Smart home spending to take a temporary hit before surging

Discussion
Photo: @ColleenWait via Twenty20
Aug 17, 2020
Tom Ryan

A new study from ABI Research predicts that the pandemic will significantly slow consumer smart home purchases in 2020 and accelerate growth in the years ahead.

“The pandemic is a double-edged sword for the smart home industry,” said Jonathan Collins, smart home research director at ABI Research, in a statement. “While the immediate impact may be negative, many of the long-term and structural changes to consumer lives initiated in 2020 will have a lasting positive impact that will help to drive adoption.”

The firm now expects smart home revenues to be up four percent over 2019, down from growth of 21 percent projected pre-pandemic. The culprits include economic uncertainty, installation and physical retail restrictions, and manufacturing disruptions.

By 2026, however, ABI Research predicts the smart home market will be up five percent over pre-COVID-19 forecasts to $317 billion as smart home technology cements its value. As an example, Mr. Collins points to how Amazon’s Alexa platform can support a household’s entire shopping process, from list creation to delivery management.

Z-Wave Alliance’s “State of the Ecosystem Report” anticipates that smart doorbells and water sensors, partly due to incentives from home insurance carriers, will see the fastest growth among categories through 2025.

Increasing demand for smartphone enabled home entertainment devices are expected in coming years due, in part, to lockdowns. Mitchell Klein, executive director, Z-Wave, said in an interview with Hiddenwires, “With more people spending time at home streaming content, working, and learning, there is a renewed focus on using smart home technology to keep people connected inside the home and from a distance.”

In Z-Wave’s report, Jennifer Pattison Tuohy, an editor at Dwell Magazine, cited complexity, interoperability and longevity as the largest hurdles to mass consumer adoption of the smart home.

She said, “Complexity because consumers don’t want to spend their weekends installing/troubleshooting their homes. Interoperability because consumers don’t want to buy something unless they know it will work with everything they have in their home now (and might want in the future). And longevity because consumers are scared by the all too common reports of the death of smart home devices.”

DISCUSSION QUESTIONS: Will COVID-19 speed up or slow the adoption of smart home technology by consumers? Have the hurdles preventing adoption changed?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I'm still waiting for one company to take the lead on smart home deployment. "
"Consumers are spending to upgrade their WFH spaces – along with the rest of their homes – as the lockdowns continue."
"It’s likely that many consumers still have the perception that smart home technology is expensive and unnecessary..."

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14 Comments on "Smart home spending to take a temporary hit before surging"


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Neil Saunders
BrainTrust

Within smart home technologies, there are few categories positioned for good growth. Smart light bulbs is one, mainly because they allow people to create an ambience and mood more than normal light bulbs do so there is a tangible benefit to adoption. Security and monitoring is another area, partly for peace of mind and partly because it can help reduce insurance costs. All that said, smart home is still falling below potential because of complexity and privacy concerns. In surveys we have done, those are the biggest barriers to wider adoption.

Mark Ryski
BrainTrust

COVID-19 has already sped up the adoption of smart home technology out of necessity. While the challenges of installing and using smart home technology haven’t necessarily changed, consumers have. The need for these technologies has taken on a practical aspect as work from home has become a full time reality for many workers. And while the hurdles for adoption are real, the broader trend of people working from home and having more time to learn to use and deploy this technology will help continue to drive its growth for the foreseeable future.

Carol Spieckerman
BrainTrust

COVID-19 should speed the adoption of smart home technology as higher-income, work-from-home consumers have more exposure to the old-school devices in their homes and more time to explore upgrades. Job/income loss is the main obstacle.

Ben Ball
BrainTrust

Well put, Carol. Add to that the flight from urban homes during the pandemic. My daughter works in D.C. and her household now decamps to our NC mountain cabin for weeks at a time. Though forced to Wi-Fi enable the cabin for basic communication years ago due to lack of cell service, I had staved off all manner of entertainment and other digital devices until now. Now Alexa can add to your shopping list and digital screens glow late into the night with Netflix and Wii Bowling tournaments. I’m sure many other “second homes” are experiencing similar digital disruption.

