Let the DIY Price Wars Begin

Do-it-Yourselfers have tended to be a fly in the ointment for alarm dealers since SimpliSafe came onto the scene in 2006. In 2017, the company remains a major player in the DIY alarm space, but lately it is seeing a vast increase in competition – and it is coming from some very big players.

When Google acquired Nest Labs in 2014, and later when Amazon acquired DIY home security provider Scout in 2015, security industry pundits and prognosticators hailed it as a major threat to the traditional alarm dealer. It is true that DIY is still a major threat and/or worry; however, just two years ago, Citigroup estimated that DIY systems – whether professionally monitored or not – comprised just 7 percent of the residential home security market. Many sources say that number is projected to grow significantly in the coming years, and smart dealers are using it as leverage to gain customers by providing installation help or monitoring services.

The interesting thing is that the real threat from huge players like Google and Amazon is to their fellow DIY players in the space. Perhaps instead of the traditional ADT or Honeywell dealers, the company that should really be on its toes is SimpliSafe itself.

Google’s Nest has fully immersed itself in the DIY security market by releasing a full home alarm system that competes directly with SimpliSafe (scheduled to begin shipping in November). Now, Ring – the company that broke into the market with the fast-growing video doorbell concept – is also set to offer complete home alarm systems (also scheduled to begin shipping in November).

Industry experts have long believed that DIY security users are attracted by the lower cost of entry vs. traditional, professionally monitored security systems. Thus, it should come as no surprise that with all the new and powerful entrants and established veterans in the DIY security space, the price wars are starting to shape up. Take a look at the numbers:

• SimpliSafe’s base home security package (base station, wireless keypad, motion sensor, entry sensor and keychain remote) is $229.96.

• The Nest Secure starter pack, which includes Nest Guard (base station), two Nest Detects (combo entry/motion sensor) and two Nest Tags (keyfob), has a suggested retail price of $499.

• Scout asks its customers to pick each product they want individually, but a similar system with base station, one contact and one motion sensor runs around $207.

• Ring is undercutting them all, with a base security kit (base station, keypad, contact sensor, motion sensor and range extender) at $199.

Of course there are lots of other DIY systems out there – some cheaper, some more expensive. That said, it seems Nest is relying heavily on brand loyalty out of the gate. “Nest has acknowledged the need for lower-priced products, so with the high starting cost of the security system, Nest may struggle to win over customers using less expensive, more open alternatives,” IHS Markit analyst Blake Kozak predicts.

All the referenced systems offer professional monitoring – for an added monthly fee of course. For an alarm dealer, it all looks kind of familiar, doesn’t it? In fact, it pretty much mirrors what alarm dealers have been offering for decades.

While it is likely only a matter of time before the price wars separate the players from the pretenders in the DIY market, the monitor-as-you-go option represents the true threat – or perhaps opportunity – to traditional home security companies.

“Professional security monitoring combined with a DIY installation continues to be a major trend,” Kozak says. “The month-to-month contracts from professional providers and DIY purchases/installation combined with no-contract monitoring will begin to challenge the traditional model of paying for two-year, three-year or even five-year contracts.”