Europe's smart home dynamics and the 2021 growth opportunities
Europe's smart home trends & recommendations for growth opportunities in 2021, plus deeper dives into UK, France and Netherlands
Europe’s smart home market and the 2021 growth opportunities
EU trends & recommendations, with deep dives into UK, France and Netherlands
The Europe overview
2020 saw over 220 new brands selling smart home devices (excluding TVs) across EU6, but consumer take-up, while growing, remains selective… What is holding them back and what can we do to push smart products past the chasm into mass market appeal?
New areas of 'smart' growth in 2020
In the first half of last year, people focused on things that they needed to have in order to work and feed themselves at home during the early lockdowns. In the second half of the year, purchases then developed into things they wanted to have, to make staying at home more convenient, comfortable and enjoyable. Within the EU7, this included US$28 billion worth of smart products – an increase of 24% on the previous year. Consumers’ take-up of devices for the smart home is growing – but why does penetration remain relatively low?
Looking at Belgium, France, Germany, Great Britain, Italy, Netherlands and Spain, the lengthy ‘stay at home’ certainly accelerated home digitization, especially in the second half of the year. Unsurprisingly, demand was highest for smart entertainment and smart office products. These made up two-thirds of the value of all connected devices sold, as people invested in their homes as their new hub for both work and play during months of lockdown.
The next biggest demand was for products within ‘small domestic appliances and health’, and ‘major domestic appliances’. These two categories were nearly level, each making up around 15% of total smart sales for EU7. Despite this relatively low slice, their growth compared to 2019 was impressive – standing at 41% and 34% respectively – and proving the underlying appeal of smart products, given the right buying environment.
Home automation (e.g. smart lawnmowers, alert detectors, intruder security, visual cams, thermostats, lighting) made up the smallest segment at just 4% of total smart sales last year. However, it also showed significant year-on-year growth of 23%, as people focused their spending inside the home.
Purchase is only half the picture. What about usage?
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We asked people which devices they had used over the previous 30 days. The answers show the work still needing to be done, to reach mass market appeal for even the more popular devices.
Smart speakers and smart watches or fitness bands are undoubtedly two of the leading success stories when it comes to consumer use of smart devices. Around 1 in 5 people globally had used these during the previous 30 days – putting them not far off video games or video steaming in terms of popular use. However, for most other connected home products, such as smart thermostats, workout equipment, robotic floor cleaners, alarms, security cameras, etc, regular users stand at around 1 in 10.
There is also huge variation between markets. For smart speakers, a small number of heavy-weight markets - particularly the US, UK and China – are driving up the global picture for regular users, while countries like Russia, France, Sweden and Argentina are some way behind.
For UK and US, this is not surprising, given that Silicon Valley’s big names started their smart speaker rollouts with versions that only supported English. The Chinese smart speaker market, on the other hand, is increasingly dominated by local players such as Baidu, Alibaba and Xiaomi that have introduced some very compelling and affordable options.
Overall, there is substantial room for growth, especially as smart speakers with local language capabilities become more accessible to consumers in markets such as France, Sweden and Russia.
The critical issue is momentum. The boost in smart robot vacuums and lighting etc proves tangible benefits motivate people to upgrade to "smart" – especially when spend on holidays etc is curtailed.
Nevin Francis, GfK’s TCG expert
The picture in the UK
Will the boost in smart speaker ownership open opportunities for other smart products?
UK
Last year, over a quarter of Brits (27%) said they owned three or more smart home devices, while a further 40% owned one or two.
The most popular products are smart TVs (almost half of all Brits), smart speakers (29%), and smart fitness or activity trackers (22%). After these, ownership drops to 10% or lower for items such as smart thermostats, detectors, lighting, plugs, and motion cameras, etc.
It’s when we look at the 4-year trend that the opportunities and challenges for different products really stand out. Claimed ownership of smart speakers has tripled in the last three years, with a regular, significant increase each year. In contrast, however, the claimed ownership for smart TVs shows much slower growth over the same period, while the popularity of smart fitness trackers fluctuates year by year, and smart detectors show a sizeable downward trend since a peak in popularity in 2018.
With the exception of smart speakers, it seems that British consumers are not yet convinced of the value of upgrading to the smart versions of these home products.
However, the uptick in smart speakers last year might be the golden opportunity needed to jump-start consumer appreciation of the convenience that smart offers and encourage a desire for more. It’s likely that the smart speaker purchases were boosted by the enforced isolation of lockdowns, with people looking for instant access to the latest news on COVID restrictions, as well as enjoying the experience of having something to talk to that talks back. The result is that smart speaker penetration in Britain has finally crossed the line towards mass-market figures.
Assuming the overall user experience continues to be positive, this lays the road for increased word of mouth, as well as purchases of other smart devices that can easily pair with, and be controlled via, the smart speaker.
There is, however, a key limiting factor in the UK, that could hold back the ‘knock on’ effect into purchasing other smart devices.
