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Smart home 2023 review: Trends, challenges and an update that ‘matters’

Smart home 2023 review: Trends, challenges and an update that ‘matters’
This article series looks back at the smart home market in 2023 and previews what’s likely to come in 2024.
In 2023, the smart home market grew due to falling prices in various smart home devices. Meanwhile, software and services are expected to accelerate growth even further in the near term. This article series looks back at the market in 2023 and previews what’s likely to come in 2024.
Needless to say, smart home has become an ever more popular concept among residents and homeowners. Smart home is all about IoT and a certain level of artificial intelligence to make the home life smarter and more automated. Asking Alexa or Google to turn on the light and play one’s favorite radio station is an experience that more and more people are going for.

General trends for 2023

So, how did the market do in 2023? According to Jack Narcotta, Principal Analyst for Smart Home at Omdia, shipments grew due to falling prices in various smart home products.
“I estimate total units shipped in the smart home market to grow about 25 percent year-to-year in calendar 2023. About 100 million new devices, including, cameras, light bulbs, plugs, video doorbells, and others found their way into consumers’ homes. The main growth driver across nearly all categories was average selling price (ASP) continuing to shrink, especially in marquee categories such as light bulbs, indoor/outdoor cameras, and video doorbells, making it easier for consumers to add to their existing smart home solutions or try the smart home for the first time,” Narcotta said.
In addition to declining prices, 2023 also saw increased maturity and availability of software and subscription services that make smart home devices more fun and intelligent. A regular Amazon user, for example, can only choose from a limited range of songs with ads to listen to from their smart speaker; a paid premium member, on the other hand, can get almost any song on demand from millions of tunes on Amazon’s platform.
“Among the biggest trends is how quickly software and services are becoming a milestone along consumers’ smart home purchasing journeys. Lower prices for the most popular devices, especially indoor/outdoor cameras, video doorbells, and light bulbs, remain a powerful selling point for consumers. Subscription-based services to unlock additional features or enroll in home monitoring services, in addition to larger caches of cloud-based video storage, are garnering more interest from consumers, especially early adopters that are looking to do more with their collections of smart home devices,” Narcotta said.

Challenges remain

In spite of these positive developments, challenges remain in the smart home arena in 2023. “Among the more pressing challenges for the smart home is that it, in general, is a ‘nice to have’ not a ‘need to have.’ One of the largest hurdles for brands to overcome is the perception that many smart home devices are ‘inconveniently convenient’ – that is, in the case of smart light bulbs for example, even with smart bulb prices continuing to shrink, many consumers wonder why they would need to use an app to control their living room lights when the ‘dumb’ switch on their wall works – and has worked – perfectly well for years,” Narcotta said.
Whether this will change in the near term remains to be seen. It largely hinges on whether solutions providers can do a good job selling the idea that "smart home way of doing things is superior to way things have been done,” as Narcotta put it. Using smart light bulbs again as an example, once they are connected to a hub-like device they can turn on and off or adjust to different intensity levels all upon a voice command issued by the user. Once the user is used to this, it’s hard for them to go back to how things were done before.

Latest with Matter

One subject that generated lots of discussion this year was Matter, a standard supported by Amazon, Apple, Google, Comcast and the Zigbee Alliance, now the Connectivity Standards Alliance (CSA). While Matter aims to be a unifying standard that enables interoperability among smart home devices of different vendors and brands, its overall market response has been a bit lethargic.
“Matter did ‘OK’ in its first year. It came to market in January 2023 at CES with a flourish on the heels of its official launch in Amsterdam a few months earlier, though since then it hasn’t quite lived up to the hype. I don’t think that’s a bad thing, as this is a large effort involving multiple high-profile companies, and that many egos in the room will always slow down the efforts of a group overall,” Narcotta said. “Adoption has been slower than expected, with large companies like Belkin and Signify (Philips Hue) either pulling out completely or pausing for a few months, respectively. Matter is already a few months behind the timelines originally set by CSA, as cameras and video doorbells are not yet ready for prime time with Matter.”
He added: “That said, Matter continues to quickly iron out technical and go-to-market wrinkles, and appears to be catching up quickly to its original timeline. Matter is likely not to have a material impact on consumer smart home device shipments in 2024, as Matter’s delays mean most consumers will need more time to understand what Matter is as well as what it’s value proposition means for them.”
So what else can we expect of the smart home in 2024? We’ll look at this in greater detail in an upcoming article.

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