Carol Spieckerman
BrainTrust

Great point about second homes and COVID-19 escapes, Ben! Also, when those smart second homes are rented out, it can be a powerful motivator for tenants to upgrade their own homes.

Suresh Chaganti
BrainTrust

Smart home technology has great use cases, but terrible implementation processes and guidance. I consider myself a tech enthusiast and reasonably tech savvy, but it is way too hard to understand the different pieces of the puzzle. Some pieces are one-time, some have recurring fees, some need rewriting at home, and there is a lack of guidance on whether devices from different vendors will work together – interoperability.

Secondly, the security and privacy concerns are substantial. Voice search doesn’t feel intuitive. The uptake of voice searches has been abysmal.

Overall there are multiple headwinds as far as I can see. The industry has to mature in multiple aspects before smart home technology takes off.

Jeff Weidauer
BrainTrust

Consumers are spending to upgrade their WFH spaces – along with the rest of their homes – as the lockdowns continue. Smart home tech may be lagging this activity, but it will catch up once desks, chairs, and workspaces have been upgraded. The challenge for many will be dealing with the complexity of connectivity, the changing and inconsistent standards, and a reluctance to allow installers inside the house. The fact is that connecting smart home devices remains a challenge, even for those of us with the technical know-how. It needs to be easier to do – that will help the adoption.

Cathy Hotka
BrainTrust

I’m still waiting for one company to take the lead on smart home deployment. The top impediment right now is the fear of looking dumb — if Magnolia or Geek Squad or Apple were the obvious go-to we would see more adoption.

David Biernbaum
BrainTrust

It’s likely that many consumers still have the perception that smart home technology is expensive and unnecessary, but also complicated to set up without bringing a tech person into the home. At present, home visits are not welcome except for absolute necessities.

Ralph Jacobson
BrainTrust

So many consumer categories are surging right now that I find it hard to believe smart home tech will slow in any significant way even temporarily, especially with personal security concerns on the rise.

Ricardo Belmar
BrainTrust

I don’t necessarily believe the forecasted slowdown in smart home tech purchases will happen. Although there is likely an impact due to individual financial uncertainties for some people, overall, I would put many components in this category into the home improvement category. As people continue to work from home and/or spend more time at home (or even second homes) there will be more desire to improve the comfort level and home automation of those locations. With more and more devices integrating with Amazon’s Alexa and Google Home products this will only become easier over time and adoption will increase. Lighting and home entertainment systems will experience the most gain initially as digging deeper require better integration and less complexity from products than many people are willing to endure today.

Craig Sundstrom
Guest

What was “holding back” people from “adopting” the Edsel? Nothing, other than that they just didn’t want one. Could that be the case with smart devices as well? Certainly those that developed them don’t think so, and as a lot of resources went into it, I’m tempted to believe them, but I also believe there are technological misfires every once in a while, and some of these “smart” devices of questionable usefulness probably fit that description.

Brian Numainville
BrainTrust

As someone who has used multiple smart home platforms, there are a couple of issues. One, most platforms do require someone to be at least inquisitive about technology to make them work given the amount of issues that crop up. Two, the longevity of platforms remains an issue with no clear leader. Wink faltered, other platforms (and numerous devices) died, and Smartthings is now changing apps, driving some customers away. Finally, a big part of my use was for when I was away, which is, right now, not often due to the pandemic. So, my interest right now (as I am sure is the case for many others) has waned lately. It will take a clear leader that people believe will be there long term, with an easy to use platform to propel this forward.

Fouad ENNIRI
Guest

The adoption of smart home products can be exponential if the user experience is improved by making the different standard interoperable and by making the onboarding seamless. KNX tried to solve the first issue 30 years ago, but it is still too expensive for the consumer market. Connected Home Over IP has better chance to succeed by making the devices “plug and play” and more affordable.

wpDiscuz
Braintrust
"I'm still waiting for one company to take the lead on smart home deployment. "
"Consumers are spending to upgrade their WFH spaces – along with the rest of their homes – as the lockdowns continue."
"It’s likely that many consumers still have the perception that smart home technology is expensive and unnecessary..."

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