Many connected home products are not being used in tandem with smart speakers. Brits are mostly using their smart speakers for things like playing music, checking the news or weather and searching for information or instructions. Only 45% of owners say they are using their smart speaker to control other devices in their home.
The majority are using their smartphone, rather than their smart speaker, to control other smart products. Clearly, this seriously limits the opportunity for smart speakers to act as a gateway to purchases of other smart products within the home.
Let’s take a look at the specific products that Brits are using their smart speaker to control as part of a proper ‘home hub’ – and what can we learn from this, in terms of potential to expand purchases of other smart products?
The most popular pairing is to control the TV, with nearly a fifth (18%) of Britain’s smart speaker owners doing this. That is followed by 14% using it to control lighting, and 13% to control plugs. What they are not using their smart speakers for are things like doorbells, security cameras and monitors, fitness trackers etc.
The difference lies in the fact that many of these connected devices are optimized for interaction via a visual display (viewing data from fitness sessions or accessing the camera view on doorbells and motion detectors), as well as for situations when the user is away from the home (smart alarms, security systems, recording a run on a fitness tracker).
Manufacturers and retailers therefore need to develop and position smart products with a clear understanding of whether the user is going to use their smart speaker or their smartphone as the control hub for that particular device.
Growth opportunities in UK:
By plotting claimed ownership of smart devices against the categories that people are most interested in buying, we see clear potential for further growth in areas including smart detectors, motion cameras, lighting, doorbells and thermostats.
However, there are barriers:
- Almost 6 in 10 feel the cost of products within smart lighting and smart security is still too high
- Half have concerns over their personal privacy if they bought from these categories.
- 4 in 10 have concerns about the technology within these categories and the impact on security in their home
Register now for UK Smart Home Study 2021 results
(available mid July)
The picture in France
Big leap in turnover of major domestic appliances last year, but smart entertainment drops
France
In France, overall consumer interest in the concept of the “smart home” has been declining over the last five years. By last year, 40% were saying they have no interest in smart home – up from 33% in 2019 and 26% in 2016.
The majority, however, remain interested - including a quarter of people saying they are “extremely” or “very” interested, which rises to a substantial 68% of “leading edge” consumers (LEC). The potential to reignite momentum lies in manufacturers and retailers understanding what will trigger these willing segments.
Despite the gradual fall in claimed interest by consumers, smart home still accounts for nearly 60% of all ‘connected’ turnover in France last year. Even more positively, certain categories saw significant jumps in year on year turnover, with the biggest being for smart domestic appliances, both large (MDA) and small (SDA). These saw turnover growth of +37% and +32% respectively, compared to 2019 – giving a total of €386 million for smart MDA and €196 million for smart SDA.
The next biggest jump was in smart control & network, at +27% growth - but French consumers show falling interest in smart entertainment products, with turnover dropping -10% last year compared to 2019.
*The definition of sectors differ between global data and country data because of country specific smart product groups
Smart ownership and satisfaction in France - and reasons for lack of interest
Just under a third of people in France own at least one smart home product – rising to an impressive two-thirds for leading-edge consumers - with the most commonly owned being smart speakers or voice assistants, followed by security and lighting.
The major reasons people have bought a smart product is to make their life simpler or improve daily comfort (true for around 4 in 10 of smart buyers), followed by saving time (a quarter of buyers) and making their home more secure (just under a quarter of buyers).
Importantly for the industry, satisfaction amongst existing owners is high – typically standing at around 90%. However, where existing owners are dissatisfied with their purchase, the top two reasons are because they are not using the connected functions, or that they ultimately find it too expensive for what it brings.
Reasons for overall lack of interest in France
The principal reason for people’s lack of interest in France is that they feel the product does not meet the need. Added to this are barriers within certain categories - such as the price of smart versions of major domestic appliances, or fears over the security of personal data when it comes to voice assistants / smart speakers.
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The picture in the Netherlands
19% of those interested in smart home technology expect to have a fully smart home within two years
Netherlands
Covid-19 is accelerating the adoption of smart home technology in the Netherlands
In the Netherlands, around half of consumers under 50 years old are interested in smart home technology, rising to 57% for those aged 18-34. By comparison, only 37% of over 65-year-olds expressed interest.
Of all those interested, almost 2 in 10 expect to have a “fully smart house” within two years – pointing to key opportunities for growth among key products.
The main benefits associated with buying smart version of products continue to be the increased convenience they offer, the energy saving (good for the environment) and being able to operate devices from anywhere. However, there has been notable increase in the recognition of other benefits – including cost savings (up six percentage points to 27% in 2020), and more sense of security (also up six percentage points to 21%).
The principle barriers are the high cost of smart home solutions (now an issue for 45% of consumers – an increase over 2019 levels) and worries about privacy issues (32%). An additional key statistic is that a quarter of people now have doubts over the added value delivered by smart home solutions – up four percentage points since 2019. Combining that with the increased numbers concerned by the initial purchase cost of products is a key alert to manufacturers and retailers, and something they must focus on addressing this year.
