of Marketing at Ihiji said “The new product is going to allow the integrators to deliver not only this remote service, but also charge their customers, and set up multi-tiers of services. It helps the integrators to make money. He explains that the integrators use its products because they want to reduce support cost and dazzle their customers. “They want to reduce the time that they sent the technicians to the remote sites. That costs money. Also, they can use our system to solve the problem before the problem happens,” added Muccini.
Surging demands
Overall speaking, the DIY solutions are simple to use and affordable; while, the custom home automation systems are more complicated and expensive. However, professional installed systems are viewed as more reliable and customizable. It is a trend to find a balance between ease of use and customization. Also, the average users want one app to control all devices.
Delia Hansen, Director of Distribution at Clare Controls indicated that the mainstream expects balance of luxury and DIY solutions. “Mainstream homeowners expect quality and reliable products at lower price points, highly personalized but simple-to-use systems, app-based solutions to work with the devices they already have, sophisticated capability set with an intuitive user experience, and professionally selected and installed solutions that allow the homeowner to retain control and ownership,“ said Hansen.
For the ultimate in ease of use, it’s important that a control system allows a high degree of customization. Stokke of RTI said, “For instance, having five to ten different apps cluttering up smart devices can be just as confusing as having a table full of remotes. RTI is the glue that holds a system together, taking all of these different elements and bringing them together into one app that is completely customizable. It cuts through the confusion, eliminating the need to explain to family members and guests which app controls each aspect of the home.”
Mohan Vellanki, Co-Founder of Orvito said, “Users in the U.S ask for simpler and an integrated solution. In that direction, we have launched Orvito Nucleo with the vision of making the physical space smarter by giving the users ability to connect, monitor, control and automate any device in home, office or building in a single, integrated IoT network.” The company creates Spindle. It is a cloud-based universal smart home controller that lets users control any IR based device and host of third party smart devices like Nest, Yale locks, Philips hue and many more.
Expanding sales territory has been a major development directions for either DIY or professional installation solution providers. LockState joins Airbnb Host Assist Program to allow Airbnb hosts to utilize its cloud-controlled smart locks like its RemoteLock 6i for access permission and easy entry management. Also, LockState partners with Kozo Keikaku, one of Japanese leading engineering system solution providers, to jointly create cloud-based smartphone applications that combine data from Internet connected sensors like motion detectors with controllable devices like door locks. They are designed for customers in the vacation rental, property management and healthcare markets in North America, Southeast Asia and Japan.
Vellanki of Orvito explained the challenges nowadays. “The IoT is booming up, there are new players every six months. The quality of the players becomes an issue right now. Consumers will start to wonder if it really works. Once they have the bad experience, they won’t try it anymore. In the marketplace, smaller and bad quality players will fall away, consolidation will happen and then there will only be good products at the end.”
From the industry experts’ viewpoints, we see that the DIY and retail markets have been growing faster than the professional installation market, despite the fact that the professional installation market is larger. The professional installation market players head towards leveraging the two markets by either partnering with leading DIY platforms like Nest or open their API to add more third-party devices. The consumers will benefit from the balance of simplicity and customization with more affordable price. For the industry players, the competition will become more intense but the market will expand even larger. Look into the future, they have to keep competiveness and find a profitable way. That’s essential.