- Following moderate growth from 2010 to late 2012, the overall US smart home market has expanded sluggishly. The market in the US currently remains the healthiest and most promising, but it's only just beginning to enter the mass market phase of adoption.
- There are a number of factors that could bolster consumer adoption of smart home devices in the coming years. As the population increasingly sees smart home devices as less of a luxury and more of a necessity or cost-saving tool, consumers will be more apt to purchase these devices. BI Intelligence forecasts that 73 million smart home devices will be installed in the US in 2023.
- But there are various barriers to mass market adoption that still need to be overcome before adoption substantially picks up. These include high device prices, technological fragmentation, long replacement cycles of existing legacy devices, and overall low consumer demand.
- Amazon's Echo established voice as the center of the smart home ecosystem for the first time. Now, voice has become a key remote interface within the smart home — a trend that will continue to upend the connected home market as devices gain more and more skills.
When Amazon released the Echo in 2014, it was viewed as gimmicky by consumers. The AI-powered speaker was equipped with only a handful of skills — apps that enable the device to perform various functions and services, like streaming music or reading the news, via voice command — offering insufficient value and, therefore, little purchase incentive. Further, the price point of the Echo was considered high, retailing at $99 for Prime members and $199 for non-Prime members. At that point, it wasn't obvious that the device would take off.
But despite initial perceptions, the Echo ended up revolutionizing the smart home market for one important reason: It established voice as the center of the smart home ecosystem for the first time. This is opening up new business opportunities — with a smart speaker at its center, the smart home can serve its inhabitants ads, a strategy Google is expected to pursue with its Home, or make e-commerce purchases easier, a route that Amazon is currently taking. Such devices have the potential to be much more powerful for consumers and smart home companies alike.
Nonetheless, the smart home market is only just entering the mass market phase of consumer adoption. While companies in this emerging market have done a good job [...]