Ownership
Owners of smart home devices in NL are more likely to be highly educated men under 50 with above-average incomes. They are most interested in lighting, energy, communication (wifi), and entertainment.
Almost 80% of those familiar with the smart home concept own at least one device. Breaking that down, 15% own one device, 34% own between two and four, and 29% own a whopping five or more. The most popular categories are smart entertainment, where 65% own a product and smart energy (45%). Notably, the biggest increases in ownership last year were also in smart entertainment and energy, as well as in smart watches - largely driven the @home trends of lockdowns and an increased focus on health and fitness.
Growing importance of virtual assistants
More people in the Netherlands use their virtual assistant to play music (52%) and check the weather (41%) than to control smart home applications (37%).
However, the exciting news for manufacturers and retailers is that 29% of those familiar with the smart home concept (strongly) anticipated buying more Smart Home products, thanks to the introduction of virtual assistants in items such as smart TVs and speakers.
The majority of consumer's 'smart' interest falls within the categories of lighting and energy, followed by network devices, security and entertainment.
Lighting, energy and security also stand out as the three areas in which people in the Netherlands are most willing to pay extra for smart versions of traditional products – making these the key areas for potential growth in 2021.
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Summary and recommendations
Cost - Privacy - Perceived value |
Tangible benefits - Smart to Intelligent - Interoperability - The role of retailers
International summary
Top 3 barriers to purchase
COST is the top barrier that is stopping people buying smart home products in 15 of the 21 countries we track. This remains the case even for high income consumers, as well as holding true across genders, generations and educational levels. Part of the reason that smart speakers have been such a success story across most countries is that they are relatively affordable as a category, with a range of price options.
PRIVACY is another core obstacle. It’s actually the #1 barrier globally when it comes to voice assistant / smart speakers and is the #2 concern (after cost) for smart domestic appliances, as well as smart security and lighting products. Following media coverage of hackers breaching home security cameras, or that smart speaker could be recording private conversations in the home, for some consumers, the risk is just simply too high to justify the benefit.
“I DON’T SEE THE NEED FOR IT” ranks #3 globally as a reason not to buy smart appliances and speakers. For many consumers, the benefits that smart home products offer compared to traditional products just aren’t that compelling for everyday life. This is especially true in developed markets where consumers are less enthusiastic and more sceptical about tech overall than their counterparts in many emerging markets.
[Recommendations on the next page]
Recommendations
Nevin Francis, GfK’s expert on technical consumer goods, gives the following five recommendations to manufacturers and retailers on how to overcome the adoption barriers and drive more smart home products cross the adoption chasm:
1. Promote convincing, tangible benefits
Providing and communicating convincing product benefits can help justify a premium and address the apathy around the perceived value-add of smart. This is particularly important to attract mainstream consumers who tend to be less swayed than early adopters by the “wow” factor of novel technologies and are far more driven by value and relevance to daily life.
“While still limited, the increasing popularity of smart robot vacuum cleaners, smart alert detectors, smart LED and cooking appliances during 2020 proves that tangible benefits do motivate consumers to upgrade to the “smart” version of household products.”
2. Move beyond ‘smart’ to ‘intelligent’
When we asked consumers what smart home features appeal to them, energy saving was rated much higher than energy tracking. In other words, they are valuing the higher-order benefits that smarter devices should bring them – they don’t want to *just* track energy usage. Manufacturers should focus on how to deliver those more significant benefits.
For example: rather than a smart watch that tracks how much good sleep a person is getting each night, the focus should be on one that additionally gives you tailored recommendations to improve that person’s quality of sleep, based on their individual information.
In this sense, the service ecosystem is as important as the smart hardware – and the opportunity arises to create new subscription-based revenue streams. In fact, at major events like IFA 2020 and CES 2021, leading brands have stressed the importance of partnerships in order to grow the service ecosystem.
3. Compatibility and interoperability is a must. Think B2B2C cooperation.
For smart homes to truly realize their full potential, devices will have to work seamlessly together to deliver ultimate convenience and user experience. This is already very evident to tech leading-edge consumers (LEC), a proprietary segment that we track. LECs are the roughly 15% of consumers globally who are knowledgeable about tech, are often early adopters in the category and tend to influence other people’s tech purchases. Tech LECs are particularly demanding that smart products work together for the optimal customer experience. The mainstream consumer will follow, as they become more aware of the potential of the IoT.
4. Go the extra mile to safeguard digital privacy
Companies must address consumers’ digital privacy and security concerns head-on. This means not only being transparent about data collection, but also demonstrating how they safeguard the cyber security of their customers. This is often intertwined with physical security when it comes to smart home products, which makes it even more important to people.
5. The role of retail in promoting smart adoption
Retailers have a “go-between” position to educate, promote and re-assure consumers on the tangible benefits of smart products and actively combat the misconceptions around value delivered. They also have a role in properly staging smart home products in stores - witnessed by major retailers in countries such as France and China opening pop-up stores to showcase their smart home offers over the last year.
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