Analyst Beecham Research points to new alliances and routes to market driving growth
Despite “high price tags”, the smart home product market is set to be worth $16.2 billion by 2020, according to analyst Beecham Research.
Earlier this week, online retailer Ocado announced it would be selling smart home products alongside its food lines to address the needs of “tech-savvy” consumers.
But Beecham warned that “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”.
While new home comforts and easy living remain the main incentives for potential customers, said Beecham, 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 Beecham 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, and also concerns around data privacy and a 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 a compound annual growth rate of around 34 percent over the next five years, from $3.1 billion in 2015 to $16.2 billion in 2020.
“A basic light bulb is more than 20 times cheaper than its smarter counterpart,” said Olena Kaplan, an analyst at Beecham Research. “But evidence shows that consumers are willing to pay a premium price if they understand the value of the more expensive product.”
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.
“The smart thermostat was amongst the first smart home devices 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, says Beecham. 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 product 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,” said Kaplan. “These partnerships will also drive the shift from product to subscription or cloud-based service offerings.”