We may not like to admit it, but in the UK and Europe we tend to follow the technology and trends in the US markets. There are some notable exceptions and home security is one of them.
In the US, there is a strong market for monitored security with over 23% of residential properties paying for professional services in a sector worth over $20bn/year whereas in the EU, the market for professional monitoring averages less than 5%. This disparity has tempted security companies like ADT, Securitas, and others to try growing the EU market and new US entrants such as Alarm.com and Honeywell Resideo are now making a push.
Parks Associates – UK Smart Home and Security Survey
There are strong cultural and business reasons that suggest growing domestic security monitoring services in Europe will be tough.
The traditional value proposition for security is not seen as strong and, even though the various players have embraced new services such as home automation, most EU consumers remain unwilling to commit to long-term contracts with high monthly fees. The potential is further undermined in many EU countries because police forces are unwilling to respond to domestic alarms and people rent rather than buy their home.
However, there are signs that the security market in the US is changing and there may be important lessons for the EU.
The leading smart home research organisation, Parks Associates, recently conducted detailed market research on the security markets in both the US and Europe. One interesting finding is that, for the first time, DIY security systems are outselling professional systems by 2-1 in the US where the advent of the IoT and smart home has made it possible for new entrants like Ring, Nest, and Smart Things to offer simple plug-and-play solutions. “Consumers value security and safety use cases, but the security market has struggled to move beyond the traditional 20% penetration level in the U.S.,” Brad Russell, research director, Connected Home, Parks Associates, said. “Aggressive moves by companies such as Ring, which launched its inexpensive Ring Protect, will help attract new and younger consumers into the security market.”
These new entrants are driving growth in the DIY sector with value propositions focused on price and capability, but it would be a mistake to think that these new systems are simply intruder alarms with a bit of home automation thrown into the mix. These new systems are the first generation of simple, affordable, and scalable smart home solutions that give consumers more value and greater peace of mind.
Delivering more value and greater peace of mind is possible because the Internet of Things (IoT) technology is driving a revolution in the way consumer products are designed, supported, and managed. In the smart home, the data from devices is being used to improve engagement, secure unique insights, and support the deployment of new, value-added services that deliver every-day benefits to both the consumer and the various parts of the supply chain. Access to this data is the reason why companies like Amazon, Google and Samsung are so committed to this market.
This growth in DIY may seem like bad news for the professional security installer.
However, behind the headlines, there are some important trends that suggest the smart home is a growth opportunity for installers; particularly in the UK and Europe where the DIY has always had a strong market share. The merging of products such as thermostats, door locks, doorbells, water shut-off, lighting controls, and cameras with simple traditional DIY security to create smart home bundles has increased the complexity of sales, installation, and support. Consequently, there is a likely to be a growing demand from consumers that will be willing to pay for someone to supply, install and support these solutions in a shift from DIY to do-it-for-me (DIFM).
In the UK, there is strong growth in the uptake of smart devices which suggest this is likely to create demand for these new DIFM business models. Security installers are ideally placed to meet this emerging need if they are willing to extend their business models beyond traditional intruder alarms to support the smart home. Installers have a strong geographical footprint, know their local markets, and have many of the key resources and capabilities to become the obvious channel for smart home products and services.
There will be challenges.
Traditional security installers lack some of the trade skills that would be needed for the eco system of smart home devices; for example, water shut-off valves that require plumbers for installation. Pulling together the eco-system of products and services will be a challenge for smaller companies, but this is where distributors could play a role. Also, there will be competition from other trade channels but it could be argued that it will be easier for security installers to expand to build partnerships to deliver turnkey solutions than, for example, plumbers.
In short, the smart home could prove to be very significant opportunity for the traditional security industry.
If the industry adapts to embrace the smart home and IoT, they could become the preferred channel for the smart home. Worst case, they could still have an important role as telco’s, insurance companies, utilities, healthcare, and retailers make their moves. They will need partners to provide the support infrastructure for their propositions and the existing security industry could fill that gap. Either option offers a good path to growth, but each requires change to succeed.