The shift to smart home translates into big opportunities for retailers. As the category continues to grow they would be well advised to explore and plan on how to consultatively sell products that interconnect.

It is an exciting time for the connected home category as sales move beyond entry-level products to more advanced offerings that work together to form a connected ecosystem. Within this ecosystem, products are creating a sense of modernization for consumers – devices are talking back to users and communicating with other devices to make homes more efficient and comfortable than before. In 2016, 80 million smart home devices were delivered worldwide, a 64 percent increase from 2015, according to IHS Markit. Analysts say despite the growth last year, 2017 will be the year of the smart home because the companies behind the technology will be smarter about educating their consumers.

The trouble so far has been the technology itself. Consumers are not sure how to integrate it into existing home systems. They do not know how to use it. Mainstream consumers want a pain-free setup and most of all a worry-free purchase experience. They feel the need to have someone to go to in a store and the peace of mind that if something went wrong, they can bring the device back to the store and talk to a human.

Creating the Right Product Mix

The first step in developing a plan is carefully selecting the right product mix. Home security is a starting point for many people, with key products including security cameras, alarm systems, smart locks, and video doorbells. HVAC control, smart lighting, and smart appliances add another layer of connectivity and efficiency. Beyond the central products, entertainment is another key area. Retailers can increase sales simply by educating their customers about how entertainment ties into the connected home. Leading manufacturers are coming out with new TVs and accompanying tablets that let users download or stream directly to the TV, as well as soundbars that tie in with the Amazon Echo or Google Home for easy voice control.

Experience Matters, Not Specifications

In this early stage of the connected home, it is not just consumers who need help in buying, brands too need help in selling. Retailers need to create an in-store experience that includes interactive product demonstrations and a consultative sales approach. Brands are opening showcase stores where product sales are no longer the focus. These store models are all about the educational process of teaching consumers what is available and enabling them to learn before they buy. Making it comfortable for shoppers to come into a retail store is important. Finally, information on what message resonates with consumers, what features close the deal, what is the job to be done – retailers can help with that information when they set up a smart environment. Information is collected about sales and direct feedback shared with the team of experts, who work in the house, and the information is used to decide what products should be displayed. Some of the insights are also shared with companies on the shelf to help them understand how guests are experiencing their products. This can be a competitive advantage in securing product exclusives and co-marketing spend.

The connected home category will continue to mature and see an influx of new products coming to market during the year ahead. This will give consumers the opportunity to access more products that work well with existing ones and expand the capabilities of what they can do in the home day to day. Retailers, who can deliver on a consumer’s questions, add new approaches to in-store, and relate to key demographics will see big success in the upcoming 2017 buying seasons.

Blake Kozak

“There has been a lot of fragmentation in the industry, a lot of confusion among consumers as to which devices are the best to go with. Is there longevity here? If they install a system tomorrow, will it be around in the next year. The consumers today are incredibly confused as to what is the value that they are getting. A consumer could be spending upwards of USD 1000 if they go to the retail market and they do not understand what the value is. Are they getting energy savings? Is it simply fun and they are not going to want to use it in a couple weeks’ time?”

Blake Kozak
Principal Analyst,
IHS Markit


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