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Our recent webinar “Home Goods and the Internet of Things: The Real Value of the Smart Home Industry” analysed today’s smart-home segments, including opportunities, challenges and the outlook for the market. The webinar ended with a Q&A session, the highlights of which are below. In addition to the expanding smart-home services sector, the webinar examines the role of the smartphone in driving consumer uptake and the role of the connected car as a new smart entertainment space. With global Internet penetration reaching tipping point and household appliances becoming more digitalised, households are ready to get smarter.
We consider that developing smart appliances – based on Google Inc or Apple Inc’s common platforms – to be more attractive to consumers, because of the convenience of controlling appliances through a centralised platform. The drawback of connecting individually is that appliances of different brands can hardly talk with each other. Rivals are unlikely to develop appliances that are compatible with LG Corp’s SmartThinQ app or Samsung Corp’s SmartThings app. Consumers are also unlikely to purchase their appliances from the same brand.
Other consumer electronics manufacturers are also eyeing a share of the pie. Wireless audio manufacturer Sonos Inc has found success by making it easy for consumers to sync up their computing devices with the Sonos Inc system by ensuring that its app can be downloaded across several operating systems and devices. Software manufacturers such as Google Inc are choosing the acquisition route to speed up entry into the connected homemarket. Nest Labs, which Google Inc acquired in January 2014, demonstrates the most potential in driving the success of the connected home. Third party smart devices and appliances, such as Aliphcom Inc’s Jawbone, Whirlpool Corp’s washer and dryer and Koninklijke Philips NV’s Hue, can be accessed through the Nest app, which simplifies the user experience.
There is certainly interest, but their focus is likely to be on the more advanced and tech-friendly markets for now. Demand for the smart segments is largely coming out of Western Europe and the USA, where Internet penetration is higher and incomes make purchases of smart appliances more realistic. In 2014, some 80.0% of the population in advanced economies were online, compared to 30.3% in emerging markets.
Emerging markets in Latin America, Eastern Europe and Asia tend to be slower adopters of high-end appliances, and demand for smart goods is likely to take much longer to come through. Nonetheless, there are also small but very wealthy consumers in such markets who are more willing to invest sizable sums into their smart homes, especially in areas like security. Therefore, companies aiming for upmarket, niche segments are likely to evaluating emerging markets with interest.
As the ever-evolving Internet of Things continues to experience widespread adoption, one of the areas in the smart home that is expected to see the greatest change over the next decade is, indeed, the kitchen. According to a recent trade report, the result of this burgeoning technology will make way for a US$10.1 billion smart kitchen market by 2020. The study found that out of all connected kitchen appliances, many consumers favour fridges that will allow them to monitor food inventory with their smartphone. Whether it is food storage, preparation, or the act of cooking itself, the arrival of new technologies will enable consumers to become more efficient, knowledgeable and possibly even better cooks in coming years. As a result, we believe that appliance makers, smart home companies as well as those who provide food to consumers will see both enormous opportunity as well as disruption to their existing businesses with the arrival of the smart kitchen. This market is especially opportune since the penetration of kitchen appliances continues to grow globally. For example, the household possession of a fridge increased globally from 69.2% of homes in 2009 to 76.4% by 2014.
1. There is no clear market leader, brand or format. A number of players from diverse backgrounds are competing for market share. Therefore, consumers are often confused and uneducated when it comes to choosing smart technologies for their home, often believing it to be an expensive and complex process. The sector requires the ‘iPod’ moment – when a single highly desired product launches mainstream demand.
2. The technology is not delivering the ‘wow’ factor. While there have certainly been breakthroughs in sensor controls and smartphone-enabled remote connectivity, there remains a lack of space-age innovation in the market. For example, a smart fridge that tracks its content and lets users know when foods are reaching their use-by date sounds appealing – but this technology remains distant in terms of affordability and capability.
3. Internet penetration remains weak in emerging markets, creating a significant gap in demand between advanced countries and the rest of the world.
Household appliances such as washing machines are beginning to reach a ceiling in terms of their capability. While consumers are still willing to pay a premium for fashionable designs and performance washing machines, there is a growing need by manufacturers to provide smart options to stand out in a crowded marketplace. For example, both LG and Samsung already have a line of fridges with Wi-Fi capability and LED displays. Smart washing machines is not too far away. Furthermore, rapid urbanisation and increase of middle class households in emerging markets is driving massive leaps in the penetration of domestic appliances, giving more consumers a stake in the smart home.
In terms of washing machine options, services can range from distance control via smartphone (switching on/off etc.), monitoring energy usage, collecting data on how often it is used, and timers for specific usage during the day.
A number of smart-home operators have developed their own home controls, but this typically is reliant upon a fairly upmarket smart-home operating system. While these have a place on the market, it is certainly not something that can be implemented on the mass market easily. The smartphone’s strength is its high penetration rates, reach and easy access to smart home apps. In the near future at least, it is difficult to see anything that can replace it, aside from similar devices such as tablets or wearable tech that are essentially built on the same system. However, even the wearable tech market has been unable to break into the mainstream due to the prevalence of the smartphone (consumers already have most of what they need in the mobile handset, so an additional mobile device seems like a luxury). So, another smartphone-displacing device is difficult to see at the moment. More than 1.2 billion smartphones units are expected to be sold in 2015.
For more information listen to the webinar recording here.