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Five reasons why Amazon – with their smart home consultation – is leading the race for the connected home

You might have heard the news of Amazon’s free ‘smart home consultation service’ that was recently launched in the US. Simply put, Amazon is offering a free in-home consultation from a trained expert to assist potential customers with choosing the right connected home products for their needs. Because of Amazon’s unique position in the market, I believe this could seriously drive the connected home market and give Amazon a leading position.

So why am I so impressed by what Amazon is doing? What allows them to offer free in-home consultations? And why are they so well placed to both drive and gain a large part of the connected home market? Here are five reasons behind my thinking:

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End of the summer fireworks in the connected home market

The connected home product catalogue is getting thicker as we speak, with announcements from every corner of Europe – especially from the IFA tradeshow in Berlin. O2 (Telefonica), Amazon Alexa & dash buttons, Homekit, Netatmo, Nest, Tado, Bosch, Sonos… These are some of the most exciting European (and US) connected home companies and all are trying to light the fuse! I’m curious to compare some of these products to our long list of energy / security ‘product profiles’ we are currently working on.

My take out of these is that more and more cool devices are coming the market from well-known connected home brands – that’s the good news. There is, however, very little happening in reducing the upfront cost barrier for non-early-adopter customers – and that’s a very concerning news.

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Winter is coming for energy companies in the connected home market - and this might be their last chance to own the customer relationship.

Sunny days have come to Europe in the first weeks of spring, meaning sales of connected heating controls will start to slow down, as customers start to turn off their heating for the summer. This is a perfect time for industry stakeholders to take a step back, and consider the learnings they gathered over the winter… before the next one comes!

This next winter season might actually be the last chance for the European energy industry to establish itself in the connected home space, and to own part of the customer relationship. It is extremely likely that this market will soon be attacked by giant companies such as Amazon and Apple, and by large telcos and retailers entering similarly to how O2 and Dixons Carphone have started doing to do in the UK. These companies will most likely own the customer relationship if they succeed, and the energy players will have reduced market power if they try and work with these companies to play in the market.

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Is remote diagnostic the new connected home trend?

When Delta-ee first looked at the connected home space many years ago, there was a fashion for selling or giving away energy monitoring devices. We coined the phrase “average time to kitchen drawer”, which we thought could be as little as two weeks: end-users lose interest in energy monitoring devices very quickly.  From 2012, a new trend emerged - with the beginning of the remote heating control market through smart thermostats.

Now, many energy suppliers and heating appliance manufacturers offer smart thermostats, and recent sales numbers start to demonstrate their potential. These products can now be bought on Amazon, in shops, through different platforms, from an energy supplier or even alongside a boiler installation. Through our Connected Home Service we’ve analysed 48 of these products in our InfoBase – and that doesn’t cover every single product!

So what do we expect from the 2014 heating season?

The IFA event in Berlin has seen lots of announcements of products being brought to more markets – for example Nest will soon be available in France, Belgium, Netherlands and Ireland – and of innovations from the giant appliance manufacturers such as Phillips, Samsung, Apple etc.

Despite all these movements from some big names, there is a new connected home trend starting to emerge: remote boiler diagnostics. Although they are not marketing it strongly for now, some leading connected home players are already active in this field. We think it could be much more than a passing fad.

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The connected home party is getting started: what do the numbers tell us?

In my first blog of this series, I explored whether the connected home “party” is just hyped up for the industry or whether consumers are coming to the party too. 

In the second blog, I discussed the impact of social media on customer interest for connected homes.

In this third blog, I will give an overview of the energy offerings that are selling today and describe some of the players trying to get a piece of the party cake.

We recently published the first report of the Delta-ee Connected Home Research Service, the annual ‘State of the European Connected Home Market’. It analyses the role of key players, the types of offerings that the customer is currently buying and why some countries are getting traction while others are a step behind. For this study we consulted over 50 key stakeholders in the connected home sector.

