Smart Home Market Slow to Grow, but Has Huge Potential
Of all the emerging consumer technology markets out there, the one that seems to have the most promise surrounding it is the smart home, and it’s not even close. It feels like we’ve been talking about smart home tech for at least a decade, which means it’s been around the block a couple of times, which can’t be said for some other emerging tech markets. But here we are in 2017 still talking about the potential of smart home tech.
There are a couple of reasons why the runway for this category seems to be extraordinarily long. For one, cost is definitely a factor. Smart home tech began reaching the mass consumer market around the time consumers started tightening their purse strings. And, at the outset, smart home products were on the pricey side. Still today, consumers are under the impression that smart home tech is impossibly expensive. According to a survey by hardware and software company Wink, one third of Americans believe it costs $5,000 or more to convert their home into a smart home. In reality, Wink’s own data shows that the average smart home shopper starts with around four smart devices and spends only about $200.
Another factor in the slow adoption rate of smart home tech is the security issue. Data privacy is a major concern for consumers, and right now—with everything going on around data privacy, or the lack thereof—most Americans are a bit hesitant to purchase a product or set of products that they feel will compromise their personal information.
The combined impact on the current state of the smart home market is that just four in ten households have an automation device active in them, according to a recent study by Report Linker.
Taken at face value, some of the data to come out of the Report Linker survey would have you believe that the smart home market is going nowhere fast. Consider some of the other key data points to come out of the report:
- 59 percent of those surveyed said they do not own any automation devices.
- 63 percent of those surveyed said it is unlikely that they would purchase a home automation device in the near future—of which, 42 percent responded ‘very unlikely.’
- Top reasons for not being interested in smart home devices included: too expensive (29 percent), they don’t see the benefits (26 percent), and privacy concerns (25 percent). Just 6 percent cited ‘complicated to install and monitor’ as a reason.
- Of the two-thirds of respondents who said they don’t own a voice assistant product, 66 percent said it’s unlikely they’d be interested in buying one in the near future.
Believe it or not, there are some pretty positive takeaways. Chief among them: the opportunity exists for everyone in the CE space—from manufacturers all the way down to the retailer—to educate consumers on home automation technology. In 2017, a majority of consumers consider themselves to be tech savvy (right around 50 percent, actually, according to the Report Linker survey), but they’re lazy when it comes to educating themselves on new tech solutions. They want something to just work, and when it doesn’t—or if they have a not-so-easy time figuring it out—they just give up. One of the top responses from owners of automation devices when asked about the main benefits is that the product is “user friendly,” a.k.a. easy to use. It just takes a little effort to make the consumer realize why that’s the case.
Beyond education, a major reason for automation device makers and sellers to remain positive is the basic numbers game at play here. According to the Report Linker survey, the average smart home consumer right now has 3.4 devices in their home (50 percent have one to two devices, 24 percent have three or four, and 26 percent have five or more). That’s a lot of smart home product floating around out there. Better yet, that’s a lot of product, and we’re only talking about 40 percent market penetration. There’s still 60 percent of households out there that haven’t bought into the smart home concept yet.
As of 2015, the smart home market was valued at around $47 billion by Markets and Markets. With that growth potential, it’s easy to see why they expect the smart home market to boom to a $121 million market by 2022.
Smart home products also stand ready to benefit from the eventual introduction of 5G network technology as well. Network reliability and the realization of an always-connected world will make the smart home concept a more feasible reality to consumers at 5G rolls out, so expect that market value to continue to skyrocket into the late 2020s.