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What sectors will reap the biggest rewards from the rise of the smart home?

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19th Oct 2015
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The smart home is clearly a nascent category, and though there is a lot of interest in some of its pioneering products - such as Nest and Amazon Echo - most people haven’t even begun to think about it.

This sentiment was backed up by research we recently conducted across Germany, France the UK. In our survey of 1,500 people, we found that 62% of respondents hadn’t heard of the term ‘smart home'. Also a concern was the fact that, in the UK, 40% don’t see the benefits of owning smart home products, and 56% just aren’t interested in them. While on the surface this appears troubling, if we look at Germany, we see device makers, retailers and utility companies really pushing to educate consumers.

In Germany, four in five see the benefit of smart home products, and only 18% aren’t interested in them. This increased awareness also translates into when consumers think they will be living in a smart home. 22% of Germans estimate this will be within a year, while only 10% of British and 9% of French people share this optimism. Almost half of all respondents (46%) think we’re likely three to five years out.

The real challenge for those involved in the smart home, beyond consumer education, is convincing customers of its relevance. There are many voices competing for attention, and each seems to offer its own proprietary solution. We think there are three sectors that could succeed in the smart home market; those who make the products, those that sell them, and those that can service the home. Here is a quick rundown of the various merits of the parties vying to win the battle to control your home.

Device manufacturers

Samsung, Amazon, Apple, Google are just a few of huge technology brands rapidly moving into the space. Samsung and Amazon have released hubs that connect all your devices together. Apple’s HomeKit is a software framework that does the same behind the scenes, and Google’s Nest remains the poster-child for the smart home.

The experience these giants have in creating amazing products is unrivalled, with each capable of building up huge user bases. The problem they will face is that people will end up with six or seven apps, making managing your home unwieldy - the exact opposite of what they are trying to achieve.

People will naturally gravitate to the platform that allows them to control the most things, in the simplest way. Let’s hope that we don’t return to the dark days of having endless remotes for your TV, DVD, TV box, Hi-Fi, PVR, etc.

Retailers

There is a genuine opportunity for retailers to own a significant portion of the smart home market. Currently, many retailers stock products by department - lightbulbs are in home furnishings, thermostats are in electronics, and ovens in appliances.  Instead, retailers should look to bringing the smart home concept together, so consumers can get a real sense of what it could look like.

Also, because they are device and platform agnostic, they are in an enviable position of being able to pivot their business models to better serve their customers. The smart home is more than just a few products bundled together, it’s a living ecosystem that needs to be managed. From integration to ongoing support, retailers can expand their capabilities to cater to this need, and build lasting relationships with their customers.

Utility companies and service providers

Utility, telecoms and TV companies already play this role well. Consumers are used to paying a recurring fee for electricity, gas, water, broadband and TV - so why not the smart home? In our research, we found that three quarters of people in the UK would trust a utility company the most to install their smart home. This sentiment is repeated in France and Germany, and is far higher than DIY retailers and even specialist technology retailers.

Utility firms should tap into this trust, and build up their capabilities to offer broader smart home solutions than simply thermostats or meters. Telecoms and TV providers could also look to emulate them, using their routers and entertainment boxes to act as the smart home gateway.

In all likelihood, there probably needn’t be one clear winner when it comes to the smart home. While each player has its advantages, all still have some way to go to convince consumers that their approach is the one to choose. For now, the category is still being formed, but over the next year you can certainly expect the battle lines to be drawn.

Adam Simon is global managing director, retail, at CONTEXT

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