Several offerings are gaining traction

While energy used to play a small role in the connected home, the number of offerings has quickly increased in the last few years. Our research highlights that some solutions start to be successful and that others show promising signs. Below is a summary of a few examples:
  • Remote heating control – replacing a traditional programmer with a new remote control system, is the leading European offering today with several hundred thousand installations reported in last winter. These products are accessible to a wide range of end-users (costs are rarely over €300), who start to understand the convenience brought to their daily life through heating apps.

  • Time of use tariff optimisation – through connected controls – is getting a lot of interest, especially in Scandinavian countries where residential time-of-use tariffs are available. Heat pump manufacturers are starting to take advantage of this by integrating smarter controls which will pick up the tariffs in advance. The heat pump will then automatically establish a heating pattern that will be the most economical for the end-user without affecting the level of comfort. See the Delta-ee Heat Pump Research Service study on smart heat pumps for more info.
  • Microgeneration monitoring, optimisation and electricity storage is also a hot topic of the connected home covered in our research. Although this remains a niche market today, it is generating a lot of interest, particularly in the social housing sector. 

Diverse players are getting involved

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Connected home: are consumers coming to the party too?

In my last blog I explored whether the connected home “party” is just for a hyped up industry or whether consumers are coming to the party too.

 In this blog I’ll look at consumer interest from another angle. In a conversation at the Delta-ee coffee machine, a colleague told me he’d been at a party at his parent’s house and overhead a group of people talking about the Nest thermostat. A simple anecdote, but unlikely to be the only case of conversations about smart thermostats entering the mainstream. In Germany, there’s similar awareness of RWE Smart Home offerings through their “Smart Friday” promotions, which provides heavily discounted bundles on a number of days throughout the year.

Whilst we haven’t yet carried out a detailed consumer study on this topic in the way we have done for low carbon heating appliances in different European countries, we’re seeing more and more promotion of smart home / smart heating controls. A simple look at social media provides some interesting insights.

  “Likes” on facebook and Twitter followers are crude measures of consumer intereset, but let’s see how many “likes” and “followers” different brands have, and to set the bar, let’s look at some companies with really desirable, mainstream products. Beats Audio clocks in at over 7 million likes and over half a million followers.  Netflicks has 6.2 million and 800k followers. Nespresso at 3.5 million. Sonos, the wireless music player, comes in at 292,000. These two have 50-100k followers.

 Nest surprised us – over 200,000 likes, and nearly 100k followers - close to Nespresso and Sonos. The next batch are down at a few thousand followers and modest “likes” - Philips Hue, the wireless lighting product from Dutch giant Philips, coming in at 37,000 likes. Further behind are Tado with 16,000; RWE Smart Home, at over 8,000. Hive, the new brand created by British Gas, has a mere 2,500 likes.

 What is interesting is that large corporations such as Philips, British Gas, and RWE, have created specific consumer brands around their smart home products. They’re able to drive interest in these sub-brands, using social media such as facebook. When we looked for facebook pages for the likes of Honeywell’s EvoHome product; and Nefit’s (a Bosch heating brand in the Netherlands) impressive “EasyControl” product, we couldn’t find any facebook page specific to their product.

 For smaller start-ups, many are relying on finding channel partners for their product – and hoping that these channel partners will promote their offering. Some still have a facebook page and twitter accounts – Climote, the Irish-based company, for example with 1,000 likes and hundreds of follower;  Owl just scrapes in with a facebook page and 69 likes and nearly 2,000 followers, and Passive Systems has no facebook page and nearly 900 followers.

 Building a successful connected home business is going to have to have a strong element of generating consumer interest and pull. The simple exercise we carried out in this blog provides one perspective on which companies are generating consumer excitement and passing the test of generating conversation at a party. It’s a topic we’ll be drilling much further into as part of our Connected Home Research Service.

 (In case you’re interested Delta-ee has 775 followers and no facebook page!)

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