There is a considerable market opportunity for residential security service providers to build on their core offering, chiefly by cultivating peace of mind value propositions for security-adjacent use cases. Certainly, macro events like the recent pandemic have impacted consumers' purchase behavior around residential security capabilities. Parks Associates asserts that the overall market growth tailwinds for residential security are strong due to mounting nationwide concerns about crime and as a result of being at home more frequently.
A rising tide will indeed lift the boats of the majority of players in the residential security space, albeit at varying levels.
Parks Associates continues to see slow and steady growth in the DIY space. Undoubtedly fueled by pandemic fears as well as improved offerings and flexible systems, this category is growing, and is not simply confined to residential security systems. More tech-savvy homeowners have used their newly established “work from home” presence to self-install smart doorbells, video cameras (inside their homes to monitor children and outside to monitor their property premises), smart garage door openers, and other sensors focused on creating peace of mind.
This category of smart home safety and security products is becoming more affordable, easier to install and use, and offers sophisticated notifications/alerts due to improved AI capabilities that would have been the stuff of science fiction just a few years ago. Our data of 10,000 households also shows where consumers are buying these products and the majority or 25% of buyers for the top adopted smart home devices note acquiring their device via an online-only retailer.
While the DIY space has been exhibiting impressive growth, there remain challenges. Installation of residential security solutions in a typical multi-room home is not a trivial undertaking for a significant, perhaps majority, percentage of homeowners. Older construction presents its own set of challenges, particularly with devices (sensors) that require physical installation and electrical wiring. While improvements in Wi-Fi, particularly coverage with mesh networking, have mitigated a significant pain point, integrating the smorgasbord of residential security devices in a coherent and organized manner that avoids “multi-app mania” is incredibly challenging for the typical homeowner.
In addition, residential security devices and other smart home devices, remain one of the most frequently returned product categories at retail according to feedback from several retailers. Putting the impact of COVID-19 aside, professional installers have a significant customer satisfaction opportunity to capitalize on as many homeowners value their time and understand the professional installation value proposition. Finally, since the welfare and safety of loved ones remain the central goal of any residential security solution, a sloppy DIY install that might jeopardize loved ones is not an attractive outcome for most homeowners.
As alluring as the DIY residential security category has been for homeowners during the pandemic, many consumers realize that their families and loved ones cannot be fully protected without a professional monitoring service that works in an integrated, complementary manner with DIY hardware. Parks Associates’ survey results validates the observation, showing 36% of smart home device owners had difficulty getting software/apps to work properly and 39% indicated challenges with getting the device to interact with other devices. Generally speaking, most home security professionals recommend professional monitoring over self-monitoring for several reasons: large homes often have multiple entry doors and windows, making it difficult to simultaneously self-monitor every entrance (particularly if numerous floor levels are involved). In addition, self-monitoring becomes challenging if homeowners are frequently away from their homes. A professionally monitoring service can validate an issue if it arises regardless of where the homeowner is at the time.
While self-monitoring does offer the appeal of avoiding monthly service fees, this financial benefit comes at the expense of no guarantees of timely emergency response. Professionally monitored service plans often allow homeowners to lower their insurance premiums. While there is an upward forecast trend for homeowners planning to embrace some type of professionally monitored service, companies offering these plans face tremendous pressure to maintain or reduce monthly fees due to competitive pressures and consider shorter contract lengths. In this area, the name of the game is recurring monthly revenue plan optimization that is both sticky and long-term. Services like video verification, home network cybersecurity, PERS, aging-in-place, and vehicle monitoring are increasingly gaining in popularity at the dealer level.
In addition to contemplating future monitoring services that include health and asset tracking, some vendors may even contemplate offering leasing-like offers that includes annual hardware upgrades as part of their monthly service fees.
Over the past several years, the residential security space has been an oasis of optimism for both hardware vendors and professional service monitoring companies. While the pandemic threw a wet blanket on those businesses offering professional installs, the overall category continues to thrive due lower product cost, new DIY products, familiarity growing, and rising concerns of crime in the US. Another significant tailwind has been the unprecedented run up in home purchases (both new and existing construction) due to historically low interest rates that are now increasing.
The residential security category continues to experience significant acquisition activity as existing players seek to solidify and expand their current positions through new product offerings and more regional distribution. Expanding markets like residential security often attract new participants, and there appears to be no shortage of new companies offering the “latest and greatest” video doorbell or network camera. Ultimately, as the market slows down, it will not be surprising to see consolidation in a “survival of the fittest” manner. Nevertheless, this will take time and the market continues to add in new entrants.
Finally, we will see huge investments into technology, especially access control, in the multi-dwelling unit (MDU) market. MDU renters, particularly those in the sub-40-year-old age bracket, tend to be disproportionately and favorably disposed towards smart home technology in their new rentals. In that respect, these renters have similar (perhaps even stronger desires) for smart home technology. Renters will continue to expect smart home connectivity as a standard feature and could have similar expectations for “smart” technology in their new apartments. With individuals fleeing large cities and the flexible work from home employer rules being extended, the MDU space will be a fascinating category to observe closely over the next twelve to twenty-four months.
In addition, the small to medium business market is heating up for access and control. Businesses report an increasing need to secure both their physical and virtual assets. SMBs are looking to add advanced safety and security solutions to protect and enhance their business operations. Parks Associates research finds nearly 40% of SMBs are likely to acquire security/safety products in the next six months, with cameras and professionally installed security systems as the top desired solutions. This is a huge and growing area for security solutions.
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