Smart home market still small in Europe, but with many players pushing it forward adoption will rise

Thursday 9 November 2017 | 13:51 CET | Background
The smart home market in Europe is still in its early days, with few households owning connected products. However, a wide range of players in the value chain are pushing their products and services, slowly creating a growing pool of consumers with enough connected devices to create smart homes. As shown at the recent Connections Europe conference in Amsterdam, the industry is looking for ways to monetise the new possibilities offered by data analytics, while being aware that the average consumer still needs to be shown the benefits, and security, of the smart home.

As Telecompaper will explain in its upcoming report on the smart home in the Netherlands, there first have to be enough connected devices in a home, which then need to be connected to each other. That network of devices then need to be connected to some sort of smart hub, allowing for the automation of processes in the house, before homes can become truly smart.

First it is necessary to create a larger pool of households with connected devices. As the participants at Connections Europe 2017 showed, many different players are actively pursuing this: utilities, telcos, insurers, big tech such as Google and Amazon and small local companies such as Quby, Cozify or Cujo. They are however vying for the same customer in many instances, and it is as yet unclear who will win this race. At the moment, the market is small enough to carry a large number of providers, but ultimately a shake-out will have to take place.

Start with a few devices, then build out and add services

Many agreed that consumers need to start with one or two connected products so they can get used to smart home products and see the value they bring. Then they can expand their ownership and functionality. Once owning various products, many consumers don’t want to have to use different apps for different products - they want to unite their products into one remotely controlled platform. Next to local smart hubs such as Cozify or Homey, such smart home kits are available from Google or Amazon, which allow for integration of various connected devices.

At the same time that the base of households with connected devices needs to grow, the industry is moving from offering just products to offering products with a service attached. The focus for many suppliers in the smart home industry is shifting towards offering consumers peace of mind as their most important service. This peace of mind is promoted as the greatest benefit of smart home: by monitoring smart products such as a boiler customers can be notified of problems before they even realise there is a problem. Centrica (British Gas) for example said that their smart home service BoilerIQ has led to a 20 percent reduction in home visits and a 67 percent decline in contract churn. Deutsche Telekom stated that their smart home products have the highest NPS of all their products. DT has recently started to offer a monitoring service with insurer Ergo, which includes an emergency service if the smart home system detects a water leak, smoke or unauthorised access to the home. If the customer does not respond to the alert from the smart home system, Ergo's emergency services centre is alerted and takes action. DT and Centrica are charging small monthly amounts for this service, as the business model of monetising the big data is still in development.

Voice assistants and integration with AI driving market forward

The improvements in voice assistants are helping push the market forward. Amazon believes that the voice interface will change the way we interact with technology. However the panel discussing ‘Voice as the leading smart home interface’ agreed that in Europe it is harder for voice to gain traction because of the large number of languages and increased concern over privacy issues compared to the US. For smaller countries, the language barrier can indeed be felt, as products such as the Amazon Echo or Google Home are still not available on many markets in Europe. Ultimately these big tech players will want to be present in all of Europe, but the many small countries will likely be low on their priority list.

Further integration with artificial intelligence capabilities also will increase the possibilities offered by smart home products. Companies are already looking into this, but it is early days for the average consumer who still needs to be convinced of the value of (many) smart home products.

Interoperability was an important theme at last year’s conference, but this year many agreed that technically there is now so much possible, it isn’t a real issue anymore. The focus has shifted to issues about interoperability at the cloud level. An often heard complaint was that not enough companies in the smart home industry have opened up their APIs. 

Other barriers for increasing adoption are concerns about security and privacy. With more reports in mainstream media about smart home devices being hacked, the public awareness of this issue has increased. According to Parks Associates, about half of US broadband households are worried about their connected devices being hacked, and they expect that share to be higher in Europe. F-Secure even said that if security doesn’t become better and more integrated, it could create the risk of bringing down the whole IoT business. Most importantly however, the average consumer doesn’t want to have to think about security issues, so manufacturers should make their products not only safe but easy for end-users to manage.

While issues remain, notably in pricing as well, the market will continue to grow, as more and more products will be offered only as connected, and utilities, insurers, telcos and others will try to entice the consumer to invest in smart home capabilities. Having a few connected devices however doesn’t make it a smart home, where things like turning on/off the lights are automated. That will still take more time before the majority of European households can claim to live in smart homes.

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