Proliferation of DIY smart home tech presents opportunities for dealers

By now everyone is keenly aware of how connected home technology has revolutionized and, in some respects, reinvigorated the residential security industry, however, nothing quite reinforces that notion like looking at hard data.

Earlier this month at ESX, market research and consulting firm Parks Associates presented the findings of two recent studies – Security Dealer Survey: Emerging Trends in Security Systems Sales and Services and Delivering Peace of Mind: Connected Home Devices & Sensors – which revealed some eye-opening statistics as it relates to just how intertwined smart home devices have become with home security.

Some of the findings include:

• 80 percent of U.S. security dealers currently install smart home devices as part of their services
• About 25 percent of security replacements or upgrades include at least one smart home device, such as smart thermostats, networked video cameras or smart lighting devices.
• Nearly three-quarters of security dealers offer interactivity with devices through smartphones, tablets, and computers.
• Dealer revenue for smart home services are around $14 per month.
• 44 percent of networked security camera owners access or control their device remotely on a daily or almost daily basis.
• Among U.S. broadband households with professional security monitoring, 32 percent also own a networked security camera.

In addition, the research also found that about half of the smart home devices currently  in U.S. broadband households are self-installed, which presents alarms dealers with an opportunity to generate even more revenue.

“A self-installed home control device is an opportunity for security dealers because they could potentially add those to their existing security offering,” says Tom Kerber, director, research, home controls & energy, Parks Associates. “If the consumer is doing that for themselves, that’s great, because it adds value to the [security dealer’s] base offering. I think it’s complementary and there is obviously a group of consumers out there who prefer to have someone else install it and having a dealer available to install things – either as part of the security system or after the fact as an add-on feature – are both upside opportunities as well.”

Of course, self-installed solutions are also a bit of a double-edged sword for the industry, because while they present an additional source of revenue for dealers, they can also take it away should an increasing number of homeowners opt to go the do-it-yourself route with every component of their system. “Yes, there is competition from self-installed systems but for the most part, all of these individual products need a central control or some kind of central system for them to work in a seamless way and the security channel is offering that through the [alarm] panel and the interactive service provider,” adds Kerber. 

Interestingly enough, Kerber also believes the proliferation of monitor-it-yourself and hybrid professional monitoring options that have emerged in recent years with the rise of the smart home do not pose a significant threat to the recurring monthly revenue model that the alarm industry has been built upon – so long as they adapt their business practices to meet the needs of different consumers.

“The other thing the industry is built on is kind of discounting those upfront costs of a security system and building it into the RMR. If the initial installation is profitable, then all of the monitoring [fees] is essentially gravy on top of that,” explains Kerber. “If they are able to make money off the equipment install and, in addition, make money – even if it’s sporadic – from monitoring, that business model seems to be sustainable. If someone were to discount the equipment and not make money off it, that’s where it would not be sustainable.”

Kerber says another added benefit of smart home technology is that has helped lower customer attrition rates for many dealers. In fact, during a recent panel discussion at ESX, one alarm dealer pointed out that customer attrition for accounts that included interactive services and home control had dropped to 1 percent. “Given that only a portion of home security systems have a home control portion added onto it and only a portion have these interactive services, there is  plenty of upside to grow the industry as well as convert the industry,” says Kerber.

Some dealers are also now exploring the potential of providing monitoring services for sensors – smoke detectors, thermostats, etc. – independent of any alarm system installed within a home.

“Solutions like that would address the portion of the market that is not being served by the security industry. If that’s 20 percent of household in the U.S. today and that grows to 30 percent with the introduction of home controls and interactive services, that’s still leaves 70 percent that is not served, so maybe solutions like this will serve that unserved market,” adds Kerber.

Kerber says all of the trends that his firm tracks relative to home security and connected services are all trending in a positive direction for the industry, and that the growth the smart home market has experienced doesn’t appear to be slowing down anytime soon. Some recent technology breakthroughs such as integrations between alarm systems and voice control platforms will only further drive consumer expectations of what can be achieved with these product and dealers stand to benefit as a result.

“Anything that simplifies the user experience is really a win for the industry,” Kerber says. “The Amazon Echo product is, in particular, extremely user friendly. For those people who don’t like the app experience or having to pull something out of their pocket and enter a code… that type of capability enhances the value of the system as well. As technologies become more and more affordable through Moore’s Law and all of the technology curves – whether it is memory or processing power that drive costs down radically year-over-year – that just allows the security industry to apply those technologies and provide more value to consumers at better price points.”

For more information about any of Parks Associates’ recent studies related to the security market, visit www.parksassociates.com.