The Future of Home Automation: Where’s the Middle Market?
Report predicts integrators serving the middle market of $7,500 to $12,000 home automation projects are not in the sweet spot for growth. It's time to start thinking whether you're steering the company toward the high end or the low end.
All of a sudden, as if someone flipped a switch, experts outside the custom electronics industry are paying attention to home automation. Overall, it’s a good thing, as Martha Stewart might say. And with this increased attention and scrutiny also come more research and analysis, which appear to be predicting that the industry is rapidly evolving into three distinct niches: DIY, entry-level and high-end luxury - but there is no mention of a “middle market.”
Here’s how it breaks down from different sources. First, there has been glowing data and financial analysis coming fast and furious from the investment community ever since Control4’s much-ballyhooed IPO in August. Industry watchers are falling all over themselves to predict solid growth for the industry. Terms like “explode” and “capital-efficient” and “rising category awareness” are all being used by influential investment groups.
Motley Fool and others have rated the Control4 stock as a “strong buy,” not because the company is rolling in profits, but because it is a key player in an industry they see as having major growth potential. One analyst even went so far as to indicate that investors who like real estate can use home automation as an opportunity to “play” the housing market trend “for those who may have missed the appreciation of the broader group [of housing stocks].”
Meanwhile, there is other research that shows how home automation, much like the U.S., is becoming a market of “haves” and “have-nots.” A recent report from GigaOm breaks the market down into those three distinct segments: DIY, custom-design smart home systems (from providers like cable, telco and entry-level security companies), and connected home systems (served by CE pros). The report estimates that by 2017:
- The DIY home automation market will be $200 million
- The telco/cable/security portion of the home automation market will reach $2.2 billion (growing 7 percent annually)
- The connected home portion of the market will reach $1.5 billion, up from $300 million in 2013
If you do the math, it means the custom channel is expected to grow by an incredible 500 percent in the next four years. And while the custom market is expected to be surpassed by the entry-level options in terms of total revenue, it also shows that the custom installation channel will be 750 percent larger than the DIY market. The report cites the growing demand for luxury systems, increasing consumer awareness being driven by the mass marketers, cloud technology that is making home automation more affordable, and open API platforms from companies like Alarm.com, iControl and AlertMe as the primary drivers of growth.
If anything, the report is interesting because it clearly pinpoints where the future lies for the market (both from high-end and low-end professionally installed systems). Unfortunately, that prediction means integrators “in the middle” serving those $7,500 to $12,000 projects are not in the sweet spot for growth. The data also helps CE pros gauge where their future competition is going to come from - not from homeowners themselves but from mega-companies entering the space on the low-end. So it sounds like Home Depot DIYers should be the least of your worries.
So are you steering your company toward the high end or the low end? Let us know.
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Jason Knott is Chief Content Officer for Emerald Expositions Connected Brands. Jason has covered low-voltage electronics as an editor since 1990, serving as editor and publisher of Security Sales & Integration. He joined CE Pro in 2000 and serves as Editor-in-Chief of that brand. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He has been a member of the CEDIA Business Working Group since 2010. Jason graduated from the University of Southern California. Have a suggestion or a topic you want to read more about? Email Jason at firstname.lastname@example.org
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